Avoid Taxing Your Finances During Tax Time

Submitted by Jen Jones on Fri, 01/07/2011 - 8:52am

Avoid Taxing Your Finances During Tax Time

As we’re all now aware, this decade’s economic downturn has dealt, and unfortunately continues to deal, a significant blow to the budgets of many American families, leaving millions in debt, facing foreclosure, and sometimes looking to any means necessary to break even, much less get back on a financially-healthy course. And so, once again, we’re finding that the beginnings of tax season can also yield it’s own set of challenges for some cash-strapped citizens as many turn to plastic to pay back what they owe the IRS.

Unfortunately, with the advent of online filings, paying your taxes with a credit card has never been simpler. So, in the interest of helping you avoid, well, high interest (among other things), here’s three simple reminders as to why you should avoid credit cards in order to limit an already taxing, tax time.

(1) Using Credit Always Means Paying More
This might seem obvious coming from bankruptcy experts, but it’s worth a reminder that if you pay the taxman with your credit card, you will pay more than what you originally owed in the end. While it’s understandable that you would want to avoid the IRS interest or penalties that can arise from paying your taxes later than your required due date, these fees will inevitably be less than those accrued from using even your lowest interest credit cards. The reason? As an incentive to pay your tax debts, the interest rates and penalties for state and federal taxes are small by comparison to the costs of unsecured credit.

(2) Credit Isn’t Your Only Option
Secondly, don’t be fooled: as is the case when you’re considering ways to get out of debt, when you are in a position where you must pay back taxes, you have options. While the IRS (or your filing agency) may encourage you to pay your taxes with plastic, this is simply because these authorities would prefer a swifter (and more efficient) transaction. However, you are neither required to pay your taxes with a credit card nor is it your only option for dealing with tax debts when money is tight. Instead, inquire with the IRS about the payment plans available for people who want to pay but need a little assistance doing so.

(3) For The Bankruptcy Bound,
Paying With Plastic Threatens Your Ability to Discharge Tax Debt
And finally, and in some cases, most importantly, if you are considering the benefits of a bankruptcy filing after paying your tax debts with your credit card, it is vital to understand that in some cases you may not then discharge that portion of your credit card debt in bankruptcy.

As a result, if you’re an individual or business debtor planning to file for bankruptcy, it is essential to work with your bankruptcy attorney to plan for the inevitable tax bills that you will receive while you’re in bankruptcy.  While bankruptcy can help you possibly discharge and/or repay pre-petition tax debt, you are still responsible for paying new tax debt that arises after you file.

So, remember, in these taxing times, a qualified bankruptcy attorney can help.  Specifically, the bankruptcy attorneys at the Law Offices of John T. Orcutt offer a totally FREE debt consultation and now, more than ever, it’s time to take them up on their offer. Just call toll free to +1-919-646-2654, or during the off hours, you can make your own appointment right online at www.billsbills.com. Simply click on the yellow “FREE Consultation Now” button.

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