Tax debt can be a difficult type of debt to manage. It has a high rate of interest and often includes additional penalties.
What can make back taxes difficult to pay off is that your payments go to the interest and penalties first, before any is applied to the actual tax debt. This can extend your repayment period.
Taxes generally cannot be included in a bankruptcy filing. They cannot be included in any debt management program.
Our financial counselors consider these types of debt as well while helping you configure your budget and calculate your net worth. It is important to include this into any strategy that will eliminate your debt.
One thing that we do mention is that the IRS is not the bad guy. They want to help you pay what you owe.
They can work with you to develop a payment plan. In some cases, they may even forgive some of the penalties, interest or even part of the debt. This can especially be helpful if you are facing a tax lien.
A trusted legal adviser can help you understand your options. However, you should probably avoid contacting expensive attorneys that promise specific results.
