Evan Vitale

Evan Vitale – Getting Out Of Debt (Part II)

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By Evan Vitale

Let’s continue our series on how to get out of debt by focusing on a major stress point for many people and that is tax debt.

Depending on your situation, you might be past due on paying your federal taxes to the Internal Revenue Service (IRS); state taxes or county and local taxes. In all cases, ignoring tax reminders and past due notices, won’t make the matter go away. The longer you wait to solve the problem, the worse it will be, especially with mounting interest and penalties.

The best thing to do is to pay off – as soon as possible – any past due taxes you owe. Of course, that is easier said than done, especially if you are in a financial crunch. If that’s the case, you should contact the IRS (and any other agency you owe); explain your financial situation and offer to make payments. In most cases, all agencies will be willing to accept a payment plan. However, you should be aware that part of the payment terms is that you must remain current on payments and file and pay all future tax liabilities on time. If you are self-employed, you should be making quarterly payments on time.

In the case of federal taxes, the IRS has information on payment plans and installment agreements. You can read about them here:

https://www.irs.gov/individuals/payment-plans-installment-agreements

According to the IRS, “if you’re financially unable to pay your tax debt immediately, you can make monthly payments through an installment agreement. As long as you pay your tax debt in full, you can reduce or eliminate your payment of penalties or interest, and avoid the fee associated with setting up the agreement.”

Remember, always file your tax returns on time – even if you can’t pay the balance due in full. All tax returns must be filed in order to apply for any payment agreement.

In our next blog, we’ll review how to pay off credit card debt.

Evan Vitale – Getting Out Of Debt (Part I)

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By Evan Vitale

We all have some level of debt – a mortgage, a car payment, etc., but big-time debt could include past-due tax liabilities and a mound of credit card debt.

However, even if you feel like you are “drowning,” there are plenty of options and steps you can take to manage it better and get out of debt before you even consider bankruptcy.

First, let’s discuss past due tax debt. If you owe the Internal Revenue Service (or any state or local authority), this is something you should take care of right away. The IRS is more than willing to work with you on allowing for monthly payment arrangements (more on that in a future blog post).

The worst thing you can do (or not do) when it comes to ignoring your tax debt is to ignore it. Believe me, it’s not going away. Ignoring “past due” statements only increases your debt with additional interest and fees, but the correspondence will become more severe until you eventually face possible garnishment.

Do not ignore your tax debt.

When it comes to credit cards, the best thing you can do in order to handle this amount of debt is to stop using your credit cards. Just stop.

If you have multiple card cards, read your statements and figure out which card is charging you the most amount of interest and then focus on paying off the balance.

Another theory to handling credit card debt is to pay off the smallest debt first and move on to the next lowest card, etc. Some choose to pay each card each month and this is good, but you’ll need to may an effort in making sure your payment is larger than just the minimum due.

If you only pay the minimum amount due, it will take you a long time to pay off that credit card because of the interest charged.

Again, take a look at the interest each credit card is charging you and make proper payments accordingly.

In our next blog post, we’ll take a more in-depth look at how you can pay off your tax debt.