Accounting News

Thursday, October 11, 2012
Reporting Tax Debt

The IRS is considering reporting tax debt to credit reporting agencies. The issue is in front of the Senate Finance Committee. The Government Accountability Office (GAO) on the "Factors for Considering a Proposal to Report Tax Debts to Credit Bureaus." Currently the IRS does not report any tax debts. The committee is evaluating what, if any, should be reported.

The IRS hopes that by reporting tax debt, some businesses and individuals would be more encouraged to pay their balances. Failure to pay their debts would result in a lower credit score. Lower credit scores increase the cost to borrow or make it more difficult.

The report said there is $373 billion of outstanding tax debt as of 2011. This breaks down into $115 billion in business debt and $258 billion in individual debt. Most of the outstanding debts were relatively small, less than $5,000. But if  you consider only the larger amounts that constitutes $310 billion of the $373 billion total. So even if it worked to convince many people and businesses to pay if they are not the filers with the large balances it won't have a significant impact on the total.

It is undetermined when the debt would be reported to the credit agencies. This may affect the $60 billion that is under protest by the taxpayer or currently being payed by an installment plan. It is unlikely that this would be reported but that will be decided by the Finance Committee.

One thing that any program should include is the ability to protest what has been reported. Errors happen all the time and if the reporting is incorrect then there needs to be a process to correct it. For the reason of data accuracy many groups were opposed of this reporting.

If you owe money to the IRS you will want to contact your tax professional. They can help you manage the maze that is the IRS. By representing you they can create a payment plan that is manageable for you and the IRS.

Labels: , ,