Yes, if you owe taxes, you can still qualify for a loan. However, tax debt can increase your debt-to-income ratio, which lenders will consider when considering applying for a loan. Using a personal loan guarantees the payment of your tax debt. This helps you avoid the interest that the IRS may charge on your late balance, as well as penalties for non-payment.
A home equity loan can be a risky way to pay your tax bill. When you apply for a home equity loan, you use the equity of your home as collateral to secure the loan. Basically, that means that if you can't make your payments, you risk losing your home during the foreclosure process. Simply ignoring your taxes will cause the IRS to take money from your salaries, federal benefits and future tax refunds to cover the original amount plus penalties and interest.
Tax season can seem difficult to manage and doesn't always end once you've filed your tax return. The IRS doesn't charge any fees for this plan, but interest and penalties will continue to accrue until you pay off all of your tax debt. While you'll still have to make regular payments throughout the term of the loan, they're generally more manageable than taking on unnecessary tax debt. Eligibility depends on how much you owe, and both plans come with penalties and interest that accrue daily until your tax debt is paid in full.
Above all, it's important to pay your taxes before the deadline; otherwise, you may have to pay the penalties in addition to your taxes. A penalty for non-payment will be imposed if you cannot pay what you owe in taxes before the due date, equivalent to 0.5% of the unpaid taxes for each month that they are not paid. If you're having trouble paying taxes this year, consider asking your employer to adjust your W-4 withholding for next year or to adjust your quarterly estimated taxes if you're self-employed. Before April 18, you'll need to have filed your tax returns and paid any remaining taxes you still owe, or face additional penalties and charges.
