Pay the IRS First

Olivia's husband installs windows and basically owns his job. They now have IRS and state tax debt as a result. Where do these tax debts need to be placed in the debt snowball?

QUESTION: Olivia in Ohio says her husband installs windows and basically owns his job. They now have IRS and state tax debt as a result. They make payments to the IRS and are managing it. Where do these tax debts need to be placed in the debt snowball?

ANSWER: I would move them to the front of the line.

Here’s the problem: They both have ridiculous interest rates and penalty rates, and they both have virtually unlimited power to screw up your life if something happens. The IRS can actually take money without even suing you. Now that they’ve gone that far, it’ll get worse fast if you hit a bump in the road, so you want to clear them up.

You definitely need to clean these up first before you move on. I don’t usually cheat on the debt snowball. I go smallest to largest, but it is a smart thing to do to go ahead and clear up those and get them out of the way first.

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