I'm trying to refinance my house, and I have good credit and plenty of equity. But, I'm a small business owner, and I pay my taxes in arrears, meaning I file my return, wait for a bill from the IRS, and set up a payment plan. I always make my payments on time, and have been doing this for years. My question, with all of the rule changes, will this cause a problem with me getting financed??
Thanks so much for your time!
Zak
ANSWER: Thanks for your question - If the IRS hasn't placed any levies or liens against property, it is very unlikely that this information has been reported to the credit agencies - The only potential problem would be the following scenario
You enter into a contract to purchase a home after the April 15th deadline - Being self employed, the lender is going to verify the information on your tax returns with the IRS - They will then discover that you have an unpaid tax liability - In addition to making you pay it prior to you closing, they'll also want a very reasonable explanation as to why it wasn't paid (Cash flow and seasonal earnings are NOT good answers...)
My advice? If you plan on purchasing a home next year, do your best to make quarterly payments as much as you can, and minimize (if not eliminate) any tax liability in the period prior to you buying a home.
There are lots of resources available on the web for the small business owner - The IRS has a small business page, as well as the NASE (National Association for the Self Employed www.nase.org)
Hope this information has been helpful, feel free to post any follow up questions.
Thanks for usiing AllExperts.com!
---------- FOLLOW-UP ----------
QUESTION: So, as far as the underwriting goes as long as I've set up a payment plan (the payment plan is set up after the IRS bills you for the previous years taxes) I'm in the clear? Or is there a new rule that says otherwise?
Answer Sorry for the delayed response... Most lenders are going to require that the amount is paid in full (They treat the IRS as a credit reference, and technically, you're past due - it may lead to concerns about the viability of the business) Best bet? Get the IRS current before the purchase...
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