A person who earns income will likely be required to pay a percentage of what he earns to the federal government in the form of taxes. This money will be paid to the Internal Revenue Service, the federal tax collecting agency. When a person pays, he calculates the amount he owes using his income and applicable deductions. The IRS generally does not check a person's credit report, as it is immaterial.
A person's credit report is a compendium of information related to loans and lines of credit that she has taken out in the past. In addition to recording what debts the person has assumed, the credit report will include information about when and how the debt was paid back, particularly whether it was done so on time. This report includes no information about the person's income.
Because the credit report contains no information about a person's income and doesn't contain information related to potential deductions from his tax burden, the IRS has no cause to check a person's credit report. Even if the IRS chooses to audit someone and request additional documentation of income, it will not check a person's credit report, as it provides no information relevant to the IRS' work.
The IRS does not divulge everything it does to collect back taxes from people who have not paid them. It is conceivable that the IRS might check a person's credit report if the person was extremely late in paying taxes, -- at the point when the IRS had issued a judgment against her. This is because creditors will often check the credit reports of debtors when collecting on a debt.
Effect on Credit Score
While the IRS will likely not check a person's credit report, the failure to pay taxes may negatively affect that person's credit score, which is calculated using information contained on the individual's credit report. This is because the IRS will often report a delinquent debt to the credit reporting bureaus that put out credit reports. Late debts bring down a person's score, as it makes him appear more of a lending risk.
- "IRS Problem Solver"; Daniel J. Pilla; 2003
- "Economics"; Roger A. Arnold; 2008
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