Here are the best ways to pay IRS tax debt when you owe.
Taxes are a sure thing if you live in the U.S. And when you owe Uncle Sam money, it can make a ding on your finances – and everyday life. That’s why if you owe, you must pay IRS tax debt ASAP.
Thankfully, the IRS offers several programs and services that help taxpayers that owe them money. The method you choose will depend on your specific situation with the IRS. Knowing what to do isn’t always easy. Once you’re compliant, analyze your situation and organize all of your financial documents, from there you can determine if one of the methods to fully satisfy your tax debt applies to you.
- Repayment of the Tax Debt in Full: The fastest and most efficient way to repay the debt you owe to the IRS is to pay the amount in full. This is not an option for many who owe the IRS, which is why the IRS provides other programs and services to help those that owe.
- Assets to Sell: If you have assets you can sell to repay your tax debt, like boats, or multiple cars, you should sell them and apply the funds toward your tax debt. Do this as soon as possible; the IRS may issue a lien which will make it more difficult to sell your property if you wait too long.
- Investment Accounts: Do you have any investment accounts like a pension of 401k? If so, you might want to consider making an early withdrawal to pay off your debt. Just make sure you pay the taxes on the withdrawn money or you could owe the IRS all over again.
- Property Equity: Do you have equity in your home property? With the way to home market is today, it may be difficult to take out and equity loan or refinance, but if you are you should consider it as a viable method for obtaining the funds to repay the IRS.
- Credit Cards and Bank Loans: Using credit cards or bank loans may seem like merely trading one debt for another. However, keep in mind, the interest rate on credit cards and bank loans tend to be less than the interest rate on IRS Tax Debt.
When the IRS sends you Notice and Demand for Federal payment they want you to fully pay the debt within 10 days after you’re notified of it. This is actually a possibility if you follow any of the methods above to repay your tax debt.