Taxes and Your Credit Score

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H&R Block is one of the world’s largest tax services providers.

We are not a government entity and we are not the IRS.

We have been serving the Latino community since 1955.

We have offices in the U.S., Puerto Rico, Canada, Australia and other countries.

Who is H&R Block?

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We have over 8,000 bilingual tax professionals who communicate in English and Spanish.

We have over 2,500 offices located in the heart of predominantly Latino communities.

We served over 1.2 million Latino clients this past tax season.

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Who is H&R Block?

H&R Block Tax Professionals are rigorously trained and deliver exceptional tax expertise.

We prepare federal, state and local tax returns for individuals and businesses.

We also offer other services such as ITIN* (Tax ID) application services, small business services and related financial solutions.

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What does H&R Block do?

*Please note H&R Block does not offer immigration services.

Valid identification card (specify) Social Security Number (SSN) or

your ITIN (Tax ID) Income reporting documents (W-2,

1099-MISC, etc.) Information on your spouse,

children and other dependents (SSN or ITIN, dates of birth, etc.)

Additional documents (see checklist).

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What do you need to file taxes?

ITIN is an Individual Taxpayer Identification Number. Also known as “Tax ID” or “Taxpayer ID.” If you earn money in the United States, but you don't have or

qualify for a Social Security Number, you can apply for an ITIN from the IRS for you and your dependents in order to file your tax return.

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What is an ITIN?

It serves as your identification number for filing your federal taxes.

If you do not qualify to have a Social Security Number, you will need an ITIN to file your tax return.

Filing a tax return may allow you to get a refund of your income tax withholding, if you qualify.

When you file your taxes, you can claim dependents you support in Mexico or Canada.• You must have sent more than 50% of the support they need to

live and must meet certain other requirements.• Documentation of support for dependents is recommended.• Claiming dependents may provide a larger tax refund.

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Why should you get an ITIN?

With an ITIN you may be able to open a bank account or apply for a mortgage loan.

By using your ITIN number to apply for loans or credit cards you can begin to establish a credit history in the United States.

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Additional Benefits

Tax-deductible interest• Borrowers of money may deduct the

interest paid on certain types of loans• Mortgage interest deductions• Student loan interest deductions• Business expense deductions• Investment expense deductions

Lenders of money usually need to report interest earned on a loan as income

Bad debt• A loss that results from the failure of a debtor to repay a loan• The taxpayer who made the loan can sometimes deduct the

amount of the bad debt for income tax purposes

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Debt Deductions

Using a Credit Card• Debt can affect your credit score• Advantages

− Convenient way to pay your tax bill, especially if you file your return electronically− Earn credit card rewards or cash back

• Disadvantages− IRS fees to a third-party payment processor

> Processors charge between 1.88% and 2.35%, which would add $94 to $117.50 to a $5,000 tax bill; minimum credit-card fee ranges from $2.99 to $3.95

− Credit card interest if you don't pay off your balance before the due date− Your credit score could decrease if the amount you charge to your card puts you

near your credit limit Using a Debit Card

• IRS fees to a third-party payment processor− Flat fee is $2.99 to $3.95, depending on the payment processor− However, two of the payment processors charge a percentage (1.88% or 2.35%)

if you use a MasterCard debit card rather than a flat fee

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Paying Your Taxes with a Card

P2P Loans• “Personal” or “Peer to Peer” loans• Typically reported as installment loans• Can be helpful as a credit reference

Mortgage Loans• Options are available for prospective home buyers with little or

no credit

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Paying Your Taxes with a Loan

If you file your taxes late, you may be subject to penalties and interest

Between you and the government; credit reporting bureaus are not notified

Two different types of payment with IRS• IRS Installment Plan

− Lets you pay the tax you owe in monthly installments− Charges a set up fee and interest− In most cases, these payment plans don’t appear on your credit.

However, if you owe a large amount, you could wind up with a Notice of Federal Tax Lien filed against you, and that will definitely affect your credit.

• Number of Days− If you can pay off your debts within a certain number of days (usually

between 30 and 120 days), you may be able to avoid the fees that come with the installment plans, and will typically end up paying less in interest and penalty charges.

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Late Tax Payments

Financial Hardship• For instance, if you recently lost your job and paying your taxes

would cause financial hardship, it might be difficult to know how much you can pay back month-to-month.

• You can request that the IRS extend the due date of filing your return by six months.

• However, interest can still accrue on any unpaid tax due at the April 15th deadline.

Offer In Compromise• Lets you settle your tax debt for less than you owe, if you can prove

you don't have the means to pay and it is very unlikely that you ever will

• This is discretionary on the part of the IRS, which only accepts about 25% of the submitted applications

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Late Tax Payments

Tax debt does not always affect credit• Finding out that you owe the IRS money• Filing an extension• IRS Payment Plan or Offer in Compromise

But sometimes it does• When you don’t have the money to pay what you owe• You don’t work out a solution and your debt remains unpaid• The IRS can choose to file a federal tax lien in court to try to

ensure repayment• In order for this to happen, your debt generally has to exceed a

certain threshold—right now that’s $10,000

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How Taxes Affect Your Credit Score

If you file your tax return expecting a refund, but are told by the IRS that your refund has already been issued

A problem that’s expected to reach $21 billion during the next five years and the IRS is not doing a lot at this point to protect taxpayers

Won’t automatically affect your credit reports Place a fraud alert or credit freeze on your credit reports

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Tax-Related Identity Theft

Removing a tax lien• Tax liens are considered very negative• Effect on your credit score depends on how old the lien is

− A tax lien will stay on your credit until it’s paid in full− Generally can’t be discharged in bankruptcy− The longer you let past years’ taxes sit unpaid, the harder it will hit the

rest of your life> Until recently, tax liens remained on credit reports for seven years from the

date they were paid or satisfied> Under the IRS Fresh Start program announced in early 2011, you can

request that the IRS withdraw the lien if you have paid or satisfied the tax debt. This is not something that happens automatically. You must ask.

• The sooner you pay your past tax, the sooner it can stop affecting your life

• Patience; extremely time-consuming process

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Rebuilding Credit

Removing a tax lien• When paid in full

− Request, in writing, that the IRS notify credit reporting agencies, creditors or financial institutions

− Also make request for removal to credit bureau− Check property records to be sure the lien isn’t showing up against the

property

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Rebuilding Credit

Importance of a trusted, trained tax professional• Receives on-going training• Experienced• Registered with IRS as required by law• Available year-round• Guarantees accuracy of their work, paying penalties and interest

if they made or caused an error on your tax return• Available for consultation in the event you are audited

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Seek An Expert

Visit us online at hrblock.com/espanol. Call us at 1-800-HRBLOCK (800-472-5625).

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Contact us!

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Questions?THANK YOU!