Purchasing a car while owing the IRS
Hello,
A friend of mine owes the IRS over $12,000. She has re-morgaged her home and has an extra $14,000 left over. Now,
she has worked out a payment plan with the IRS, but wants to
purchase a used car with the $12,000 from the re-morgaged home.
Can she do this without the IRS coming down on her hard?
2 Answers from Attorneys
Re: Purchasing a car while owing the IRS
As long as she (1) makes the payments as provided for in the installment agreement, and (2) stays in full compliance with her ongoing tax obligations for the current and future tax years, she should have no problem. However, given that interest and late payment penalties continue to accrue on the tax liability, it may be cheaper and easier to pay off the IRS and finance the purchase of the car.
Re: Purchasing a car while owing the IRS
I agree with the earlier response, but would like to add that your friend should make paying off her tax liability a first priority. If something happens, and she cannot make the promised payments, the consequences can be very harsh. I recommend that she use the $14,000 to buy a car in the $4,000-$5,000 range and use the remainder of the money to pay the IRS.
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