Self Employed Back Taxes

Anonymous · ‎03-22-2016

I am self employed (sole proprietor) and I owe back taxes. I am in a payment plan and have never been late nor do I have any type of tax lien. Will my mortgage lender use the payments made to the IRS against my DTI? My business is paying my back taxes for me. It does not come out of my personal account, it comes out of my business account. SInce I do it this way will the payments made to the IRS still count against my personal DTI?

Anonymous · ‎03-23-2016

How is your business structured? Mine is setup as a sole prop. and I'm on a installment plan with the IRS. They will be counting the monthly payment into my DTI.

Anonymous · ‎03-23-2016

After reading around online a bit, I have found my payments made to the IRS would count against my DTI. I was paying $2000 a month just to pay off my balance quickly but paying that much seems to really hurt my DTI. I will have those paid off next month but after filing my 2015 taxes I have another payment installment I have to pay to make to the IRS. I signed up for the mininum payment amount on my 2015 taxes so it won't hurt my DTI too much. After I close on the house I will continue with the larger payments.

How did your lender find out about your payments to the IRS? Did you just tell them about the payments or did they see them on your bank statement?

Anonymous · ‎03-23-2016

They require you to disclose any monthly payment obligations that you have even if they aren't on your credit report.

Anonymous · ‎03-23-2016

The lender will most likely obtain tax transcripts from the IRS for the past 2-3 years and any delinquent taxes owed will show there. And yes, you'll be asked on the mortgage application most likely about it and you'll want to be honest. If the business is paying for them its still going to affect your debt ratios as your company has an extra $2k/mo of expense which means $2k less the owner is receiving. Ask your lender and see if they'll just reduce the business income or add it to the debt. You'd rather them just reduce the income as it'll have less impact on your debt ratios.