Using your credit card does have some advantages. For example, you may be able to rack up more points.
But an installment plan may still be cheaper since the interest costs are generally lower. Besides, the IRS charges an extra fee for credit card plans.
Next, you may also borrow from friends and family, which can certainly mean much lower costs and a longer payment period. But then again, this could cause all kinds of other problems – especially if the debt is not paid off!
Finally, you could borrow against your 401(k). But unfortunately, there are many issues with this. You can only borrow 50% of the balance or $50,000, whichever is higher. There will also be interest charges and you are required to pay back the loan within 5 years.
But if you leave your job or are terminated, then you will be required to pay back the debt. So if you do not have the money to do so, the remaining amount may be considered a distribution – which would be subject to taxes and a 10% penalty.
#4 –Offer In Compromise
This is when the IRS reduces the amount of the debt owed. But as should be no surprise, this is not easy to do. You must provide a comprehensive disclosure of your financials and deal with complicated rules. As a result, it’s a good idea to get the help of a tax professional.