There are very few things that are as scary as owing back taxes to the big, bad IRS. The IRS is a very powerful organization that can take harsh action, including garnishing wages, to make sure they collect what they are owed on their terms.
If you cannot pay what you owe, you can request an additional 60-120 days to pay your account in full through the Online Payment Agreement application; no user fee will be charged. If you need more time to pay, you can request an installment agreement, or you may qualify for an offer in compromise. Visit irs.gov for more information.
Here are some tips for how to manage tax debt.
Consult a certified public accountant (CPA) who can help you revise your taxes and see if there are additional deductions or other ways to minimize your tax debt. This is especially helpful if you’re self-employed. A tax attorney or credit counselor can also help navigate your options for paying off your debt.
If you have a low interest or zero-percent credit card, consider moving your tax balance to that card. Not only will you lower your monthly payment, but you’ll also increase your repayment time, free yourself from additional IRS fees and fines and give yourself the option of moving this debt to other low-interest cards.
Depending on your repayment costs, a personal loan may provide you with a lower monthly payment at a lower rate. You’ll also have more flexibility for other repayment options along the way, such as the credit card option mentioned above.
If you have equity in your home, perhaps use some of it to repay your tax bill in the form of a Home Equity Line of Credit (HELOC). Only consider doing this if you have the discipline to pay it back, as any additional debt on your home puts it at risk.