Generally, your business taxes don’t affect your credit standing, but when you fail to pay them in a timely fashion, that’s when your score can go down. It won’t always happen, though; you will have to owe the IRS an amount that’s equal or more than their thresholds. That’s because your credit score can only be affected if the IRS issues you a Notice of Federal Tax Lien. At present, the IRS issues that notice for debt amounting to $10,000 or more, but they can also issue it to debts of lower value when (in their terms) “circumstances warrant”.
Why Should This Concern You?
Your credit reports can be tarnished with this federal debt for seven years. For individuals, this may be manageable, but for business owners, it may be difficult to bear. During that period, you may not get the best financing deals for your company. It could prevent you altogether from getting approved for loans for your company equipment, vehicles, and other purposes. Likewise, if you don’t clear your Notice of Federal Tax Lien, any proceeds from selling your assets and your other revenues can be collected by the IRS.
How Do You Prevent It?
To avoid negative consequences to your credit, you need to settle your tax bill with the IRS before they even issue a tax lien. Work with experienced IRS tax lawyers to explore your options, particularly the offer in compromise if you can’t pay your tax debt in full.