July 12, 2022 | 7 MIN

How to Pay

Tax debts can be scary, and knowing how to pay off Internal Revenue Service debt fast challenges many taxpayers.

Sam Brotman, JD, LLM, MBA

Sam Brotman, JD, LLM, MBA

Owner and Director of Legal
Brotman Law

CONTENTS

Tax debts can be scary, and knowing how to pay off Internal Revenue Service debt fast challenges many taxpayers.

Paying off your IRS debt in a short time period helps you focus entirely on other financial goals and removes the mental and emotional burden. We'll discuss how to pay off IRS debt fast and methods to clear your tax debts.

Here's how to pay off IRS debt fast

A lot of tax payers are stressed when they owe taxes and want to know how to pay off IRS debt fast. Applying for personal loans, refinancing your home, filing for innocent spousal programs, or using your credit card are quick ways to pay IRS debt. We’ll discuss these options in detail below.

1. Using a personal loan to pay off IRS debt

Tax debt is soul-crushing for many taxpayers, and failure to remit quick payment to the Internal Revenue Service often leads to fines and penalties. The Internal Revenue Service charges taxpayers 5% interest on unpaid taxes and from 0.5% to 25% in penalties.

Using personal loans to pay off IRS debt is one way to resolve your issue, and a way to avoid IRS interest or penalty fees. Your debt to income ratio, high-interest rates, and lender fees are a few factors to consider before taking out a personal loan. Taxpayers with good credit scores can qualify for $100,000 in personal loans, leaving them enough to repay their tax debt.

Most lenders offer people with good credit an interest rate as low as 3% for personal loans. Your bank account statements, personal ID, credit report, employment information, and collateral are all needed when applying for a personal loan. The application fee is minimal and generally takes a few days before a bank transfer or money order is approved.

2. How to pay off the IRS using your Credit Card

Paying your taxes with a credit card is another way you could avoid interest and penalty fees from the Internal Revenue Service. If you face asset seizures or expect cash payment after the IRS deadline, paying your debt with your credit card is a good option for you.

You can clear your tax debts by using a credit card as a short-term loan and pay the credit card bill later. Before paying off IRS debt with your credit card, ensure your credit limit can account for the tax debt amount in order to avoid interests fees and penalties.

3. Paying off tax debt by refinancing your home

If you're a homeowner, paying off your tax debt by refinancing your home is a potential solution to save you from IRS interest and penalty fees. Before refinancing your home, the discount rate, refinancing fee, monthly payment, interest rate, and equity are factors you should consider. The Internal Revenue Service also clearly states that your home must have enough equity to be refinanced.

Many taxpayers ask, can you buy a house if you owe taxes? Yes, you can qualify for home loans even if you owe taxes. Taxpayers should explore this tax settlement option with a certified public account (CPA) or experienced tax debt attorney. Brotman Law is home to knowledgeable and experienced tax attorneys that can help you clear your IRS debts by refinancing your home.

4. Paying off IRS debt with innocent spouse programs

The Internal Revenue Service holds both partners responsible for tax debts, even if you're legally separated. The IRS offers innocent spouse programs to relieve separated or married couples' tax liabilities. Innocent spouse programs are ideal ways to settle tax debt your partner or former partner failed to report.

If you're not responsible for the tax debts on the joint return you can request innocent spouse relief, and the Internal Revenue Service can relieve you of paying the taxes, penalties, and interest owed by your partner.

Taxpayers need the Internal Revenue Service Form 8857 to request innocent spouse tax relief. Consider approaching this option with an experienced tax debt attorney by your side. Brotman law is home to excellent tax attorneys with experience settling tax debts using innocent spouse programs. 

5. Paying off tax debt by filing for bankruptcy

Filing for bankruptcy is another way to pay off tax debts. While the IRS can be aggressive with tax collection efforts, filing Chapter 7 bankruptcy is an easy way to end the harassment.

Bankruptcy is a legal process that helps large or small business owners and individual taxpayers erase tax debt they cannot pay. Filing for bankruptcy means some of your assets go up for sale and you use the proceeds to pay off debts. The commission may forgive the remaining tax balance, preventing revenue agents from contacting you to collect unpaid tax debts.

If you owe payroll taxes or have fraud penalties, filing for bankruptcy will not resolve these debts. The Internal Revenue Service requires documentation showing taxpayers did not willfully evade paying taxes to file for bankruptcy. You will need to file a tax return for the debt before filing for bankruptcy.

How to pay off tax debt when fast options are not open

Are you wondering how to pay back IRS debt when fast options are not available? Don't worry, we'll discuss applying for an installment plan, requesting an offer in compromise, or making total payments to pay off tax debt.

1. Address Penalties and Interest

The Internal Revenue Service slaps interests and penalties on taxpayers who owe back taxes, and addressing these fees may help your situation. While the commission charges interest and penalties based on the amount owed in taxes, addressing the issues can significantly minimize the charges.

Taxpayers can remove specific interests and penalties by qualifying for administrative waivers, benefiting from legal exceptions, or documenting reasonable cause. The IRS wants taxpayers to provide reasons for owing tax debts. Medical and financial hardship, miscalculation of taxes, taking wrong advice, or death of a family member are a few reasonable causes the commission accepts. If the reasons are supported with documents, the commission can remove penalties and clear tax debt.

2. Apply for an Installment Plan

One way to pay off tax debt when fast options are unavailable is applying for an installment plan. An installment plan is an agreement between the IRS and taxpayers to settle existing tax debts in a more manageable way that will not put an unnecessary strain on your finances. Using this option means paying back tax debt over a more extended period of time instead of coming up with a large sum for a one-time payment.

The commission only enters into an installment agreement with taxpayers whose tax debts are below $50,000. As long as taxpayers continue to remit payments based on the agreement, the commission will not file liens or issue levies. But before establishing an agreement with the Internal Revenue Service, taxpayers must fulfill certain tax obligations. Penalties and interests still accrue during the life of your agreement with the commission, so do not default on the agreed terms.

If you're considering this option, it is advisable to work with tax professionals or certified public accountants to protect your interests. The Brotman Law team consists of experienced IRS agents that can determine the right installment plan to settle your tax debts.

4. Consider an Offer-in-Compromise

Offer in compromise, also known as tax settlement, is an excellent way to pay off Internal Revenue Service debts when fast options are unavailable. An offer in compromise is an agreement between taxpayers and the revenue commission agents to settle tax debts for less.

While an offer in compromise is a great way to settle off debts, taxpayers must meet specific criteria to qualify for it. The commission will consider an offer in compromise if your assets and income are less than you owe. Furthermore, if income tax debt payments will cause undue hardship to living expenses, the commission will consider your offer. You must provide your proof of inability to pay the tax debt, current quarterly payments made, estimated taxes for the current year, and tax returns filed to qualify for OIC.

Many taxpayers' requests get rejected by the commission for lack of quality representation, and that's why you need the services of certified public accountants or experienced tax attorneys. Consider engaging tax attorneys at Brotman law for quality representation, as the attorneys here are very familiar with the IRS and have experience with OIC. Our professionals can analyze your financial situation to determine your request eligibility and the best way to present it for acceptance.

5. Pay Tax Debts in Full (the best way to pay off tax debt)

You can avoid tax interests and penalties by paying your debts in full to the IRS. You can make tax debt payments with the Internal Revenue Service direct pay tool. This tool streamlines the payment system and is an easy and free way to pay tax debts from your savings and checking accounts.

If you cannot make full payment of your tax debts immediately, the commission gives taxpayers an extension. The commission allows taxpayers to pay within 120 days or less with the short-term extension policy. Consider applying for an extension online or contact the commission by phone.

Need help paying off federal taxes to the IRS?

Do you owe tax debts to the Internal Revenue Service and seek legal representation to help with federal taxes? Brotman Law offers the best IRS tax representation services in the United States. Our experienced tax attorneys can save you from fines and penalties resulting from back taxes owed to the IRS and provide you with quality representation. Contact us today and we’ll start making a custom action plan for you.

Our conclusion on how to pay tax debt fast

If you're wondering how to pay off IRS tax debt, there are various options to consider. You can pay off your debts using personal loans, credit cards, or by applying for installment agreements or an offer in compromise. You can even refinance your home or if needed apply for innocent spouse programs. Our biggest tip is to engage revenue agents with an experienced tax attorney or certified public accountant, as quality representation will play a huge part in the success of resolving your tax debt.

FAQs

Can I pay off IRS payment plan early?

You can pay off your IRS payment plan early to avoid interests and penalties by paying more than the agreed amount. Remember that back taxes continue to accrue interest, even with a payment plan. Consider making payments early to reduce interest on your payment timeline.

How long do I have to pay off IRS debt?

The Internal Revenue Service has a ten-year statute of limitations on tax debt collections. The commission can adopt different tax collection strategies from the assessment date for ten years. While there are important exceptions, if they do not apply the IRS will clear the debt and stop tax collection efforts.

What is the best way to pay off tax debt?

The best way to pay off tax debt to the IRS is to make payments in full. While there are other payment strategies, paying in full ensures quick resolution. Paying with installment plans, offer in compromise, and personal loans are other ways to pay off tax debt without full remittance.

 

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