Tax debt can be incredibly stressful, but it’s possible to dig yourself out of this financial nightmare without draining your life savings all at once. For many taxpayers, monthly payments represent the most realistic solution. Determining your payment level can be tricky, however — especially if you’re already struggling to make ends meet. Keep the following in mind as you determine an appropriate monthly payment:
What Is the Payment Timeline?
The amount of time you’re given to pay off your debt will depend on the type of plan you pursue. Longer plans tend to cost more overall but may be easier to manage at the moment. Offers in compromise, for example, can be accompanied by periodic payments extending up to 24 months. Traditional installment plans may last longer, although short-term plans (paid within 120 days) are available.
Take Your Current Budget and Income Into Account
While your tax debt should be a chief budgetary priority, you should also feel confident that you can make all payments on time when you draft an offer in compromise or set up an installment plan. After all, your failure to pay could land you in even more trouble with the IRS. Don’t be overambitious; consider current fixed expenses such as rent or student loans, as well as your income and the potential for unexpected financial hardships.
There is no one monthly payment amount that will suit every taxpayer on an installment plan. If you’re struggling to determine your best course of action, it behooves you to work with a tax expert who understands your concerns. The Highland Tax Group can help you tailor a plan that chips away at your tax debt while also granting your budget a little breathing room. Reach out today to learn more.