Is your federal tax bill stressing you out? Your anxiety is perfectly understandable, but it could cause you to make financial decisions that aren’t in your best interest. Loans, for example, while appearing to provide quick relief, could leave you trapped in a cycle of debt that is inherently difficult to escape. Every situation differs, however, and in select cases, loans are worth considering. Before you apply, consider the opportunities and concerns outlined below:
Interest rates can vary dramatically based on your credit score. Personal loans sometimes feature favorable rates, but shockingly high interest is far from uncommon. What’s more, interest on tax debt tends to be more stable than that assessed for private loans. Ultimately, you’ll need to examine both IRS and personal loan interest policies to determine how much you’ll owe over time.
Protection Against IRS Penalties
While the IRS offers numerous options for altering installments or otherwise achieving tax debt relief, the consequences will ultimately prove harsh if you fail to pay up or make alternate arrangements. You could be subject to a federal lien or problematic collection solutions, such as wage garnishment. That’s not to suggest you’ll be free of adverse consequences if you neglect payments on your loan — but this approach could potentially shield you from stressful IRS interactions.
Loans are not perfect in all situations, but they at least supply you with an additional option for handling your tax debt. Before you sign on, however, it is crucial that you determine and compare your options. This will reduce your chances of missing out on alternative solutions for reducing or paying off your tax debt.
If you’re overwhelmed by your tax situation, you can count on the Highland Tax Group for help. Our team of tax experts can help you pursue a viable solution, such as an installment plan or an offer in compromise. Contact us today to learn more about your options.