IRS Fresh Start ProgramIRS Fresh Start Program Manhattan

Before getting into the ‘hows’ of IRS, let us first know the ‘whats.’ IRS or the Internal Revenue Service is a government body that deals with the collection and enforcement of taxes and all tax laws. As for the IRS Fresh Start Program, it is a program developed to help taxpayers pay off any substantial debts that they owe to the IRS in six years. In the program, you will be asked to pay taxes according to your current income and the value of your assets (liquid) per month. Tax Debts owed to the IRS.

Do I qualify for IRS Fresh Start?

To answer that question, first, you would need a few things:

  • To qualify for the IRS Fresh Start, you must first ensure that you have no unfiled or missing tax returns. If you do, make sure you have them filled first.
  • Also, you need to make sure that you are current and up to date with your estimated tax payments. Or make sure that all your current withholdings are proper and have been so for the past six months.
  • Your tax debt amount should not exceed $50,000 to qualify for the fresh start program.
  • Taxpayers who are self-employed need to provide sufficient proof of a drop of 25 percent in their net income.
  • An individual taxpayer’s income must be less than $100,000 per year to qualify. In the case of couples, their total earnings should be less than or equal to $200,000.

Can you buy a house if you owe the IRS?

It is not entirely impossible to buy a house when you owe the IRS. However, there may be a few hitches that you might want to deal with. Firstly, the best option here would be to pay off the debt before you process with your estate purchase of mortgage. However, if you are not in the position to pay your debt, then at least try to pay off a little portion of it to show your ability to pay it back. To be specific, the details of your tax debts will further layout your course of action. Therefore, make sure you are honest about your debts so that you can work a way out. That way, your mortgage lender or bank can properly establish what you need to do to get approval.

 

You have to actively work on your tax debt to improve your case. An FHA loan is possible even if you are under tax debt. But, a manual underwriting process is mandatory for the same. The lender needs a legally valid agreement for your willingness to pay the IRS. There are other factors too involving FHA loans, which include your income and credit history. You are placed under the category of high-risk applicants if you owe a tax debt. Therefore, this puts you at a disadvantage among other potential home buyers. Your interest rate may increase even if a mortgage is approved.

Does tax debt affect my credit score?

The effect a tax debt has on your credit depends on various factors. For starters, a tax debt would not really affect your credit score until your tax debt crosses a particular set mark. And once that happens, the IRS will file a notice of Federal Tax Lien on the court. The tax lien can then give the government the right to claim every asset that you own. Only then will your tax debt affect your credit score, which, if reduced, will make getting credit very difficult for you in the future.

 

However, before your tax debts become eligible to affect your credit score, the IRS will send you notices so that you are informed. There are various safeguards in place which ensure your credit score does not deteriorate because of tax debt. For instance, if you have your tax returns ready, but there are still additional taxes pending, then there would not be any significant effect on your credit score. The actions taken by the IRS to recover the tax dues from you can come up in your credit report. A vicious cycle could be in the making since the IRS can also garnish wages. IRS can put levies on your property. This could further affect your credit score, reducing your ability to pay back any debts.

Can I buy a car and house with tax debt?

As already mentioned for a house, more or less, the same applies to the purchase of a car. It is not entirely impossible, but not easy either. Various factors will affect your ability to purchase a vehicle, including the kind of scoring model used, the amount you still owe, and the age of the lien.

 

 

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