The Complete Guide to IRS Collections

Your tax return is home to essential information, and lenders also verify credit information. Your credit information reveals if you owe federal or state tax debt.

Can You Buy a House if You Owe Taxes to the IRS or State?

Many taxpayers feel worried when embroiled in tax issues with the IRS. But can you buy a house if you owe taxes to the IRS or state, or will the commission prevent you from buying your dream home? Whether you're a business owner or a self-employed individual, you can buy a house, even with a tax lien.

While homeownership is a goal for many people, owing taxes to the IRS can make conventional mortgage approval challenging. Lenders extensively examine your debt-to-income ratio (DTI), and tax liabilities adversely affect it. But If I owe the IRS can I buy a house?

Can you buy a house if you owe taxes?

Can I buy a house if I owe taxes to the Internal Revenue Service? There is a possibility you can become a homeowner, even with tax liabilities. Buying a house while owing money to the IRS can seem like an insurmountable obstacle, but tax debt cannot keep you from attaining your dream of owning a home.

This is one example of the of many dilemmas Brotman Law helps people with tax liabilities deal with successfully. Every tax debt attorney at Brotman Law has experience in helping families achieve homeownership while managing a their tax bill.

Can you buy a house if you owe the IRS?

Taxpayers with back taxes run into real estate agents and ask, Can owing taxes affect home purchases, or can I buy a house if I owe the IRS? Owing taxes to the Internal Revenue Service can adversely affect your life, especially if you want to buy a house. But it's possible.

Taking steps towards debt resolution with the Internal Revenue Service is significant to your homeownership success, mortgage payments and approval. Furthermore, the Federal Housing Administration (FHA) loan program is another easy route with an FHA IRS payment plan. The commission's website is home to the FHA guidelines for IRS payment plans. Consider engaging a tax attorney to improve your approval chances for an FHA loan with back taxes owed.

“Can I buy a home if I owe taxes?” is a common question for taxpayers. Consider providing evidence proving your active tax resolution steps with the IRS to improve your chances of buying a house.

“Will a tax lien affect me buying a house?” Brotman Law can protect your finances and prevent your tax debt from turning into a lien. A tax lien can definitely lead to loan and mortgage denial.

How does owing the IRS affect buying a house?

Dealing with the IRS complicates the lives of many taxpayers. But if you owe taxes, can you buy a house? Tax liens, debt servicing, and lack of security are all ways owing the IRS affects buying a house. We'll discuss each point more in-depth below:

1. Owing the IRS can lead to a tax lien

Owing back taxes to the Internal Revenue Service can make the commission slap a lien on your property. A tax lien represents the government’s legal claim to your property if you owe the IRS tax debt. Failure to pay back taxes after receiving notice within the required timeframe can lead to the seizure of your property.

Arising complications and disagreements can lead to loan denial and affect your home purchase, especially with a tax lien on your assets. Can you buy a house with a tax lien? Buying a new home is possible, but lenders offer higher interest rates, and a tax lien will affect your mortgage and repayment chances.

2. Debt Servicing

Lending institutions consider mortgage applications with manual underwriting process involving debt servicing abilities and security. Having tax liabilities with the Internal Revenue Service will adversely affect your application and lead to home purchase denial. If you want to make your dream home purchase come true, consider how to pay off IRS debt fast by taking debt resolution steps with the commission.

3. Security

If you can, think about the bank’s position on loan repayments and relationships with other creditors. Tax debt issues affect your credit score, and the bank's interest as a lending institution will see debts attached to taxpayers' assets.

Many taxpayers endure refinancing complications with lending institutions because of the lack of security. Lenders look for taxpayers who pay their debts.

What is considered delinquent federal tax debt?

Delinquent federal tax debts are back taxes owed to the Internal Revenue Service. If taxpayers miss the payment deadline for filing, the commission considers the tax debt delinquent. Consider engaging a tax attorney if you receive a delinquent tax notice from the IRS.

Remember that failure to adhere to FHA tax lien guidelines and not paying your debts before the grace period can have severe consequences. The commission subjects debtors to fines and penalties in order to recover debts with aggressive actions. 

Fannie Mae guidelines on IRS taxes debt lets you get a mortgage if you have an installment agreement to repay your delinquent taxes. The FNMA IRS payment plan is a government installment agreement for taxpayers.

If you don't follow the FHA guidelines on IRS payment plan, the delinquent taxes can quickly become a tax lien, leading to the seizure of assets and properties. The IRS may issue a tax lien if you fail to make the down payment, or your federal tax debt exceeds $55,000 including penalties and interest.

How does a tax lien affect buying a house?

A lien is the IRS's legal right to seize a taxpayers' property in order to satisfy a debt. A tax lien grants the Internal Revenue Service legal claim on properties and assets taxpayers potentially acquire. Can I buy a house with a tax lien? While taxpayers can purchase houses even with a tax lien, the tax liability can still impede lending institutions' ability to facilitate mortgages.

Having a tax lien is a red flag and can complicate your mortgage application process, making buying a home harder. Furthermore, buying a house with an IRS tax lien mortgage can ruin your finances. Tax liens can negatively affect creditworthiness and financing options, especially in the home buying process's final stages. Mortgage lenders can see your tax lien, so your inability to pay your debts will have negative affects.

Moreover, appearing as a risky option to lending institutions with a tax lien may derail your chance of a dream home. If you're offering cash for a house with a lien, the tax liability may not affect your new home purchase. But can you buy a house owing the IRS? You can buy houses that owe taxes, but it is not advisable. Consider resolving the lien with the sellers before closing the deal because buying a house with IRS debt leads to inherited outstanding payments.

Selling or refinancing when there is an IRS lien

Many homeowners panic when the Internal Revenue Service slaps a lien on their assets. It is a stressful situation, and many homeowners ask whether selling or refinancing the property is the solution. There are options to consider before making a decision, and we will discuss the process more in-depth to aid your understanding.

• Selling a Home with a Tax Lien

The Internal Revenue Service ensures taxpayers satisfy the lien before authorizing the sale of the property. However, if the property has equity, you can pay the debt in part or whole through the sale. The amount of equity in the home will determine how much debt must be paid to satisfy the commission.

Making full tax debt payment will get your lien withdrawn and probably a great sense of relief. You can also negotiate installments or other payment methods with the IRS.

• Refinancing a Home with a Tax Lien

Having an IRS tax lien will also affect your refinancing options, often making a tax attorney necessary. Can I refinance if I owe the IRS? The tax lien affects your lending chances, but a good tax attorney can find a solution.

At Brotman Law, we can demand tax lien subordination which can enable you to get a loan and find other means to refinance your home. The application process requires filing a Certificate of Subordination and notice of Federal Tax Lien. Our legal tax pros can streamline the process.

Do mortgage companies report to the IRS?

The IRS does not take a taxpayers' word for it and and will communicate with mortgage companies for information. Mortgage companies report the significant expenses related to deductions, reimbursements, and homeownership to the commission. Your lenders will report several different expenses to the IRS such as:

Mortgage Interest Statement

Lending institutions report your interest statement to the IRS with Form 1098. The form is mandatory for every lender. Moreover, it has sections where the commission demands to know the lending institutions' borrowers and their yearly interest statements.


The government also wants to know the total interest paid on your loan and mortgage companies will report it to the IRS. If there are deductible expenses or points payments when closing your loan deal, your lender will also report it to the Internal Revenue Service.

The government will want to know if the transaction with your lender involve mortgage insurance and premium payments. Mortgage companies also report property taxes paid to the Internal Revenue Service on your behalf.


The IRS provides lending institutions with Form 1098 to find out whether borrowers get reimbursement for overpaid interests. Mortgage companies report this information to the IRS yearly.

The government ensures that lenders pay interest on overpaid debts to taxpayers, making the reporting of this information necessary. Furthermore, the commission wants to know if the institution pays more than the required interest rate on overpaid debts.


The law demands that mortgage companies report large transactions to the Internal Revenue Service. If you buy a house worth over $10,000 in cash, your lenders will report the transaction on Form 8300 to the IRS.

Want To Save This Guide For Later?

No problem! Just enter your email address and we'll send you the PDF of this guide for free.

Can the IRS take your home if you have a mortgage?

A mortgage doesn’t stop the Internal Revenue Service from taking your home if other assets cannot pay your debt. If you have no agreement with the IRS, do not honor the repayment agreement you do have and cannot pay your debt, the commission can indeed take your house.

Most homeowners with a mortgage get rid of the tax lien on a property and sell or refinance the property to avoid issues with the commission. Kicking taxpayers out of their homes is not a common practice of the IRS, as the commission usually goes after cash assets like stock and bank accounts.

Can I get a mortgage with unfiled taxes?

Having unfiled taxes means you haven’t filed your tax return and cannot substantiate your annual income. But can you buy a house if you haven't filed taxes? The lender plays a significant role determining the chances of your success.

Many lending institutions will give you a mortgage even if you have unpaid taxes if you can provide a structured repayment plan. Some will not, especially if you cannot verify your income. Consider consulting with lending institutions before applying for a mortgage. This way, lenders can help to clarify mortgage approval requirements and save your time.

Can you buy a house if you owe state taxes?

State taxes are an additional fiscal responsibility. But can you owe state taxes and buy a house? If you owe taxes to the state, you can still buy a house if you convince a lending institution to approve your application or offer a cash payment.

While owing state taxes makes the buying process challenging for taxpayers, you can buy your dream home. Consider negotiating a loan with lending institutions to buy or complete the house deal with a payment plan. But none of these matters if you're paying in cash as you can negotiate a price with sellers and complete the sale.

Convincing lenders for conventional loans may require a knowledgeable tax attorney, and Brotman Law can help. By working with our team, you'll learn how to buy a house and pay back your state tax liability. Our experienced attorneys can approach lenders with your structured payment plan based on the house type.

How can I get a mortgage if I owe back taxes to the state?

Getting mortgage approval is great news, but can you get a mortgage if you owe state taxes? Most people jump through many hoops to obtain a mortgage approval, and owing the state can make it all the more difficult. If you identify all the issues, make a plan, and communicate openly with the lending institution however, in many cases you can still get approved for a mortgage.

1. Identify the issue

Your first step to getting a mortgage is identifying the problem. Underpaid, property or accumulated years of taxes could be the reason for your back taxes. Many lenders may not work with you if you owe back taxes to the state, but you can still get a mortgage. Before applying for the mortgage, know the type of debt you owe and make a plan to pay it off.

2. Make a plan

Tax debt definitely affects your chances of getting a home loan, so making a plan will help you overcome the obstacles. After identifying and acknowledging the problem, discuss a solution for your tax liabilities with IRS before approaching the lender. The best option is to ask Internal Revenue Service agents for your exact payoff amount and make full payment.

If you can fully pay your debt, consider getting receipts from the commission as lending institutions can demand evidence. If you cannot pay your tax debt off completely, consider negotiating a payment play with the IRS.

A tax attorney can facilitate negotiation on your behalf. After payment plan negotiations, keep track of your paperwork and do not delay payments. The paperwork and payment receipts show active tax resolution steps with the IRS and help your case with lending institutions.

3. Approach your lender

There are different requirements for loans related to tax debts, so consider working with an experienced tax attorney to ensure smooth negotiation with lenders. Find a lender that will help ensure you meet all requirements for mortgage approval.

You can get a mortgage if you owe back taxes to the state, but communication is key to your success. Consider communicating clearly with Internal Revenue Service agents and resolving a payment plan issue. The payment plan improves lenders' confidence and increases your chances of becoming a homeowner.

Can I get a mortgage with a state tax lien?

A state tax lien grants the government legal claim to taxpayers' property who refuse to pay owed taxes. While state tax liens create different problems for taxpayers, you can get a mortgage even with a state tax liability.

Although many lenders do not do business with taxpayers with state tax liens, taking steps to resolve the debt can improve your chances. Consider consulting Brotman services if you have a state tax lien and would like to buy a home. Our attorneys can walk you through the process and someday soon you too can attain that dream of homeownership.

How do lenders know you owe taxes?

Before granting mortgage approval or home loans, most lenders demand paperwork for one to two years of tax returns. Your tax return is home to essential information, and lenders also verify credit information. Your credit information reveals if you owe federal or state tax debt.

Furthermore, lenders search public records to verify if you have a tax lien. With access to your tax return paperwork, credit reports, a search of public records, and other essential information, lenders can provide details of tax debt.

Can you buy a home if you owe taxes? Our conclusion

If you owe taxes to the Internal Revenue Service, purchasing a home can become challenging. There is always a chance for success so it’s worth doing your homework (like reading this article). Taxpayers with state or federal tax debts can buy a home, even with a lien liability. But there are required practical steps to take first.

Identifying the tax problem and communicating with IRS agents before approaching lenders is essential to obtain the result you’re looking for. Before approaching the tax commission and lending institutions, consulting with a tax attorney would be a good course of action.


Are there mortgage companies that help with tax liens?

Can you get a mortgage with a tax lien? Many mortgage companies help taxpayers with liens by asking the commission to make the debt secondary to allow refinancing. Mortgage companies can help with tax liens if the sales amount covers the IRS debt. After payment, the commission releases the lien.

Can I get a conventional loan if I owe taxes?

Conventional loans, also known as mortgage loans, are available to taxpayers through private lenders like credit unions, banks, etc. But can I get a conventional mortgage if I owe back taxes? You can get a conventional loan with an IRS payment plan from certain lending institutions, even if you owe taxes.

Your first step is to ensure that your tax records are accurate and fortify other parts of your loan application. The more substantial other parts of your loan application, the better. Set up an IRS payment plan to ensure the success of your application.

Can you buy a house if you have a payment plan with the IRS?

If you owe the IRS can you buy a house? You can as long as you have an IRS payment plan in place. Taxpayers can get loan approval for homes if the IRS payment plan and monthly obligations do not exceed exceed 45% of your income to buy a house.

Can you get a USDA loan if you owe taxes?

Can I get a home loan with a tax lien? Getting a USDA loan if you owe taxes to the IRS is possible with an approved repayment plan. USDA guidelines allow applicants to get a loan after making three timely payments with an IRS-approved repayment plan to qualify.

Can you get a VA loan if you owe back taxes?

You can get a VA loan if you owe back taxes to the IRS. The process is tricky and can affect the overall loan amount. Records must also show timely payments in previous years to get a VA loan. If you're financially capable, paying off the debt improves your chances.


New call-to-action
Schedule a Tax Action Plan Today!