If you’re like most people, the thought of doing your taxes and getting them filed fills you with dread. There is nothing quite as complicated and confusing as the U.S. tax code, so you might be thinking about filing an extension. Before you do, however, you want to consider any consequences it might have on your credit score.
What is an Income Tax Extension
As you know, the deadline to file your taxes each year is April 15th. An extension gives you an additional six months to file. That means you have until October 15th. While the process to request an extension is pretty easy, you need to keep in mind that the extension is only for the paperwork.
That means you will still need to estimate how much you owe in taxes and pay that amount by the April 15th deadline (April 17 in 2017).
Will an Income Tax Extension Hurt Your Credit?
There is good news here. Filing an income tax extension does not hurt your credit. In fact, it isn’t reported to the three major credit reporting agencies at all. This is due to the fact that if you are filing an income tax extension you are still paying your estimated tax bill on time.
The IRS is not allowed to share with anyone your tax information which is why the credit agencies are not notified. This all changes, of course, if you don’t pay your taxes.
What Happens if You File an Extension and Don’t Pay Your Taxes?
If you don’t pay your taxes then very quickly the IRS will start charging you interest and penalties. If the amount you own is over $10,000 they will also automatically file a tax lien. This lien will show up on your credit report and will fall into the seriously negative category.
In addition, this lien can stay on your credit report until your tax liability has been paid in full. Once it has been, you can request the lien to be withdrawn and then removed from your credit reports.
This is a road you really don’t want to go down. Instead, if you find you are having difficulties paying your taxes when you file your income tax extension, you should look for another source of income to pay the amount you own on time.
Options for Paying Your Taxes when You File an Income Tax Extension
You have a few options to pay your taxes if you don’t have the cash. You can always set up a payment plan with the IRS. If the amount you own is small and you are making the payments on time, then they typically don’t show up on your credit score. However, if you owe a large amount, you can expect to see a tax lien filed against you.
Another option is to use a credit card or personal loan to pay off your taxes once you have filed an income tax extension. While there is interest associated with both of these options, it is always better to owe a lender money than the IRS.
This information was brought to you by BetterLoanChoice
Are you looking for a bad credit loan? Or perhaps your credit is in good shape and you just had an unexpected expense pop up? BetterLoanChoice is an online source to match people of multiple credit types for personal loans with a lender. Our form is quick and easy. If you’re looking for a personal loan (no matter good credit loans or bad credit loans), click here to get started now!