1-800-548-4639Owing back taxes can feel like a huge weight on your shoulders, so it’s normal to question how it might affect your chances of getting a loan. Will the IRS debt block you? Is there a way through?
Here, we’ll break down the process of getting a loan when you owe back taxes.
1. Understand Exactly Where You Stand
Before you start the process, get a clear picture of your taxes. How much do you owe the IRS? For how many years are you behind? Has the IRS filed a lien against you?
It’s important to have these details on hand because lenders will want to see your overall financial picture. It makes a big difference if you can show how you plan to pay off your taxes.
2. Explore IRS Payment Options
The IRS offers payment plans called installment agreements that allow you to pay what you owe over time. Having a payment plan in place shows lenders that you are actively taking steps to resolve your debt, which may improve your chances of achieving loan approval.
3. Gather Your Financial Documents
When you apply for a loan, lenders will ask for proof of income, assets and liabilities. If you owe back taxes, that will also include your tax debt. Be prepared to provide your recent tax returns, proof of income and documentation of any IRS payment plan. Being organized makes the process much smoother and shows lenders that you understand your finances.
4. Talk to Lenders Early
Different lenders handle tax debt differently. Some may require all tax debt to be cleared, while others may approve you as long as you have a payment plan and a steady income.
It’s a good idea to start talking to lenders early. Find out how they approach back taxes, what documentation they need and whether having an IRS payment plan will improve your chances of loan approval. This can save you time and prevent surprises down the line.
5. Submit Your Loan Application
Once you know which lenders are willing to work with you, it’s time to start the application process. During this stage, your financial profile matters. A strong credit score, stable income and reasonable debt-to-income ratio can outweigh concerns about your back taxes.
Honesty is the best policy. Lenders will find out about your tax debt through credit reports or liens, so there’s no hiding it. Instead, focus on proving that you are responsible and capable.
6. Respond to Requests and Follow Through
After you submit your application, lenders might ask for extra documents or clarification. Be responsive. If you’re on an IRS payment plan, promptly provide any updates the lenders request. The more transparent and proactive you are, the smoother the process is, and the higher your chances of securing the loan may be.
7. Finalize the Loan and Stick to Your Plan
If your loan gets approved, congratulations! The next part will be crucial in protecting your credit and preventing financial headaches in the future — you must stick to your loan payments and your IRS payment plan. With a clear budget and tax planning, you can stay on track.
Getting a Loan While Owing Back Taxes Is Possible With the Right Help.
With preparation and clear steps, you can successfully get the financing you need. Working with experienced tax professionals can make all the difference. At BC Tax, we’re committed to helping our clients reduce their tax debt. Our team of Enrolled Agents, CPAs and former IRS agents can help you file your back taxes and alleviate your tax-related stress. Contact us today to get started!
Authored by the BC Tax Insights Team, this article reflects the collective expertise and experience of our seasoned tax professionals. The Insights Team at BC Tax comprises specialists with a deep understanding of various tax scenarios and solutions. With a focus on providing informative, accurate, and practical insights, our goal is to guide readers through the complexities of taxation and financial planning. Every piece is crafted with the intent to help individuals and businesses navigate the ever-evolving world of taxes, ensuring clarity and confidence in decision-making.
