This may seem like the most obvious method of tax settlement and even if you can’t pay the amount in full you may be able to with a little thinking outside of the box. Settling taxes owed by paying in full is a good idea because you will not have to pay the additional interest amounts like you would if you set up an IRS payment plan. Once the taxes are paid off in full the IRS will immediately stop collections and lift any liens or levies it may have placed.
If you do not have the full amount of money to pay in full you can always consider a home equity loan, borrowing from friends and family, selling assets, or borrowing on credit.
If you own a home and your home value is more than your mortgage value, you may be able to take out a home equity loan. The great thing about a home equity loan is that the interest you will be paying on the loan will most likely be far less than any other type of loan you can get since the value of the loan is secured by a real asset. This could be a good option for you if you owe a lot of money and the cost of receiving the home equity loan plus the savings on interest is less than the interest amounts paid with taking out a loan on credit or setting up an installment agreement.
This is only a good option if you know you will be able to pay them back soon. There is no reason to pass on the tax burden to family and friends when the IRS has many other methods for settling back taxes owed. Only do this if you plan on the money being available soon, you are planning on selling something (but it takes time to sell), you plan on your bonus check coming, etc, and once you receive the money you will immediately be able to pay the amount owed back.
Selling some of your assets can be an option if you have items that you don’t need anymore. Maybe you collect old cars and you have since lost interest in the hobby, consider selling to get the cash to pay off the tax liability owed. Also, if you have a lot of miscellaneous stuff, consider having a yard sale to get some extra cash.
This can be a good option if you are able to pay it off quickly because you expect to receive the money you need soon. Doing this will eliminate the future possibilities of additional penalties and interest occurred from not paying. If you cannot pay off the amount soon, you are better off setting up an installment agreement with the IRS and pay back the amount over time in the form of monthly payments at an interest rate lower than most lines of credit.
Payment Plans Available for Back Taxes
Depending upon your financial situation you may qualify for a payment plan if you cannot pay the tax amount in full.
What if I Can’t Pay Taxes in Full?
What to do if you cannot afford to pay all the taxes you owe in full. There are many options available to taxpayers to pay their taxes back.
Failure to Pay Tax Penalty
The penalty for not paying taxes or underpaying taxes ranges from 1/4% to 1%. Understand what rate you will be charged and if you can remove the penalties.
Delaying IRS Collections
If you need more time to pay back taxes, consider delaying the IRS. Some information the IRS would never tell you, but a very easy method to use to gain a few months of time to pay.
Options When You Can’t Pay When Taxes are Due
Say the tax filing deadline for taxes is coming up and you know you will not have enough money to pay the taxes owed. These are some options for dealing with this type of situation.
Solutions To Settle Back Taxes
Different trusted tax solutions to settle back taxes if you cannot make payment in full or you don’t believe you should
Protecting your Assets for Seizure
How to protect your assets from the IRS if you know they are planning on imposing a levy on your assets
This post was published on April 16, 2015