GAO report weighs allowing tax debt to appear on consumer credit reports

Group of Senators wondering if change could help tax collection

Oct 11, 2012 @ 3:04 pm

By Liz Skinner

A group of senators is contemplating allowing the Internal Revenue Service to report directly to consumer credit bureaus the $373 billion that individuals and businesses owe in federal taxes.

The IRS can't report this information directly because of laws aimed at keeping tax return data private. Tax liens, however, are part of the public record and credit bureaus can then pick up that information and use it when compiling credit histories.

A Government Accountability Office review out Wednesday weighed the pros and cons of such a policy switch, but made no recommendations.

The report said fear of a credit ding could encourage more Americans to pay taxes on time. On the flip side, however, errors in reporting by the IRS could affect a citizen's access to credit negatively.

“Taxpayers would be forced to either dispute the inaccurate information to have it corrected or face possible serious consequences such as denial of credit, employment, or housing due to the inaccurate negative information on their credit histories,” the GAO report said.

Senate Finance Committee Chairman Max Baucus, D-Mont., Sen. Orrin Hatch, R-Utah, and Sen. Charles Grassley, R-Iowa, asked the GAO to look into whether this change would help the U.S. government collect more of what's owed to the U.S. Treasury. Other federal agencies already report non-tax debt to credit bureaus to encourage payment of debts to those agencies.

In a letter sent to the three senators, the GAO said millions of individuals and businesses owed about $373 billion in federal taxes as of Sept. 30, 2011.

Before any changes are made, Congress would have to evaluate whether all federal tax debts, or just large balances, should be reported and how often this information would be updated with credit bureaus, the report said.

The full report can be found at gao.gov/products/GAO-12-939

0
Comments

What do you think?

View comments

Recommended for you

Featured video

Events

Martin Dempsey: Geopolitical hotspots (and how they could impact investing)

What are the big international hotspots and how could it affect advisers and investors. Gen. Martin Dempsey, the former chairman of the joinst chiefs of staff, offers his unique perspective.

Video Spotlight

Help Clients Be Prepared, Not Surprised

Sponsored by Prudential

Recommended Video

Path to growth

Latest news & opinion

Brace for steepest rate hikes since 2006 in new year

Citigroup, JPMorgan Chase predict average interest rates across advanced economies will climb to at least 1 percent in 2018.

Why private equity wants a piece of the RIA market

Several factors, including consolidation in the independent advice industry and PE's own growing mountain of cash, are fueling the zeal to invest.

Finra bars former UBS rep for private securities transactions

Regulator says Kenneth Tyrrell engaged in undisclosed trades worth $13 million.

Stripped of fat commissions, nontraded REIT sales tank

The "income, diversify and interest rate" pitch was never the main draw for brokers.

Morgan Stanley fires former Congressman Harold Ford for misconduct

Allegations against the wirehouse's former managing director include sexual harassment, which Ford denies.

X

Subscribe and Save 60%

Premium Access
Print + Digital

Learn more
Subscribe to Print