If I Owe Federal Taxes Will It Affect My Background Check?

Before making a job offer, employers want to know whether potential employees have a history of, say, drug use or employee theft. Background checks are a common hoop for job-seekers to jump through. What the employer checks varies from company to company and with what state law allows. Unpaid taxes aren't usually covered, but it's a possibility.

Tax Background

In most cases, back taxes won't affect your background check. The IRS doesn't report your back taxes to the credit bureaus, so simply paying late or asking for an extension won't show up on your credit history. If, however, you have a substantial unpaid bill -- $10,000, say -- the IRS may file a tax lien on your property. That's going to show up on your credit report, and it can cut your credit score by as much as 100 points.

Impact on Employment

If you paid off your tax debt seven years ago or more, don't worry about it. Federal law says tax liens disappear from your credit report after seven years. If it's more recent, or still current, an employment credit check will turn it up. That may not be a big deal, but some employers treat credit history as a metric for gauging whether you're trustworthy.

Legal Protection

Even if your credit history is troubled, your employer may not get to see it. Some states ban the use of credit scores and history unless they have some relevance to your job. In California, for example, the law only allows it for certain jobs, such as positions where you're handling lots of money. In all states, the employer has to ask you for written permission to research your credit. You can say no, but the employer can then decide not to hire you.

Solving Problems

The best way to prevent back taxes from becoming an issue is to avoid tax liens. Respond to notices from the IRS and if the taxes are seriously late, try to work out a payment plan. If you've paid off a tax lien and your credit report shows you still owe the debt, contact the major credit bureaus. If you present evidence from the IRS that the lien is gone, the bureaus are obligated to correct the misinformation.

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About the Author

A graduate of Oberlin College, Fraser Sherman began writing in 1981. Since then he's researched and written newspaper and magazine stories on city government, court cases, business, real estate and finance, the uses of new technologies and film history. Sherman has worked for more than a decade as a newspaper reporter, and his magazine articles have been published in "Newsweek," "Air & Space," "Backpacker" and "Boys' Life." Sherman is also the author of three film reference books, with a fourth currently under way.

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