The government has IRS tax relief programs available to help you pay back past taxes. You must pay the debt from taxes. Unlike other creditors, the government can garnish your wages without a court order.
Tax attorneys and representatives working for the IRS can set up an installment agreement that allows you to pay back your debt without getting additional fines.
Every month that you are late paying your taxes, the IRS will charge half of a percent until you reach the max of a 25 percent interest rate.
A 25 percent interest rate on $10,000 debt over the course of 5 years would cost you more than $7,600 in interest alone. At the end of the term, you would have spent $17,600 for your $10,000 debt.
On the other hand, if you agree to an installment plan at a lower rate, you can save yourself thousands of dollars.
If you stopped the interest rate at 7 percent, you would pay about $1,800 in interest rate fees over the same period. Your total payment amount to the IRS would be around $11,880.
If you have almost enough money to pay your tax debt, the IRS may accept a lump sum for less than the amount that you actually owe.
The Offer in Compromise option is only available if you have tried all other options.
You will need to speak with a tax attorney to see if you qualify for this option. You can find a tax attorney online.