Now that tax season is over you may or may not find yourself owing the IRS money. While tax debts are not typically financially troublesome for most people, they can be overwhelming if you aren’t expecting them.
Avoiding Back Taxes
Many people begin to panic when they think of the possibility of back taxes. While no one wants to owe the IRS money, drastic measures are not always needed. For example, it isn’t uncommon for people to pay their tax debts using a credit card. While this may be a quick and easy way to get settled with the IRS, chances are you are going to end up with a bigger challenge on your hands. Besides paying hundreds or thousands more in interest fees, paying tax debts with a credit card will leave you with a high debt balance that can directly impact your credit. Since tax debt qualifications for bankruptcy are highly specific, there are a few better ways to resolve them
Remember that the IRS is just like any other creditor and is willing to negotiate your debt repayments. The IRS offers two ways for you to resolve your tax debts directly and affordably. An installment plan can arrange for you to repay your tax liabilities over the period of two to three years. If you can’t afford to repay the full amount owed, the IRS may allow for a debt settlement through an Offer In Compromise. Both of these programs should be considered before taking out a loan, using credit cards or ending up in bankruptcy over unpaid taxes.