Taking the step of establishing a payment agreement with the IRS does not generate any reports to the credit bureaus. As mentioned above, the IRS cannot share your personally identifiable information. While lenders could find a notice of a federal tax lien, the payment plan itself wouldn't. An installment agreement to pay your back taxes won't adversely affect your credit.
However, not paying your taxes or filing a late tax return can easily turn a good credit score into a bad one, since the IRS can impose a tax levy against you. A lien can affect your ability to buy a car or a home and will have a negative impact on your credit score. If you're behind on paying your taxes, you can set up an installment agreement with the IRS to update your account. The payments you make under that agreement will not be reported to the credit bureaus, but they will help you pay off your debt over time.
However, these installment plans incur interest and fees, and you'll have to pay a setup fee to set up the plan. IRS payment plans are not considered loans. They are not recorded in your credit reports and do not affect your credit scores. If you are a low-income taxpayer but are unable to make electronic debit payments when you sign up for a DDIA, your user fee will be refunded once you complete the installment agreement.
If the IRS system identifies you as a low-income taxpayer, the online payment agreement tool will automatically reflect the applicable rate. The Office of Management and Budget has directed federal agencies to charge users fees for services such as the installment agreement program. When you still owe previous taxes to the IRS, the agency is likely to be more willing to work with you, for example, allowing you to pay your taxes in monthly installments. When you apply for a payment plan (installment agreement), with certain exceptions, the IRS is generally prohibited from collecting taxes and the IRS's time to collect is suspended or extended while an installment agreement (IA) is pending.
Applicants must submit the form to the IRS within 30 days from the date of their letter of acceptance of the installment agreement to ask the IRS to reconsider their status. Submit your request online through the online payment agreement tool or by phone or by mail by submitting Form 9465, Request for an Installment Agreement. Pay by direct debit (automatic monthly payments from your checking account), also known as an installment direct debit agreement (DDIA). Unlike most types of debt, paying the IRS on time or even making installment payments on time doesn't positively affect your credit.
File all required tax returns on time and pay all taxes in full and on time (contact the IRS to change your current agreement if you are unable to do so). If you are a low-income taxpayer, you will not be charged the user fee if you agree to make direct debit payments through an installment direct debit agreement (DDIA). If you're not eligible for a payment plan through the online payment agreement tool, you may still be able to pay in installments.
