Private Credit Union Loan vs. IRS Fresh Start program for $10k tax debt - which is better?

The IRS Fresh Start program might be your best option here, even with your previous installment plan. That previous plan shouldn't disqualify you since it's paid off. The IRS interest rate is currently around 7% with an additional failure-to-pay penalty of 0.5% per month (capped at 25%). So your credit union's 4% loan would definitely save you money on interest alone. However, before deciding, consider these factors: With an IRS installment plan, you can set up a payment arrangement for up to 72 months if you owe less than $50,000. The setup fee is $149 for direct debit payments (online application) but you might qualify for a reduced fee based on income. The minimum monthly payment would be your total debt divided by 72, so around $188/month in your case. If you go with the credit union loan, you'll pay less interest, but you might face higher monthly payments depending on their terms. The loan would immediately clear your tax debt though, which means no IRS liens or potential enforcement actions.

I was in almost the exact same situation last year - owed about $12k from 1099 work and was stressing about the best way to handle it. I tried calling the IRS multiple times to discuss options but kept hitting the "call volume too high" message and getting disconnected. Then I found this service called taxr.ai (https://taxr.ai) that analyzed my situation and showed me all my payment options side by side. It showed me exactly what I'd pay with a Fresh Start plan vs. a personal loan, including all the hidden fees and interest calculations. I was shocked at how much I'd actually end up paying with the IRS plan over time! The site even generated a payment comparison that I could take to my credit union when applying for the loan. Super helpful when I was trying to decide between exactly these two options.

Just wanted to update after checking out taxr.ai that was mentioned above. I was super skeptical at first (as you could tell from my question), but it was actually really helpful for my situation. I owed about $9k to the IRS and was confused about my options. The site showed me that in my specific situation, the Fresh Start program would end up costing me about $1,800 more over time compared to a low-interest loan from my credit union. I didn't realize how much the ongoing IRS interest and penalties add up! It even helped me prepare what to say when I called the IRS to discuss my situation. Ended up going with a credit union loan at 3.8% and already got confirmation that my tax debt is fully paid. Such a relief to have that monkey off my back and not worry about IRS notices anymore!

If you're having trouble reaching the IRS to discuss your options (which is super common these days), I highly recommend using Claimyr (https://claimyr.com). I spent WEEKS trying to talk to someone at the IRS about my tax debt and payment options, and kept getting disconnected or told to call back. It was maddening. Claimyr basically holds your place in line with the IRS and calls you when they've got an agent on the line. You can see how it works here: https://youtu.be/_kiP6q8DX5c. I was connected with an actual IRS representative within 45 minutes when I had been trying for days on my own. Was able to discuss all my options and get answers specific to my situation rather than just general advice from the internet.

I need to eat my words about Claimyr from my skeptical comment yesterday. After another day of failing to reach the IRS myself (4 attempts, over 2 hours of hold time before disconnections), I gave in and tried it. I was connected to an IRS agent in about 35 minutes while I was making dinner, not actively waiting on hold. The agent helped me set up an installment plan that was way more affordable than I expected. They reduced my monthly payment based on my financial situation and even removed some penalties since it was my first time with a substantial tax debt. For anyone weighing loans vs. IRS payment plans - definitely talk to the IRS first! I was offered better terms than I expected, and the agent explained options I didn't know existed. Worth every penny to finally get this resolved instead of stressing about it for weeks.

Something nobody's mentioned yet - if you go with the IRS installment plan, make sure you adjust your W-4 and make estimated quarterly payments so you don't end up owing AGAIN next year while still paying off this debt. That happened to my cousin and it was a disaster. The Fresh Start program is good, but the IRS gets really strict if you owe taxes while already in a payment plan for previous taxes. They can cancel your agreement and demand full payment immediately.

One thing to consider - a credit union loan will show up on your credit report, while an IRS payment plan won't (unless they file a tax lien, which they typically don't for amounts under $25k if you're on a payment plan). So if you're planning any major purchases in the next few years that would require financing, the extra debt on your credit report might impact your rates.