How Does Debt Owed to the IRS Fit into the Debt Snowball?

Jared owes the IRS $6,000 and is paying them monthly. Should he add a personal loan to this debt or continue the debt snowball until the IRS debt makes it to the top of the list?

QUESTION: Jared owes the IRS $6,000 and is paying them monthly. Should he add a personal loan to this debt or continue the debt snowball until the IRS debt makes it to the top of the list?

ANSWER: Put the IRS at the top of the debt snowball. You pay that before you pay anybody for two reasons. First, their interest rates and penalties are so high, and the second is that they have virtually unlimited power to collect.

Put them at the top of your debt snowball and pay them first. It’s one of the few times I say to pay the debt snowball out of order, which is smallest to largest.