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Advice for taxes/debt

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Advice for taxes/debt

Here’s my situation:

I have about 7500 in cash I was hoping to put toward debt. However, I owe about that in taxes. I expected to owe since i took a 401k withdrawal to buy a home in 2018. Still, the bill is higher than I would like. I also have a current irs installment plan from 2017 with about 3k owed. I’ve already adjusted withholding so that hopefully I won’t owe again next year ( we were both withholding at Married 1 and are now Married 0). That said , wondering what the best options are...

1) Use all the money to pay the 2018 taxes in full
2) Use some of it to pay off the current installment plan and start a new installment plan for 2018. Use the rest to pay down credit cards.
3) combine both tax years into one plan and use the money to pay down debt and save a little

I inderstand I would need a higher payment for the IRS installment plan. I’m also weary of receiving a lock-in letter from the IRS where I got locked into Single 0 withholding ( as would my spouse). So I don’t want that to happen... and I don’t know if that’s likely or not.

Any advice is appreciated. I’ve made it a goal to get rid of all debt and credit cards. Of course I know the IRS is debt too


What should I do, or what would you do?
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Super Contributor

Re: Advice for taxes/debt

There are pros and cons to each option you listed.

 

If it were ME, I would simply pay the 2018 taxes in full and not alter your existing payment plan with the IRS.

 

 

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Super Contributor

Re: Advice for taxes/debt


@tcbofade wrote:

There are pros and cons to each option you listed.

 

If it were ME, I would simply pay the 2018 taxes in full and not alter your existing payment plan with the IRS.

 

 


+1

I am also in an installment plan with IRS and it’s a problem if you owe taxes the following year because they want your exemptions reduced to avoid that.

 

So I agree 100% with @tcbofade. Pay 2018. This way, You don’t have to worry about IRS increasing the amount of your installment agreement. 

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