Are Credit Scores Affected By IRS Installment Agreements?

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The revenue service of the United States, the IRS (Internal Revenue Service) is a government agency that operates under the immediate supervision of the Commissioner of Internal Revenue.

As anyone could guess, the IRS is responsible for collecting taxes, and if you do not pay them, then there is a blatant penalty for it.

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However, the IRS also offers you a payment plan. This refers to the taxes that you owe and can be paid within an extended period of time.

With thousands of dollars that reportedly belongs to the US government, millions of Americans continue to fall behind on paying their taxes.

According to the data compiled by the IRS, nearly 14 million Americans failed to pay $131 billion in taxes, penalties, and interest in 2018.

In light of this information, let’s take a look at how such kind of behavior can have an effect on your credit scores and other routine activities:

Are Credit Scores Affected By IRS Installment Agreements?

Ways Not Paying Taxes Can Affect Your Credit Scores

1. Continued Failure Can Become A Crime

It is quite clear that if you continue to not pay your taxes then, in the long run, you might be reprimanded for it.

While initially, the IRS would penalize you in terms of added interest to your due payments and this can even double the amount if you continue to miss out on your payments. 

While all this time, cost and interest will keep on rising. The last draw comes when a federal tax lien is called out that means the IRS would then have a claim to your property, and in the end, they might seize your property as well.

2. Damages To Public Faith

Public trust in the government and the system is extremely important. Furthermore, even the courts heavily rely on public support to perform its role for the system. Not paying taxes goes against it all and thus damages public trust. 

Not paying taxes that amount to a substantial amount such as in excess of $10,000, the IRS may file a tax lien, and this can show up on your background check. Anonymous background checks are frequent, and in such an event, the person whose background is being checked will not be notified.

Thus, when a tax lien shows up on your background check, then it becomes a big ‘No’ for investors who might be willing to cooperate with you.

Quick Tip:

Once you start an installment plan, you will have a harder time qualifying for a debt reduction request later.  We recommend you speak to an expert to see if you qualify for tax relief first.

3. End Up Paying More

It should be clear by now that the more time you take to pay back the money you own the more interest and cost stacks up against you. The IRS charges you interest on top of unpaid taxes as well as penalty fees.

This means that you not only have to pay the owed taxes, additional penalty fees, but also interest on top of that. 

This can be quite a tough challenge to overcome for someone who lives from one paycheck to another. This will definitely impact your ability to pay the rest of your monthly bills and dues.

The IRS answers less than 50% of the telephone calls it receives. Having a tax professional on your side can help you get through to the IRS and settle your tax debt.

Hence sooner or later, this might affect your credit score as one might ask for a solution to pay dues by getting a loan. This is a vicious cycle that can bring anyone down.

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4. Failure To Pay Penalty

According to the IRS, the failure to pay the penalty is one-half of 1% for each month or a part of the month. This can go up to a maximum of 25% of the tax amount that is unpaid. 

If the tax amount remains unpaid for ten days after the issuances of the notice by the IRS, then the rate goes up to 1%. However, an installment agreement by the due date can reduce this to a quarter of 1%. 

However, you can find relief by contacting FTA (Federal Tax Authority) and see if they can help you out with this situation. You can also find more information about penalty relief on the IRS website.

Are Credit Scores Affected By IRS Installment Agreements?

5. Illegal Tax Evasion

Tax avoidance can be defined as a legal measure to use the governing tax body and its set regulations to find a way to pay the lowest tax rate possible. This is not an offence.

However, tax evasion is absolutely illegal as it means taking steps to avoid paying taxes. This is a crime at an individual level and also at the corporate level. 

This takes into account dishonest means or declaring or reporting less income as well as profits or gains that can actually be counted as a part of earnings. In such a case, hefty fine or even imprisonment can be imposed.

In the US, in particular, tax evasion is also known as tax fraud. According to the IRS, around 18-19% of total reportable incomes are still not adequately reported to this day.

6. Notice Of Federal Tax Lien

It is important to know that the Federal Tax Lien is a public document and may show up on your background check. Plus according to Federal Law tax liens can show up on your credit report and take nearly seven years to disappear.

That is a lot of time, which means a lot of investors who are willing to do business with you or those that want to lend you a loan will eventually find out about. 

This will severely impact your ability to get credit. In fact, tax liens are so terrible that they can also afflict damages on your chances to get employed.

During an employment credit checkup, it will definitely come up. While many employers would prefer not to pay heed to it, there are some who consider your ability to pay taxes as a measure of your trustworthiness.

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7. Trouble Qualifying For A Loan

It is essential to know here that while in minor cases, even back taxes do not show up on your background check. The IRS doesn’t report your back taxes to the credit industry.

Hence your credit history remains clean as long as you are simply paying late or asking for an extension.

Hence the question; will my credit scores be affected by the IRS Installment Agreements, absolutely not. 

However if by any chance the money you owe to the IRS exceeds $10,000, then they might file a Federal Tax Lien on you and that is a public declaration.

IRS Communication Mistakes:

The IRS might not be aggressive at first.  But if you ignore their letters and requests, you could face tax liens and levies that take the cash in your bank account, your house, and more.  Work with a tax relief expert to avoid federal tax liens and bank levies.

We already discussed how terrible a Federal Tax Lien could be not only for your credit history but also for getting employed.

However, if you are studying and finding someone to compose your coursework at low prices, then consult assignment writers UK to get the job done.

8. Stealing From Your Neighbors

Avoiding taxes, not paying them on time, and the rest of similar kind of behavior does impose that one is going against the system. Your neighbors, community members, people living in the same area, within a city and the state are all liable to pay taxes. 

When they do, they are supporting the system that keeps us together and gives us the protection we need to survive. When somebody stops paying taxes, they are putting that much of burden on everybody else as the system requires tax money to run correctly.

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Therefore one can say that those who don’t pay taxes are actually stealing from their neighbors who do their rightful duty to pay whatever amount is expected from them.


We certainly do not advise that you take your taxes and their payments in an unserious manner. They can quickly become a grave concern as the IRS charges way more interest than any creditor does, so it’s better not to get on their wrong side. 

Not paying taxes can get you penalized on top of that there are additional interest charges along with the due amount. We strongly recommend saving yourself from following this spiraling case of falling downwards. No one wants to be writhing in debt. All the best for your future endeavors!

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By Melissa Calvert

Melissa Calvert currently works as a Learning and Development Expert and Content Curator at Crowd Writer, a platform for students to buy assignment from professionals. During her free time, she likes to play out country songs on her acoustic guitar for which had received learning lessons during her childhood years.

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