Creative Solutions to Your IRS Problem
If you’re like so many Americans, living paycheck to paycheck, scraping together cash for those little extras can be tricky. When you receive an IRS notice regarding a sudden tax debt, it’s natural to panic. But there are creative ways to address even the steepest tax liability and avoid sliding into a pit of delinquent despair.
The good news is that we have no debtor’s prison in the United States, so you won’t be carted off if you can’t pay a massive sum at once. The IRS is tenacious when it comes to collection efforts, though, so you have to carefully consider how you’ll proceed. Before you decide that there’s no way out, have a look at some inventive ways to free up funds for your tax bill.
Lines of Credit
Hopefully, your credit cards are few and they’re not maxed out. A viable solution to your tax problem may reside with how high you can push your line of credit. While typically not an interest-friendly option, using a credit card – even if it means requesting a limit increase – may help resolve your IRS liability. Before you dismiss this pricey course of action, remember that any delinquent tax bill generates monthly penalties and interest. Ultimately, you may prefer to owe your creditor rather than Uncle Sam.
Mortgages & Loans
If you own your own home, there’s a chance that you’ve built up positive equity. If so, you may want to talk to your lender about borrowing against this excess to satisfy your tax balance. Similarly, you may be able to borrow against your vehicle, so long as you’re not upside-down on the current market value. Having a healthy credit score helps with these options but, if you’re approved, these may be a relatively affordable avenues to concluding your tax matter.
Friends & Relatives
If all else fails, tackling a tax problem may come down to who you feel comfortable borrowing from. Assuming you have a family member or friend who can lend you the money to settle your tax bill, it may be a good idea to first set up terms you’re both comfortable with. For instance, you’ll want to give your benefactor an idea of when you’ll be able to them pay back, how much you can give them monthly and if you intend to pay interest. Agreeing on these terms in advance can help establish reasonable expectations and prevent souring your relationship.
There are a wide variety of IRS resolutions for which you may be eligible. In order to understand how they apply to your unique tax situation, you may wish to speak with a licensed tax professional. This consultation is typically without cost and will enable you to make a well-informed decision on how to proceed. You’ll also be advised how to prevent legal entanglements from choosing the wrong path. While you may have to be creative when handling a tax debt, you can’t afford to be careless.