Top Five Ways to Stop Hating the Month of April

One of the main problems with owing a tax debt to the IRS is that the debt can grow and get worse, year after year. Every April, like clockwork, the pile grows larger.

It doesn't have to be this way, but it will be until something changes. Here are five options for making sure that April isn't your least favorite month every year for the rest of your life.

1. Financing Tax Debt with a Credit Card

Did you know that you can pay your income taxes by credit card? You can, and sometimes it's a good idea.

You'll commonly pay a transaction fee equal to 2.5% of the tax bill owed. But when you consider that the IRS can penalize you up to 25% of your tax bill if you don't make any payment by April 15th, especially if you're a habitual tax debtor, 2.5% percent starts to look pretty good.

Of course, paying by credit card is only a good option if you have a good interest rate on your credit card.

2. Change Your Withholdings at Work

You know that confusing form you fill out at the beginning of every year? The one where you put single, married, and some number of dependents, and then you sign the bottom?

It's called a W-4, and it controls how much tax your employer takes out in order to pay your income taxes. As a general rule, if you put more dependents on this form than you actually have in real life, you're definitely going to owe tax at the end of the year.

Yes, you'll get more in your paychecks during the year, but again, IRS tax debt interest and penalties make this a long-term losing strategy. What's worse, once you're in the IRS systems as a repeated under-withholder, the IRS may contact your employer and begin garnishing your wages.

3. Financing Tax Debt by Borrowing From Friends and Family

Needless to say, this one is tricky. Nevertheless, it is an option, and probably better than owing the IRS directly.

4. Accept and Adhere to an IRS Installment Plan

It may not be as bad as you think. The IRS should work with you, based on your monthly earnings, to create a manageable arrangement.

However, make sure you are ready to meet the requirements of an installment plan before committing. You must make that payment on the appointed day every month, or else your whole agreement becomes invalidated.

Also note that you may be able to obtain a rate discount if you allow payments to be directly debited from your bank account.

5. Settling Up Once and For All Through an Offer in Compromise

Crafting an IRS Offer in Compromise that has a decent chance of success is best practiced by a competent tax professional. It can be complicated. But it can also be a massive money saver.

Sometimes, the IRS is ready to make a deal, and you can take advantage.

About the Author:
Andrew Freiburghouse is a freelance writer and editor living in Brooklyn, NY. He has worked in a variety of fields including magazine journalism, tax preparation, screenwriting, copywriting, and real estate. He graduated from Santa Clara University in 1999 with a B.A. in English. A regular contributor at tech blog Edgelings.com, Andrew was born and raised in the City of Los Angeles. He hopes he will survive the New York winter.