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Ethical Honest or Flat Out Illegal? Your thoughts please.

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Anonymous
Not applicable

Ethical Honest or Flat Out Illegal? Your thoughts please.

I have been reading these boards for several years and have worked hard to get where I am today, which is not perfect but considerably better than I was before.  I was finally to the point where I would be able to be approved for a mortgage.  Already found the house, which would be well within our means.  Unfortunately, the day before my appointment at the bank, we were notified of an IRS audit.   If I apply for mortgage right now, I do not have any concrete idea if or what I owe the IRS.  My lender is going to use my W-2 only, not tax returns. 

It will kill the deal if I owe money, as I will not be able to pay them all at once and the bank won't loan if I owe the IRS until I have made 12 on time payments to them.  I don't want to be dishonest, but will save a lot of money over what I am paying in rent and will be able to pay the IRS faster if I do owe them.  Opinions as to whether I need to disclose that I might owe the IRS a lot of money.  Thank you in advance.

Message 1 of 13
12 REPLIES 12
ShanetheMortgageMan
Super Contributor

Re: Ethical Honest or Flat Out Illegal? Your thoughts please.

Well you don't owe the IRS anything until they say you owe... so if they audit you and determine you owe, then at that point you should immediately disclose that you owe money to the IRS.  Some lenders will require you to be on a payment plan for 12 months for IRS debt, some will just be OK with you being on a payment plan and making 1 payment... sounds like yours wants 12 months.  Now if you think this will become an issue during the underwriting process, it may be a smart idea to hold off on proceeding until the IRS audit is done, as you wouldn't want to get real far into the homebuying process (i.e. under contract, spending money for appraisal, inspections, etc.) and then not be able to close because of something you knew would potentially cause a problem.  If there is money owed to the IRS, you may want to consider taking out a personal loan to pay the IRS off... sure you'd have payments on a personal loan included in your debt ratio, but the other way you'd have IRS payments to include in your debt ratio.

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Message 2 of 13
Anonymous
Not applicable

Re: Ethical Honest or Flat Out Illegal? Your thoughts please.

Thank you Shane, I was hoping you would be the one to answer, or JM_AM.   Ethically, I don't exactly feel right about it, although technically, I don't owe anything yet.  My luck, the fat lady would start singing at the last minute.

Message 3 of 13
DallasLoanGuy
Super Contributor

Re: Ethical Honest or Flat Out Illegal? Your thoughts please.

what are the chances you owe a lot?

only you know that

 

if i were audited.... i wouldn't owe anything because i don't write off every penny that i possibly can.

 

Retired Lender
Message 4 of 13
Anonymous
Not applicable

Re: Ethical Honest or Flat Out Illegal? Your thoughts please.

I made a rather ridiculous error.  It was an honest mistake, but likely to be costly.   As soon as I did the 2012 taxes I realized 2011 were incorrect, but the IRS must have noticed it the same time, because before I could even fix it (less than 24 hours of me finding the error) the letter from them arrived.

Message 5 of 13
MovingForward_2012
Valued Contributor

Re: Ethical Honest or Flat Out Illegal? Your thoughts please.

Did you do your taxes through HR Block? They will pay your full IRS bill if you are audited. Or did you use turbotax or something like that?

I also agree with taking out a personal loan to pay them back as you will end up paying less, as paying the IRS back directly eliminates some of the penalties and interest.
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Message 6 of 13
JM-AM
Valued Contributor

Re: Ethical Honest or Flat Out Illegal? Your thoughts please.

Lol sometimes the fat lady just needs to let out some hot air.

I just asked my other half about your audit since they are a CPA.

There words..... Being audited does not mean you owe anything. The IRS does random audits all the time. If things were done properly nothing to worry about. If they find an honest mistake (it happens) it is handled usually very quickly with little impact and sometimes just overlooked depending on how serious the mistake was. They mention only you really know if you fudged information or can not show proof of things written off, etc etc... Advice is to be cooperative, friendly and respectful no matter what the outcome is even if its not in your favor. Being ugly puts you on there internal list (which no ones is suppose to know about) which will cause you more headaches down the road.

Things should work out fine and there are lenders that have no issues as long as in repayment plan as mentioned earlier.

I also agree with Shane if you do owe IRS money sometimes it is cheaper to take out a loan to pay it off since the IRS charges you penalties and interest while paying it off in most cases ( not all ).
Good Luck
May all your dreams and wishes become a reality!
Message 7 of 13
DallasLoanGuy
Super Contributor

Re: Ethical Honest or Flat Out Illegal? Your thoughts please.

if it is a few hundred bucks..... no sweat.

if it is ten grand.... you should be sweating....

 

 

Retired Lender
Message 8 of 13
Anonymous
Not applicable

Re: Ethical Honest or Flat Out Illegal? Your thoughts please.

They already did the audit, just don't have results yet.  It was an honest error, and they knew that.  It was for claiming something I had never done before, and I did it (and the documentation of "it") wrong.  I will definitely owe something.  I have a very small budget, so it doesn't take much to be "a lot" to me.  He already said he won't charge me penalties, and they will likely forgive some of the debt because I don't have much income.  I am obviously not looking to buy a really expensive house Smiley Wink.  I just don't particularly want to lose the cheap house I buy due to mortgage fraud.  I might end up with a "home", but really prefer to not live in a prison.  (No actual experience with that, in case you are wondering.)

Message 9 of 13
Anonymous
Not applicable

Re: Ethical Honest or Flat Out Illegal? Your thoughts please.

Likely to be somewhere between those two amounts, Dallas Loan Guy.  He said it likely is not a million.  Whew.

Message 10 of 13
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