While most Americans are current on their taxes, there’s little agreement on the best way to handle overdue taxes among those who aren’t. A recent GOBankingRates survey of more than 1,000 adults revealed that approximately 77% of respondents are in good standing with the IRS, but 23% have fallen behind and have varying strategies for addressing their overdue taxes.

Ignoring overdue taxes is the worst possible approach as penalties and interest accumulate, and the IRS becomes less patient. Ultimately, you will have to pay, but how you do so can significantly impact your financial health.

Strategies to Handle Overdue Taxes

Payment Plans: The Preferred Approach

The largest group of respondents with overdue taxes — nearly 7% of all surveyed — plan to establish a payment plan with the IRS. This approach spreads payments over a manageable period, reducing immediate financial strain.

Benefits of IRS Payment Plans

1. Lower interest rates compared to credit cards and personal loans.

2. Structured payments tailored to your financial situation.

3. Avoids the need to strain personal relationships by borrowing from friends or family.

Using Savings to Pay Off Taxes

About 5% of respondents plan to dip into their savings or emergency funds to pay their overdue taxes in full. This strategy can be beneficial if it helps avoid accruing additional interest and penalties.

However, while using your emergency fund to pay taxes is often wise, ensure that you don’t deplete your savings completely, leaving yourself vulnerable to future financial emergencies. Solving one problem shouldn’t create another, after all.

Borrowing Money: Pros and Cons

Some individuals consider borrowing money to pay overdue taxes. About 4.5% will take out a personal loan or use a credit card, and 2.6% will borrow from family or friends.

Considerations for Borrowing

• Personal Loans: Typically lower interest rates than credit cards, but higher than IRS payment plans.

• Credit Cards: High interest rates, averaging around 28.05%, make this the least favorable option.

• Loans from Friends/Family: Potentially interest-free but can strain personal relationships if not managed carefully.

Steps to Address Overdue Taxes

If you find yourself owing overdue taxes, consider taking the following steps:

1. Create an IRS Account: Sign up at IRS.gov to view your balance, check payment status, and explore your options.

2. Assess Your Finances: Determine how much of your savings you can use without jeopardizing your financial security.

3. Seek Professional Advice: Consider hiring a tax attorney or financial advisor to help navigate your options and develop a payment strategy.

Why Hiring a Tax Attorney is Beneficial

Hiring a tax attorney can be a game-changer in managing overdue taxes. Here’s why:

• In-Depth Knowledge: Tax attorneys understand complex tax laws and can offer tailored advice for your situation.

• Negotiation Skills: They can negotiate with the IRS on your behalf, potentially reducing the amount owed and securing more favorable payment terms.

• Professional Representation: Handling all communications with the IRS, a tax attorney can save you time and stress while ensuring that your rights are protected.

Getting Back on Track

Overdue taxes present a significant challenge for many Americans, but understanding the various strategies to address them can make a substantial difference. Whether it’s setting up a payment plan, using savings, or borrowing money, each option has its pros and cons.

Hiring a qualified tax attorney can provide valuable assistance, offering knowledgeable guidance, negotiating with the IRS, and handling all necessary communications. For those struggling with overdue taxes, seeking professional help through services like TaxDebtLawyer.net can be a critical step towards resolving these issues and achieving financial stability.

By proactively managing overdue taxes and enlisting professional support, taxpayers can navigate their financial challenges more effectively and avoid the long-term consequences of unresolved tax debt.