If you are an aspiring homeowner, you would want to have your finances in order before applying for a mortgage. However, if you’re hesitant to buy a property because you have tax problems you still need to address, don’t worry—owning a home is still possible for you.
Here are some tips to consider taking into account if you want to buy a home even when you’re unsure of your tax situation.
Know the Problem
Before knowing what to do, it’s best to grasp how you have been doing, including addressing your tax problem. Tax problems can come from three things: not filing taxes, not knowing how much tax to pay, and having tax debt.
Not Filing Taxes
Unfiled taxes can cause uncertainties in your finances, penalties, and even legal repercussions. If you’re unsure if you can file your taxes late, the answer is yes. Remember, it’s better to file your taxes late than not file them at all.
Not Knowing How Much Taxes to Pay
When you don’t know how much taxes you owe, you can inquire about your balance in an IRS office or request a transcript. You can also see a tax resolution consultant.
Having Tax Debt
It’s good that you filed your taxes and know how much you owe the government. Although you can’t pay your taxes in full at the moment, there are still ways that you can slowly pay your taxes that your finances can handle without the government seizing your assets.
You will not have issues buying a home or applying for a mortgage if you properly filed your taxes and paid all your dues even though they’re late. Tax debt, however, is a trickier issue to solve—it’s tough but not impossible.
Buying a Home with Tax Debt
If you have an existing tax debt, the good news is that you don’t have to pay all of it to qualify for a home loan. Your main concern now is to get your finances in check, starting with payment negotiations with the IRS.
Tax Installment Plans
Tax installment plans are arrangements between a taxpayer and the IRS where the agency allows taxpayers with tax debts less than $100,000 to make scheduled payments over time. With the amount due, taxpayers would have to pay a 0.25 percent interest for every month that they cannot completely pay off the debt.
Offer in Compromise
Offer in Compromise is another agreement between the IRS and the taxpayer. However, in this case, the taxpayer expresses that they cannot pay their taxes. The IRS offers terms that the taxpayer can negotiate and pay in 20 percent lump sum and the 80 percent through periodic payments that are fewer than five installments.
Currently Non-Collectible (CNC) is when the taxpayer has proven to the IRS that they have no means to pay their taxes. However, it may also indicate that you cannot buy a new home. Legal action may be taken if a CNC is filed, but the taxpayer acquires a new property days after.
Negotiation by Default
If the IRS does not make a move to collect a taxpayer’s debt within ten years, then it’s the same as the taxpayer not owing anything at all. But in case the IRS finds your debt in less than ten years, you could face penalties on top of interest.
Among these arrangements, tax resolution through an installment plan is the best option. Although it weighs heavier on your pocketbook, installment plans can show mortgage lenders that you can pay for your new home and not default on your payments.
You can be a homeowner despite having tax debt. You have to make sure you address the problem, get your finances in order, and negotiate payments rather than wait for it to disappear.
If you need experienced tax resolution consultants in Birmingham, AL, Axiom Tax Resolution Group is here for you. We help you work out the best way to pay your debt and get your dream home too. Team up with us today!