Can I Buy a House If I Have Back Taxes?

Are you planning to buy a home but worried that having back taxes will affect your ability to get a mortgage? The truth is that you have a good reason to be concerned. The answer depends on how big your tax liability is and whether the IRS has made a legal claim on your assets.

You have back taxes if you owe taxes during a particular year and don’t pay them by the due date.. And your debt will continue to increase when you incur interest and tax penalties. And if the back taxes you owe is $10,000 or more, the tax authorities will likely issue a tax lien. If you get a written tax lien from the IRS and don’t pay your back taxes within ten days, the lien becomes a public record.

You may think that your chances of being approved for a mortgage are good because you have a good credit score. It’s possible that you’ve been able to keep up with all your other credit obligations and have only failed to pay your taxes on time. You may also know that tax liens have stopped appearing on credit reports since 2018. The IRS also does not report your tax debt to consumer credit bureaus.

But while tax liens have stopped appearing on credit reports and cannot affect your credit score, lenders can still discover your tax lien by searching public records. For lenders, a tax lien indicates your inability to fulfill financial obligations and will, therefore, raise a red flag. And lenders may use the tax lien as grounds for denying your mortgage application.

What should I do to have a tax lien removed?

To get a tax lien removed, call a tax professional. The truth is that paying your back taxes is the quickest answer, but for obvious reasons, it is not the easiest solution. You may think that using the money that you’ve saved up for a home down payment to pay your tax debt is the best strategy. But is it? Before you make any bold moves, consider what your financial situation will be after using up your savings.

Yes, you can pay taxes with a credit card or a personal loan. However, credit card debt or late payments on your personal loan can also affect your credit score. Consequently, the negative impact on your credit score can also hurt your mortgage application. Also, there are other factors to consider such as rising interest rates.

The IRS may suggest solutions such as an OIC (offer in compromise) or a payment plan. However, these approaches come with certain rules and requirements. A tax professional with extensive experience in tax resolution can help you resolve your issues with back taxes and get a tax lien removed.

The best part about having a tax professional on your side is that you never have to communicate with the IRS directly. Contact us at 877-447-7529 and let us fight the IRS for you. We’re here to help Chicago taxpayers with their tax concerns and troubles.