Posted on January 16, 2010 at 7:53 am I have to make a decision on what I should pay first  - a credit card or my taxes.I will end up owing approx $20k in taxes.  I also owe $20k on a credit card.  The interest rate on the card is 12.99%.I can file an extension until October 15, 2010 and pay the card off, and pay the taxes in October, but interest will accumulate. Or I can pay the taxes now, and just do the minimum on the card for now, and pay that off in the coming months with the money I was going to put aside to pay the taxes in October.I looked on the IRS site, and it APPEARS that the interest rate on taxes on extension is 4%, but maybe I looked at a wrong chart or something? Would that be 4% per annum?It seems that the best way to go would be to pay off the higher interest credit card, and leave the lower interest taxes until later.Does anyone have any insight into this?TIA

Posted on January 16, 2010 at 10:35 am Wow, that is a tough one.  Here is the thing - taxes are a public record, and the credit cards are not.  Make sure you have your bases covered because you do not want the tax situation to get out of control.

Posted on January 18, 2010 at 6:11 am For some reason, anything that has to do with the government sounds more urgent to me than the other things -- it could just be me.Have you considered doing debt settlement with your credit card debt? The amount qualifies. Is your account past due though? That way you don't have to pay your usual monthly payment to it-and dedicate it instead to the taxes.To give you an idea as to how much a debt settlement is going to cost you monthly - if you owe $10,000, your monthly payment is $150. Since you owe $20,000, your monthly payment is $300/mo. for 12-36 months.Again, it's just me, perhaps it's better for you to speak with a financial expert. If you'd like to speak with a debt consultant for free - just fill out a form here at destroydebt.com.All the best to you.

Posted on February 11, 2010 at 6:41 am Another issue or topic that links taxes and credit card is if a debt is forgiven. What isits tax implication (?)

Posted on February 11, 2010 at 6:52 am If the forgiven amount is at least $600, that's considered taxable income by the IRS. The creditor provides the form 1099-C for this.

Posted on February 11, 2010 at 6:56 am Speaking of tax implication, another good question to ask is - can the consumerever get away from paying taxes on their forgiven credit card debt?

Posted on February 11, 2010 at 6:58 am It is possible but very difficult to achieve- it's via the IRS offer in compromise -- which according to many, only about 2% qualify. One of the qualifications is having less than $10,000 in debt and having a good payment record for the past five years