It’s been a long time coming, and it’s finally here. You have managed to pay off the remaining balance of your tax debt. Everything has been squared away, and you can finally breathe a deep sigh of relief. Understandably, the next steps may not be clear, especially if there was quite a lot of time and resource-gathering that went into solving the debt issue.
You might be looking for a good starting point for your new budget. Or you’ve developed anxieties about debts and really want to prevent dealing with them again. No matter what it is, there are most certainly tax solutions that can aid in you taking the next best steps as you move forward from the just-paid debt.
Here are some tips on the steps you can take post-debt repayment for a better future:
Bring Down Your Annual Tax Rates
For many people, debt being paid off is less about relief and more like a reset button of sorts. It can feel like an invisible countdown until the next amount due that’s just beyond the reach of being paid in full. And then interest will start to kick in, followed by several things, and before you know it, there’s a new tax debt to pay off! While that sounds extreme, it’s a very true reality for many, especially those who had a particularly tough time paying their tax debt off the first time.
An excellent way to address this is by rearranging the root of it all. Your best bet is to bring down your annual tax rates. Less liability means less likelihood for tax debt to suddenly accumulate before you’ve even realized what’s happening. You can do this in several ways, including charity donations throughout the year and getting a health savings account.
Retirement account contributions also play a key role. These are deducted from taxable income, bringing your tax debt down that way. No 401(k) or similar from your job? Look into an IRA, which can also serve as a 401(k) booster.
Prioritize Savings With Your Renewed Budget
You’ve probably already made an assessment and the necessary adjustments to your budget. After all, a good amount of your extra money used to be earmarked for tax debt payment. Now, that same amount can go to more productive uses that will be of more help in case of a financial crisis down the line. Or most of it can, at least; try to give yourself “fun money” for dining, clothes, and other “non-essential” expenses. Compensation is valid, and you should absolutely enjoy your hard-earned money after working so hard to be debt-free.
When saving, be sure to put an emergency fund first. Consider your monthly bills and aim to have at least a month’s worth tucked away just in case. If you still have some excess, look into investing.
Paying off a tax debt will no doubt give off a major sense of relief. However, it’s not unusual to feel at a loss about what steps to take next. Ideally, you should bring down your annual tax rates and prioritize savings with your renewed budget.
If you need to get tax relief solutions, reach out to Axiom Tax Resolution Group today! We’re a tax resolution services specialist you can rely on.