Can I Consolidate Income Tax Debt?
You’ve probably heard of debt consolidation, but what is it exactly. Well, in short, debt consolidation is typically a home equity loan that brings together all your debt accounts into a single low interest loan that is amortized over a period of years, say 15 or 30, just like a mortgage. You gain control of those various debts under one payment with an interest rate that doesn’t change. Because it is spread out so far, and has a lower interest rate than most credit cards, the lower net payment helps you get a handle on your finances and keep your credit in good standing.
But what about other debts besides credit cards? One debt that frightens a lot of people is back taxes they owe. Are you among those who owe the IRS for taxes?
If you are, then you know how fast penalties and interest continue to accrue, even after you have an installment agreement with them. And you know what they can do should you be late on a payment. They can seize assets, garnish your wages, and put liens on your home. It’s no small deal when you’re faced with the ultimate authority on earth, the U.S. Government, and one of its most powerful federal agencies on top of it.
Now you are doing your level best to get your financial house in order. You’re looking into debt consolidation. You don’t want something as important as income tax debt to be missed. So, the $64,000 question if you have IRS debt is, Can I consolidate income tax debt?
You Can Consolidate IRS Debt!
Yes, you can! Like any other financial obligation, you can pay it with the funds made available by a debt consolidation loan. And there is very good reason to do so:
- A bank loan is much less expensive than an IRS installment agreement. Not only does the IRS set your payments high enough that you’ll pay off the debt more quickly, they are also charging penalties and interest, which causes your debt to grow. If you are paying your consolidation agreement on-time, there are no late fees and the interest rate will likely be considerably lower than the IRS charges, usually 8% compounded daily.
- You can consolidate even if you have a lien. If you have a lien on your home, the IRS will actually release it so you can take out the consolidation loan to pay off your IRS debt. Bear in mind that the release is very specific and typically does not allow for other uses like taking money for home improvements. This is strictly in association with a debt consolidation loan that will pay off the IRS debt.
- Remove the dark cloud of IRS debt. Have you looked forward to the day when that awful income tax debt is erased from the books? Isn’t it a burden knowing that as fast as you try to pay it, the penalties and interest still grow? Wouldn’t it be fantastic to be rid of that albatross?
- Actually start getting a refund! Once your IRS debt is paid off in full by the consolidation loan, you can finally start receiving your overpayment refunds from the IRS.
Consolidate Today and Say “Good day, IRS!”
If you have IRS debt, then you know the worry that comes with it. And now you know that the myths about not being able to consolidate income tax debt are just that. So, why delay? Consolidate your debt today! (Well, maybe that’s a little optimistic. But you can get your application processed today, no worries!)