America’s multi-tiered tax system, unfortunately, includes annual filings and payments at both the federal and state levels. While policies differ dramatically from one state to the next, many people find themselves paying in on multiple occasions each year.
Taxpayers struggling to come up with the cash needed to handle various tax obligations may be forced to make a difficult decision: starting with IRS or state tax payments. Ultimately, no one approach is ideal. Your decision will come down to the extent of your current debt and the specific tax regulations in your state.
Reasons to Start With State Taxes
Sometimes, it’s best to tackle state taxes first. Often, these total far less than IRS obligations — particularly in states that only collect based on interest and dividends, versus salary-based income. What’s more, the IRS often proves more forgiving than state-based tax boards, which often prove surprisingly aggressive in their attempts to collect. If your state tax burden is small, you might as well get it out of the way.
Reasons to Start With IRS Taxes
While you might not immediately be able to pay off IRS debts, a proactive approach could open up the possibility of installment agreements or other viable solutions. If tax authorities from your state come knocking, you may be capable of paying up quickly before you face significant consequences, but the same won’t necessarily be true of IRS debt.
Struggling to determine a viable strategy for handling multiple sources of debt? Often, it’s best to seek an outside perspective from somebody who understands the complications of tax policy. The team at the Highland Tax Group can provide the guidance you require every step of the way. Reach out today to learn more about our tax resolution services and compassionate approach.