When it comes to income-tax season, there are generally two types of people: those who expect a refund, and those who are pretty sure they owe. People who expect a refund tend to file early so they can get their money back as quickly as possible.  Those who expect to owe often hold off on filing as long as possible, either to find ways to reduce their tax liability or to figure out how to come up with the money they owe.

If you owe the government money this tax season, you need to be aware that not paying on time — or worse, not filing at all — can result in a blemish on your credit report.

The wisest move is to pay your tax debt as soon as you know you owe it. If you don’t, according to IRS Publication 594 (PDF), the IRS will send a “Notice of Tax Due and Demand for Payment.” The amount in this bill will include your tax liability as well as the interest payment and any penalties owed.

If your tax debt isn’t paid in full, the federal government may file a “Notice of Federal Tax Lien” against your property. A tax lien is a public record, which means it will be reported to the credit agencies —TransUnion, Experian, and Equifax.

A lien can affect your ability to take out a loan, get a credit card, or even sign a lease. Once a lien is on your credit report, it will remain there for seven years unless you can successfully dispute it and have it removed. If you have a lien placed on your property and later removed, you may want to check your credit reports to ensure that the information in your files is accurate and up-to-date.

Knowing what your credit scores are and what’s in your credit reports is vital to helping you make informed decisions about your purchases.

Have you ever had a lien placed on your property?  If so, what were the consequences you faced?

Tags: Credit Score, credit scores, tax returns, taxes