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Valued Member
GPMDRL
Posts: 38
Registered: ‎04-20-2012
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Self employed with a 2012 tax balance

Hi. I plan on applying for a mortgage in April or May. I am self employed and under estimated my income in 2012. I know I'll owe about $10k in taxes when I file. I talked to a loan officer before I realized this and told him my 730 credit score, $0 debt etc. and he said I was in great shape for a loan. Here's my question, I know they check my filed taxes to confirm what I claim but will the loan officer see if I paid my 2012 taxes yet?  I was going to past for an IRS payment plan when I filed. If unpaid taxes show then it will put me back as I don't want a debt that large when I apply. Any info on the subject would be most helpful. Thanks!

Valued Contributor
MovingForward_2012
Posts: 3,406
Registered: ‎12-19-2012
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Re: Self employed with a 2012 tax balance

Usually the IRS will file a tax lien when your taxes owed are $10,000 or more. It usually occurs a month after the IRS accepts your return. Can you pay the back taxes owed in full or will you have to do a payment plan? If they file a tax lien before you close, you probably won't get approved.
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chasmith
Posts: 1,062
Registered: ‎05-26-2010
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Re: Self employed with a 2012 tax balance

IRS doesn't move that fast, and no longer files liens instantly.  But your problem is they'll want a copy of your tax return and it will show unpaid taxes.  (don't even think about faking it).  So unless you can close before the lender requires tax returns for last year, you may have a problem.

 

I owed about 50% more in tax last year, waited until second notice in June and offered a single payment in October.  No lien.

BK7 Filed 8/11/2009 Discharged 11/23/2009. Purchased new home 4/11/2012
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Valued Contributor
MovingForward_2012
Posts: 3,406
Registered: ‎12-19-2012
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Re: Self employed with a 2012 tax balance

They moved pretty quickly on me in 2005. I filed and a month later got the enormous $10,000 bill in a month and called to setup a payment plan. After they setup the payment plan they said oh, and we are going to have to file a lien. At that time I had 2 BKs on my credit report and I told them a tax lien would be utterly devastating. They told me sorry but if it is $10,000 or more, we have to file a lien. I said ok. Next thing that happened was NO LIEN! Someone there had mercy on me! So I finally pay the remaining balance off this year with my tax refund. So the timeframe probably varies from 1-4 months after you file depending on when you get your bill and when you call them.
Cards: Orchard Bank ($1100) | Cap1 Cash Rewards ($2500) | Chase Freedom ($1000) | Best Buy ($2500) | Discover It ($1000) | Barclay Rewards ($2500) | Current scores: EX FAKO: 684, CK TU: 649, FICO EQ: 680, FICO TU: 698, FICO EX: 658 Happy Homeowner Since 2/6/13! :smileyhappy: Last App: 4/5/13 Gardening until July 2014
Valued Contributor
chasmith
Posts: 1,062
Registered: ‎05-26-2010
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Re: Self employed with a 2012 tax balance

Things have changed within the past two years on amounts $25,000 and less.  If you make and keep a payment arrangement they won't file a lien - where in 2005 they definitely would have.

 

 

BK7 Filed 8/11/2009 Discharged 11/23/2009. Purchased new home 4/11/2012
Starting Score:11/16/2009 EQ 566 11/16/2009 TU 538
Interim Score: 12/27/2012 EQ 683 09/17/2012 EX (lender) 670 1/01/2013 TU 701
Current Score: 11/06/2013 EQ 708 11/06/2013 EX 702 11/16/2013 702 11/06/2013 TU 729
Goal Score: EQ 740 EX 740 TU 740
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Valued Contributor
MovingForward_2012
Posts: 3,406
Registered: ‎12-19-2012
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Re: Self employed with a 2012 tax balance

Interesting! I didn't know the rules changed. That is great news for the OP but there is still the question on how the lender will view that large sum of debt to the IRS.
Cards: Orchard Bank ($1100) | Cap1 Cash Rewards ($2500) | Chase Freedom ($1000) | Best Buy ($2500) | Discover It ($1000) | Barclay Rewards ($2500) | Current scores: EX FAKO: 684, CK TU: 649, FICO EQ: 680, FICO TU: 698, FICO EX: 658 Happy Homeowner Since 2/6/13! :smileyhappy: Last App: 4/5/13 Gardening until July 2014
Valued Member
GPMDRL
Posts: 38
Registered: ‎04-20-2012
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Re: Self employed with a 2012 tax balance

Good info so far.  I didn't even think of a lien!  Oh my.  I need to file my 2012 taxes before putting in for a mortgage just because we had such a great year, the income amount shown will help a lot.  So applying before filing taxes is not an option.  So the thing is, the lender looks at my returns, but do they see I still owe???  I don't like the idea of filing on April 15, applying for mortgage a few days later and hope the unpaid bill doesn't show up until after I close.  I'll prob have to break payments up over a few monthswhich will prevent me from applying until late 2013 instead of this spring.  I was hoping lender would just see I filed and not that I still had a balance :smileyhappy:  Bummed i let this happen to me

Valued Contributor
MovingForward_2012
Posts: 3,406
Registered: ‎12-19-2012
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Re: Self employed with a 2012 tax balance


GPMDRL wrote:

Good info so far.  I didn't even think of a lien!  Oh my.  I need to file my 2012 taxes before putting in for a mortgage just because we had such a great year, the income amount shown will help a lot.  So applying before filing taxes is not an option.  So the thing is, the lender looks at my returns, but do they see I still owe???  I don't like the idea of filing on April 15, applying for mortgage a few days later and hope the unpaid bill doesn't show up until after I close.  I'll prob have to break payments up over a few monthswhich will prevent me from applying until late 2013 instead of this spring.  I was hoping lender would just see I filed and not that I still had a balance :smileyhappy:  Bummed i let this happen to me


I wish I could say that was the case but in reality, the underwriter looks at every number on every document you give them.  They comb through it very thoroughly and then write their conditions that must be satisfied for approval. I don't know what the condition might be if they have concerns with a high debt owed on one of your IRS tax returns. You usually have to go back 2-3 years.

Couldn't you close before you file? In other words, go on contract very soon?  All you need to give them is the W2 or the form for self-employed income for last year to get approved for a higher amount or some other proof of income (bank deposits?).  In my case, I am in underwriting right now and they didn't ask me for 2012 return because I haven't filed it yet but they are using the income from salary for last year based on my year end paystub...I'm still waiting for my W2's to come in the mail.  What I wrote is not definitive...just throwing out ideas.  

Cards: Orchard Bank ($1100) | Cap1 Cash Rewards ($2500) | Chase Freedom ($1000) | Best Buy ($2500) | Discover It ($1000) | Barclay Rewards ($2500) | Current scores: EX FAKO: 684, CK TU: 649, FICO EQ: 680, FICO TU: 698, FICO EX: 658 Happy Homeowner Since 2/6/13! :smileyhappy: Last App: 4/5/13 Gardening until July 2014
Valued Contributor
chasmith
Posts: 1,062
Registered: ‎05-26-2010
0

Re: Self employed with a 2012 tax balance

So as a self-employed borrower you're probably going to get looked at closely.  Things that look like you have a tendency to "chisel" will only work against you.  The lender might not even give credit for your great year but do some sort of averaging.

 

If you have zero debt, why don't you do what could be considered the responsible thing.  Borrow the $12K, a five year loan should yield payments of $330 a month or so.  If that kills your DTI then you're buying more than you can afford.  But this is readily explained - "I had a great year, underestimated taxes and have taken steps to be sure I'm not under-wiheld again".  Then take those steps.  If you get the money before the end of this month you can even put it on your final quarter estimated taxes.

 

 

BK7 Filed 8/11/2009 Discharged 11/23/2009. Purchased new home 4/11/2012
Starting Score:11/16/2009 EQ 566 11/16/2009 TU 538
Interim Score: 12/27/2012 EQ 683 09/17/2012 EX (lender) 670 1/01/2013 TU 701
Current Score: 11/06/2013 EQ 708 11/06/2013 EX 702 11/16/2013 702 11/06/2013 TU 729
Goal Score: EQ 740 EX 740 TU 740
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Senior Contributor
StartingOver10
Posts: 3,924
Registered: ‎03-06-2010
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Re: Self employed with a 2012 tax balance


chasmith wrote:

So as a self-employed borrower you're probably going to get looked at closely.  Things that look like you have a tendency to "chisel" will only work against you.  The lender might not even give credit for your great year but do some sort of averaging.

 

If you have zero debt, why don't you do what could be considered the responsible thing.  Borrow the $12K, a five year loan should yield payments of $330 a month or so.  If that kills your DTI then you're buying more than you can afford.  But this is readily explained - "I had a great year, underestimated taxes and have taken steps to be sure I'm not under-wiheld again".  Then take those steps.  If you get the money before the end of this month you can even put it on your final quarter estimated taxes.

 

 


+1


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