Tax Debt

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This topic contains 5 replies, has 4 voices, and was last updated by  TTrumble 19 hours, 23 minutes ago.

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  • #39627

    MMMS
    Member

    Does a state tax debt have to be completely paid off before being qualified for a loan? The taxes are currently on an approved payment plan.

    #39630

    Hello MMMS,

    I can hear Tim yelling now, “you should’ve read your handbook!”. I don’t know the ins and outs with the repayment of taxes, but I can share with you my experience.

    During my 3rd session with my MC he noticed I owed taxes for 2016. I explained to him I was going on a repayment plan and he said great, fax it in. Welp, I received another call later on to explain a repayment plan was not acceptable and I would need to pay off any taxes that was due this year. He did say, state taxes were not required to be paid, but if I go on a repayment plan it would be counted in my DTI. I was a little annoyed as my transcripts and tax returns were available since day 1, but hey I paid them off and canceled the repayment plan so I could proceed with the process. I ended up paying my state taxes as well as I didn’t want anymore surprises (no one can memorize the WHOLE handbook Tim!).

    Hope this helps. I was able to find an from Tim on this topic in 2015.

    Response from Tim on a prior post about back taxes in 2015.

    Hello all,

    With regard to back taxes, at the very least, you must have a documented payment plan in place and be able to show that you have paid in accordance with the payment plan for a minimum of 6 months (possibly 12 months if it is a large amount).

    If you owe taxes this year, they will have to be paid before your file can move forward. If you have already filed, your signed 2014 return needs to be in your file if it is not there already.

    ALL files will need to have their 2014 returns submitted by April 15th. If you filed a Form 4868 (Automatic Extension of Filing Date), your file will not be able to move forward until you have actually filed the return and submitted it to your file.

    Unpaid or back taxes are just about the fastest way to get a “super lien” put on your home, so any tax issues need to be dealt with before you can be qualified.

    #39632

    MMMS
    Member

    This is very helpful!! No federal taxes are owed…just state taxes from prior years. The last two years I was due a refund but that was applied to my previous years balance. I have no problem with it being included in my DTI because I have no other debts except my living expenses. I paid everyone else off. I’ll keep my fingers crossed as to whether this will present qualification issues but Im hoping state taxes won’t be an issue.

    Thank you again for your help!

    #39636

    TTrumble
    Member

    Hello MMMS,

    In the case of state taxes, it may well depend on the state you live in. Don’t forget that a handful of states don’t even have any income taxes, while others legally prohibit closing on a mortgage while there is an outstanding tax debt. Every state will handle back taxes their own way when it comes to establishing payment plans, liens, withholding future refunds, etc. Either your counselor or the underwriter will have to make the final determination.

    If you have a payment plan in place and you have developed a history of paying as scheduled, you may well be okay, especially if it’s not a large amount. A payment plan will at the very least be factored into your budget if there are ten months or more of payments still due, just like any other installment debt.

    The bigger issue may be when you file your 2017 taxes. If there are any taxes due with your 2017 returns, they must be paid in full or you will come to a dead stop without exception until they are paid. You may not incur any new tax debt of any kind.

    Tim Trumble
    Online Operations, NACA
    ttrumble@naca.com

    #39654

    PINEYWOODS
    Member

    With the new tax season approaching, will our counselors make us wait till we file 2017 taxes before we can move any further in the qualification process? (i know we have to have 2 years worth of tax returns on file). I have my 2015 and 2016 tax documents ready.

    #39660

    TTrumble
    Member

    Hello PINEYWOODS,

    Here’s the rundown of what must be done by when:

    As of February 1, 2018, you must have all W2’s received submitted to your NACA file.

    Submit a copy of your 2017 tax return as soon as you file, and absolutely no later than Tuesday, April 17th (which is the tax filing deadline for 2018).

    As noted above, if you file a Form 4868 (Automatic Extension of Filing Date), your file will not be able to move forward until you have actually filed the return and submitted it to your file.

    Also, any taxes due with your 2017 return must be paid in full before your file can proceed.

    One additional reminder: Your $25 annual membership dues are due and payable as of January 1, 2018. Payment of dues is also required before your file will be able to continue moving forward.

    Tim Trumble
    Online Operations, NACA
    ttrumble@naca.com

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