If you owe taxes to the Internal Revenue Service (IRS), you can set up an arrangement to pay off the debt completely or partially. Keep in mind that the IRS also has fines for late tax payment. For every month you are late, your interest rate will increase by 0.5 percent.

You can set up an installment agreement that works with your income. The IRS will garnish – or deduct the payment – directly from your paycheck. Since your payments are automatic as long as you work, your interest rate will not increase. 

Top Options to Get Out of Tax Debt

It is best to take advantage of an IRS installment agreement while it has a low-interest rate. You may, instead, benefit from a personal loan at a low rate if your interest with the IRS is high. 

For example, an installment agreement for $20,000 at 20 percent could cost you a total of $40,000 in 5 years. With a $20,000 loan at 10 percent, you would pay a collective total of $30,000 in 5 years.

That is a savings of $10,000 in interest fees!

Similarly, lower-interest rates decrease your monthly payment as well. Your monthly payment would be around $334 at 20 percent or $167 at 10 percent.

The rate for debt consolidation loans for good credit borrowers may be even lower, saving thousands of dollars over the life of the loan. 

If you need to get out of debt fast, you may consider sacrificing your credit for significant reductions from your debt.

By Admin