How to File Taxes When You Have Bad Credit
While your credit score impacts nearly every other part of your financial life, it has very little to do with your taxes.
Neither federal nor state governments consider your credit score for any part of your tax return. As a result, it really doesn’t matter whether you have bad credit or not when you file your taxes.
The correct procedure for filing taxes with bad credit is the same as filing taxes with good credit.
1. Pay taxes throughout the year.
Throughout the year, you are supposed to be paying taxes to the IRS.
For most workers, this happens automatically through their employers. If you are working for someone else, you see with every paycheck money is being deducted for taxes, so you should be fine.
If you’re self-employed, you need to handle these taxes yourself. You need to pay a quarter of your estimated tax liability four times a year: April 15, June 15, September 15 and December 15.
To figure out how much you need to owe, you need to fill out Tax Form 1040 ES.
2. File your return by April 15.
For each year, you need to file your completed tax return by April 15 of the following year. In other words, you need to submit your 2013 tax return by April 15 of 2014.
Once again, don’t worry about your bad credit score. You’ll notice this never comes up on the tax paperwork. Simply complete your return and see if you owe any more taxes or if you are entitled to a refund.
If you do owe taxes, be sure to pay by April 15.
“Make sure to pay everything on time. Tax
problems could make your score even worse.”
3. Collect your refund as normal.
If you are entitled to a refund, this money will come in regardless of your credit score or your outstanding debts.
If you have debt problems, that’s an issue between you and your creditors. The government isn’t involved.
You’ll get your tax refund and it’s up to you whether or not you want to use the money to pay down your debts.
4. Always pay your property taxes on time.
One of the few tax scenarios that could further damage your credit score is when you don’t pay your property taxes on time.
You owe property taxes when you own a house. This money goes to your local county and the amount you owe is based on the value of your property.
If you don’t pay these taxes, your county could put a lien against the home. This means you wouldn’t be allowed to sell the property.
In addition, a lien shows up on your credit report as a negative judgment, so this will hurt your score.
5. Delaying your taxes counts as a loan.
If you are having financial problems and can’t pay your taxes, the IRS could react a couple different ways – both impact your credit score.
First, they could reach an agreement with you and set a later payment date. This shows up on your credit report as an outstanding loan.
If you don’t reach an agreement, the IRS could place a lien against your assets. This shows up on your credit report as a negative judgment. Reaching an agreement is a better outcome, but ideally you want to avoid both situations.
As you can see, a bad credit score shouldn’t get in the way of you filing your taxes normally. Just make sure to pay everything on time or else tax problems could make your score even worse.
Photo source: turner.com.