Top 5 Solutions to Resolve Your IRS Tax Debt Completely

Taxes are mandatory for residents of the U.S., and having debt owed to the IRS can affect personal finances and everyday life. It is important to tackle IRS tax debt without delay.

The IRS provides several programs and services to help taxpayers with unpaid balances. The best approach for dealing with tax debt will vary based on individual situations. Assessing one’s financial situation and organizing relevant documents is crucial. After understanding the issue, taxpayers can select the payment option that best suits their circumstances.

5 Proven Ways to Pay Your IRS Tax Debt

1. Pay Off Your Taxes

The fastest way to deal with your tax bill from the IRS is to pay it in full. This is the best option to clear your debt if you can afford it. If you can't pay for everything at once, don't worry! The IRS has programs that can help you with your tax situation. It's a good idea to talk to a tax professional who can guide you on setting up a payment plan or looking into other options for getting help with your taxes.

2. Sell Some Possessions

If you're facing a tax bill you can't pay, consider selling some of your valuable items. You can raise money to help pay off your tax debt by selling these things. Acting quickly is essential, as waiting too long could lead to the IRS putting a legal claim on your property (called a lien) or even taking your possessions (called a levy). A lien can make it harder to sell your items, while a levy means the IRS can take and sell your belongings themselves. Remember that if the IRS sells your property, only some of the money from the sale will go toward your tax bill. They will deduct the costs of selling it before putting the rest toward your debts.

3. Withdrawal from Investment Accounts

People with investment accounts like pensions or 401(k) plans might consider making early withdrawals to pay off existing debts. Understanding that these withdrawals will incur taxes, leading to potential additional liabilities with the Internal Revenue Service (IRS), is crucial.

4. Accessing Home Equity

If you're considering the current housing market, getting a home equity loan or refinancing your mortgage might help you with your taxes. But it's essential to ensure that any monthly payment increase is affordable so you don't put yourself in a tough financial spot.

5. Utilizing Credit Cards or Bank Loans

Credit cards or bank loans are the last option to pay off tax debt. At present, average credit card interest rates hover around 28 percent, considerably higher than the interest rates usually charged by the IRS. The main benefit of this approach may be the possibility of stopping IRS collection actions, such as wage garnishments or liens. Careful thought is recommended before choosing this method of debt repayment.

Taking action on tax debt before receiving an IRS notice is crucial. If resources are constrained or the tax obligation is too high, it’s wise to seek advice from a tax expert. An IRS tax expert can negotiate with the IRS on behalf of the individual and help identify an appropriate resolution based on the particular situation.