A whopping 65% of Americans own their own homes. The remainder either rent, live with family members, or suffer from homelessness. If you haven’t become a homeowner, then you likely have your reasons. Are you currently not pursuing home ownership because you’re uncertain about your tax status? Have you found yourself wondering, If I owe taxes, can I still buy a house? The last thing you want to do is invest in a home only to have to forfeit it to the IRS. Thankfully, you don’t have to! If you’re interested in learning more about buying a house with IRS debt, then you’ve come to the right place. Read on to learn everything you need to know about becoming a homeowner, even if you owe back taxes.
Can You Buy a House if You Owe Taxes?
The American Dream often involves homeownership, so if you’re getting older, you’re likely considering whether now is the right time to buy a home. But, there’s just one problem. You haven’t paid your taxes over the past few years, and you do owe a significant amount of back taxes to the IRS. Can you still buy a house? The short answer is yes. It will take some hard work on your part, though, and the road won’t be as straightforward as it will be for someone who doesn’t owe money in back taxes. You’ll need to first learn about and understand the real consequences of not paying taxes. Depending on how long it has been since you filed or how much you owe, the IRS could already have started pursuing collection actions. If you don’t have any assets, then you might not realize that you could already have a tax levy against you. A tax levy is legal permission for the IRS to seize your assets or property to settle a tax debt. If you’ve received a “Final Notice of Intent to Levy” document in the mail, then the IRS likely already has this legal measure in place. If you are in this situation or you’re not sure about your tax levy status, it’s crucial that you speak with a tax expert ASAP. If you do end up securing a home without attempting to settle your tax debt situation with the IRS, then the IRS could utilize their tax levy to take it away from you. You might also already be facing significant IRS penalties, like wage garnishment, which can make it harder to buy your home. If you’re struggling under the weight of collection efforts but want to buy a home, then you do have options. Get more details about how you can move forward with your homebuying aspirations even while you still owe back taxes below.
Your Guide to Buying a House With Back Owed Taxes
So, what should you do if you want to buy a home but you’re unsure about your tax situation? If you’re not sure whether you owe taxes or how much you owe, then your first step is to identify where you fell short. You may need to get in contact with the IRS to determine what years you didn’t file for or what years have errors. You’ll need to rectify those errors by filing the correct tax returns for each year you missed. The IRS will accept your forms, process them, and then let you know how much you still owe. Your best option at this point is to completely pay off your back taxes, but this usually isn’t an option for most Americans. After all, if you had the money to pay off your tax debt, then you probably would have when they were originally due! Don’t panic. There are plenty of options for you if you can’t pay off your tax debt right away. The IRS will work with you as long as you prove that you’re not intentionally avoiding paying your taxes. Not taking any action at all, though, could be viewed as evasive. If the government suspects you’re willingly avoiding paying your taxes while you have the means to do so, then they will likely take action against you. That’s why you need to work with the IRS to come up with a tax debt negotiation that works for both parties. We’ll get into more detail about that below. Remember, once you initiate contact with the IRS, they’ll be looking into your accounts. Depending on how much time has passed since you last filed your taxes, the IRS may have stopped attempting to collect from you. Once they have your current contact information, things might change. To avoid getting hit with collection efforts, criminal charges, or other penalties, it’s advised that you speak with a tax professional about your situation before you get in touch with the IRS.
How to Tackle Your Tax Debt Before Buying a House
So, how can you tackle your tax debt and start to buy your own home? Both are possible! You don’t have to pay off all your debt to qualify for a home loan. You also don’t have to pay off all your debt to avoid penalties, criminal charges, or collection efforts. All you need to do is show the IRS that you aren’t willingly avoiding your tax bill. Here are the most common tax debt negotiation methods Americans utilize when they don’t have money to pay their tax debt right away:
- Installment Agreements
- Currently Non-Collectible (CNC)
- Offer in Compromise (OIC)
- Innocent Spouse Relief
- Negotiation by Default
Often, the best solution is to enter into an installment agreement with the IRS. An installment agreement is like a payment plan between you and the IRS. You pay down your tax debt each month, and in exchange, the IRS won’t pursue collection efforts or criminal charges against you for your debt. An Offer in Compromise could help you pay less than what you owe through a reduced payment plan. The IRS must determine that you’re experiencing financial hardship, though. You could also get filed under Currently Non-Collectible status if you can prove that you really can’t pay off your tax debt. Did you know that you could also have your tax debt disappear through Negotiation by Default? There is a statute of limitations on tax debt, which is usually 10 years from the date your tax debt was originally assessed. If enough time passes without the IRS taking action, then you could end up not owing the IRS anything! If you believe you may have tax debt that has already expired, it’s wise to consult with a tax professional to ensure that’s the case.
Are You Considering Buying a House When You Owe the IRS?
If you owe the IRS money in back taxes, then you’re in good company. Right now, a whopping 11.23 million Americans are in the same position that you are. Despite that, many of them own their own homes or plan on purchasing one in the coming years. How is that possible? So long as you’re actively working on reducing your tax debt, the IRS will work with you, too. Keep in mind that there’s no benefit to penalizing you if the IRS knows they won’t be able to collect what you owe. Instead, they have an incentive to help keep you on your feet and working so that you can continue to be a source of revenue for them no matter how small. Are you getting ready to buy a house while owing the IRS back taxes? You don’t have to face this situation alone. The experts at Tax Group Center specialize in providing affordable solutions to individuals who owe the IRS. Our tax attorneys, CPAs, and certified tax consultants will work together with you to create a customized tax debt plan that works for both you and the IRS. Are you ready to get started? Leave your name, email address, and phone number on our online form now to hear back from one of our agents as soon as possible.