How will setting up an installment plan with the IRS affect my credit score?
An installment plan by itself won’t affect your credit score, says Gerri Detweiler, personal finance adviser at Credit.com. But if you owe more than $5,000 when you set up the plan, there’s a good chance the IRS will file a Notice of Federal Tax Lien, and that can have a devastating effect on your credit score, she says. A tax lien notice reduces the average credit score by 100 points, according to a 2009 report by the IRS National Taxpayer Advocate. Worse, a federal tax lien notice will remain on your credit report for seven years after your tax debt is paid, Detweiler says. If you owe the IRS more than $5,000, consider using a credit card or a family loan to bring your debt under that amount, Detweiler says. That way, you can set up an installment plan for the balance without damaging your score, she says. Q: If I file for an extension, do I get more time to pay? A: In most cases, filing for an extension does not give you more time to pay. There are, however, some exceptions: •Member
