It is top priority to pay all your overdue taxes as soon as possible due to the compounding problems that occur.
With penalties and interest on overdue taxes it doesn’t take long for the total to mount up where you will be paying more for those than the original amount outstanding.
Federal taxes are one of your most important debts to clear as there is no one quite as ruthless at recovering debt than the IRS. They have more powers than anyone else to recover debt.
They can take assets to cover the debt and that even includes your home so you don’t want to be messing with the IRS.
If you know that you won’t be able to pay your tax when it falls due then you will need to look at all alternatives and that might even include the necessity to use your credit card to pay your account simply because that will be an easier debt to manage than the IRS and the interest and penalties that they will impose.
If you have enough equity in your home then that is another solution because the interest you will pay on your home mortgage will be a lot less that the IRS interest for late payments.
You will probably be reluctant to use your house to borrow the money, and rightly so, however in the case of federal taxes you could stand to lose your house if you didn’t pay anyway.
If you have already incurred penalties and interest for outstanding taxes then it is possible to come to an arrangement with the IRS where they will reduce some of these charges provided you can offer them some reasonable explanation as to why this happened. An example of this would be an illness that stopped you from working and earning enough money to make payments.
Often you can arrange a payment plan with the IRS to pay off your debt and if they agree to that use your budget to work out how much you can reasonably afford to pay without getting in difficulty and defaulting. Once you get a payment plan sorted you won’t want to miss any payments under any circumstances.
|
