Job seekers already face plenty of obstacles when looking for employment. Fortunately for most, late or unpaid taxes do not make searching for a job more difficult. However, a poor relationship with the IRS can affect your job hunt in some situations, either directly or indirectly. Late or unpaid taxes may impede your job search in two main ways.
1. Credit Score
The most common way late or unpaid taxes can affect your job search is by impacting your credit score negatively. Once your unpaid debt reaches a certain amount, the IRS has the option to file a tax lien against you. A tax lien will significantly affect your credit score: according to H & R Block, a tax lien has the potential to drop your credit score by as much as 100 points. This is a significant blow, even for someone with a stellar credit rating. A lower credit score means employers who run a credit check are going to be left with a distinctly poorer impression of your sense of personal responsibility and could choose not to hire you. The total amount of unpaid taxes required to pursue a tax lien against an individual is set by the IRS and changes from time to time.
2. Federal or State Work
A second way late or unpaid taxes can impact your job hunt depends on where you are applying for employment. Even though federal law makes your tax records private, it is legal for the IRS to share your tax records with other federal and state agencies. This means employers in the defense industry and government agencies often have access to your tax history. These jobs also often require security clearance. Delinquent debt, with or without a tax lien, is often considered a security risk. Also, remember that employers actively seek information online about prospective employees. Even though tax records are considered private, records can leak, and computers can be hacked. Either risk can potentially expose your private records to prospective employers. However, if you have a good relationship with the IRS, you won't have to worry about something out of your control negatively affecting your job search.
Tax debt can influence your job hunt in other, less direct ways as well. Late or unpaid taxes come with additional fees and penalties as well as jail time in the most serious cases. Fewer financial resources means you have less money to spend on transportation, resumes and websites that bring you to the attention of potential employers. Being in jail makes it extremely difficult to find a job.
If you receive a notification from the IRS informing you of unpaid taxes and are currently out of work, avoid the temptation to postpone communicating with the IRS. Penalties and interest can increase your debt, and suddenly, the size of your tax debt begins to impede your search for employment. Looking for a job is complicated enough. Don’t make it more difficult by allowing your tax debt to grow.
(Photo courtesy of Arvind Balaraman / freedigitalphotos.net)
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