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Archive for February, 2012

Another Tax Bill Extension Debate

February 29th

Another tax bill is set to expire at the end of this year, which could lead to steep consequences for homeowners suffering mortgage debt troubles. The Mortgage Forgiveness Debt Relief Act of 2007 has helped homeowners in debt with their mortgage avoid tax liability over any restructured or forgiven deficiency balances. If the bill isn’t extended before the end of the year, homeowners facing foreclosure could also end up with a steep tax debt bill.

Forgiving Debts

Prior to the 2007 tax bill, homeowners who sold their home through a short sale or avoided foreclosure through a deed in lieu were held liable for paying taxes on any amount of forgiven debt. Any amount of mortgage debt that was forgiven or waived through a short sale or other mortgage debt solution was to be claimed as income according to the IRS. Since the bill has been in place homeowners have been able to avoid liability on nearly $2 million worth of forgiven debts.

Critics of the bill say the $2 million savings over the last several years is much needed revenue for helping to boost the economy. Those in favor of renewing the tax bill suggest the continued financial relief the bill will provide already struggling Americans will help the housing market recovery efforts. The current issue seems to be whether taking from one source to help another debt problem is really worth it in the end.

 

 

 

Payroll Tax Holiday Extension Causes Concern

February 22nd

Last week, Congress announced the extension of the payroll tax holiday. The holiday was originally put forth to provide small businesses and employers a break from large tax burdens and the threat of owing back taxes in hopes of spurring job market growth. Despite some giving partial credit to the holiday for boosting the job market and decreasing the unemployment rate, many are concerned about the longer lasting effects the holiday could bring.

Down The Line

One of the biggest objections to the payroll tax holiday has always been the debt ceiling issue. Many lawmakers insist that the tax break only exacerbates the nation’s debt problems and has the potential for pushing us over the top in the future. Billions of dollars will be missing in revenue during the time of the tax holiday, leading many critics to argue whether the holiday is helping the economy as planned or simply redirecting the problem into other areas.

Further problems are soon to be seen in Social Security funds. As one of the main sources of funding for these vital government programs, payroll taxes are extremely important to the overall health of an already dying fund. Extending the payroll tax breaks will leave the Social Security funds millions less than could have been earned in revenue for the next year. Many are holding out hope that the funds will not be battered past the point of financial recovery as a result of the tax breaks.

 

 

The Dos and Don’ts of Tax Debt

February 15th

Unpaid taxes are not inherently difficult to resolve. The trouble starts when people don’t know which steps to take or how to go about the process. In general, there are a few things anyone can do to ensure their tax debts are resolved with ease and minimal stress.

The Dos

Whether you already owe the IRS money, or are anticipating owing in the future, there are a few ways to ensure your tax debt liabilities get handled correctly. First, always keep your tax records for a minimum of three years. This includes a copy of your tax return as well as any receipts and itemized deduction documents. If there are questions as to the accuracy of debt liability, keep your records until resolved plus an additional three years. Next, request a review of your tax debt liability. Everyone has the right to have their tax debts assessed for accuracy. You may request to have old tax debts reviewed prior to negotiating a payment plan.

The Don’ts

One of the biggest issues people face when filing their taxes is failing to complete acknowledge their tax debt liability. This is especially a problem when people experience financial trouble. Stay in contact with the IRS. It is important that you maintain an open line of communication about your tax debts.Ignoring tax debts is a poor strategy that will likely lead to IRS penalties and even tax liens. It is important you pay attention to your debts and make efforts to resolve them. Remember that the IRS offers payment assistance plans for anyone experiencing hardships.  If you find dealing with your tax debts to be too much, don’t fight the problem alone. Instead, hire a tax attorney to help you negotiate and resolve your debts.

 

Different Types Of Tax Debt

February 8th

Not all tax debts are the same, which means that different types of tax debt are resolved differently.   While most people look for ways to resolve their debts directly with the tax assessor, there are certain programs available to help those who cannot afford to repay their debts in one lump sum.

Resolving Tax Debt

Income tax debts are the most common type among taxpayers. They arise from large tax liability burdens and foreseen circumstances. While most people assume tax debts are not eligible for bankruptcy protection, some income tax debts may actually qualify.

In general, tax debts must meet the following conditions in order to be eligible for a debt discharge: (a) older than three years, (b) have a corresponding tax return filed with the IRS and (c) not be associated with fraud. The IRS also offers for taxpayers to resolve their debts through an installment plan or Offer in Compromise. These programs are used to help taxpayers that cannot afford to repay their debts quickly or in one payment.

Business tax debts, such as past due payroll taxes, are different than income taxes. Because these debts are important for maintaining business operations, owing the IRS business taxes can put the future of the company at risk. Tax liens, wage garnishments and seizure of operations are all steep consequences associated with business tax debts. However, the IRS does offer ways for businesses to get caught up on their tax debts and remain without consequences. Business owners may be able to negotiate a payment arrangement directly with the IRS.

Property taxes are also a cause for concern among taxpayers. Unlike personal taxes, back due property taxes can lead to liens against the property and, in some cases, foreclosure. Homeowners who are significantly delinquent on their property taxes may find that their homes are at risk of seizure. However, most property tax assessors also offer tax repayment programs that help the homeowner get caught up over a series of smaller payments.

 

Important W-2 Tax Changes For 2012

February 1st

Although the 2011 tax season is not over, it is never too early to start thinking about your W-2 for 2012. Most people never make adjustments to their tax withholding, which can significantly impact how much the tax liability will be at the end of the year. As we begin 2012, it is important to take a look at your withholding and possibly make adjustments to prevent an end of the year tax debt surprise.

Making Changes

Many people adjust their tax withholding only when major life changes arise. Marriage, divorce, and the birth of a child are the most common reasons for adjusting tax withholding. Although these are good changes to make, they aren’t the only reason to make adjustments to a tax bill.

People who are already carrying unpaid taxes may find themselves penalized over the course of the year for not paying their taxes. Increasing the amount of withholding tax will take more out of a person’s paycheck, but it will also ensure their tax liabilities are thoroughly covered at the end of the year. Further, any potential for a refund could then be used to satisfy an owed tax debt.

Self employed individuals also need to monitor their withholding tax closely. Over claiming deductions or decreasing the amount of withholding tax can lead to underpayment, causing problems with their yearend tax bill. Further, certain government programs and benefits require that individuals be caught up on their quarterly tax payment. Failure to pay quarterly taxes could result in IRS penalties if they aren’t claimed properly.

 

 

 
 
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