When Steve came to us looking for a car loan, he had a few concerns about his financial past. Before he found his current job, he had spent the year prior unemployed. During that time, he couldn't afford to have his taxes withheld from the benefit payments. This left him with a tax debt that he had been unable to pay, and was still looming overhead when he needed to buy a car.
How would this affect his credit score? That was the issue he was most concerned about. The good news for Steve was that he didn't have a large amount that he owed, only a couple thousand. Typically, the IRS doesn't report tax debt under $10,000 to the credit reporting agencies. If you owe more than that, they will file a Notice of Federal Tax Lien. Once they do this, it will appear on your report and damage your credit.
But, to be on the safe side, our advice to Steve was to wait to see if his upcoming tax return would take care of or reduce his unpaid tax debt before applying for a loan. This way, he wouldn't have anything pop up in the future that would possibly make it difficult for him to keep up with payments on a new vehicle.
Tax Advice for You
We know that Steve isn't alone in this type of dilemma, so we here at Auto Credit Express wanted to share some helpful tips with you if you have back taxes.
- Pay your taxes on time! This one seems obvious, but you may want to consult with a tax expert to ensure that the right deductions are being made from your income.
- Set up a payment plan with the IRS. By making an installment arrangement with the IRS, you are sure to avoid any liens being levied against you. Also, these payment plans aren't reported to the credit agencies, so they will not negatively affect your credit history and score.
- Your tax refund might help. If you owe back taxes, the IRS will seize your refund to pay off or reduce your tax debt.
- Have the lien removed from your credit report. Tax Liens are considered very serious, and can dramatically affect your credit. If you have had a tax lien levied against you and paid it off or set up a direct debit agreement to pay it in installments, you can request that they remove the lien from your report by completing and filing IRS form 12277.
We Can Help
Just a few days ago, Steve called us back and told us that not only had his tax refund negated his tax debt, but he also had some cash left over to put towards a down payment on a vehicle purchase. We were able to arrange a meeting time for him with a dealer and get him back on the road in 48 hours.
If you have had past issues with getting approved for a car loan, Auto Credit Express can help. We have helped millions find the car dealers that were able to work with them despite their credit issues. Don't let your tax or credit woes stand in your way and apply today!