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Archive for April, 2012

Missing Tax Deadlines

April 25th

The deadline for filing your tax return was last Tuesday, April 17th. Although many people scramble to file their taxes on time, there are cases in which the deadline gets missed. If you failed to file your 2011 taxes on time this year and did not request an extension, there are still ways to take care of your tax liabilities.

Take Action

Time is of the essence at this point, especially if you want to avoid IRS penalties and interest fees. If you were expecting a refund, you will not be charged any penalties or interest for being late. If you were expecting to owe the IRS money this year, you need to get in contact with them right away as they are likely to begin penalties and interest fees any day. At this point, your owed taxes are now a matter of tax debt, not just unpaid taxes and the longer you wait the more you will owe.

Now that you have a tax debt situation on your hand there are a few things you can do to make the process easier. First, contact the IRS right away and explain your situation for missing the deadline. Next, determine the amount of your tax debt that you can afford to pay and offer to send in the payment right away with your tax return. This will help minimize the chance the IRS begins any penalty or interest fees on your account. If you can’t afford to repay your tax liabilities, promptly file your tax return and then request an installment payment agreement with the IRS to begin repaying your debts over a series of smaller payments.

 

 

 

Tax Refund Purchases

April 18th

If you are one of the lucky ones expecting a tax refund check this year, you have probably have begun thinking about how you are going to spend it. Although saving the money is the recommended use of the check, it isn’t very common. However, there are a few smart purchases you can make with the check to put that money to work for you.

Mental Accounting

The problem with getting a tax refund check is that most people view it as “free money” or money they wouldn’t otherwise have had. This is false. Your tax refund is already your money, you just allowed the government to borrow it in a sense. Keeping this in mind, it is also important that you do some mental accounting of that money before it reaches your mailbox.

Now that you know what you can expect to get in the way of a tax refund check, spend it wisely. This means find a spot to spend your  money that will give back and be financially savvy. For example, if you have unpaid taxes from years past or any other type of debt burden, use your tax refund to pay these debts. The average person receives anywhere between $1000 and $1500 in a tax refund check, which can put a huge dent in one’s debt balances.

If your debts are in order and have manageable balances, consider using your tax refund check to pay an extra mortgage payment. Get one step closer to paying off your home by making an additional payment towards the principal on your mortgage. If you prefer, you can do the same with your car loan and get closer to having the title of the car be 100 percent yours.

 

 

 

Tax Questions, Answered

April 11th

Tax QuestionThe deadline for filing taxes is just days away, but even if you haven’t already prepared your taxes you may still have time to review some important questions that could affect the outcome of your tax return.

Can I do my taxes by myself?

While anyone is certainly free to do their taxes alone, there are some added benefits to having a professional review your taxes before you file. A tax professional can help you maximize your deductions and exemptions, saving you the most money and even boosting your refund amount. If you owe the IRS money, a tax attorney can help you find a way to repay your tax liabilities without stress or additional fees.

What do I do about debt cancellations?

If you have had any debts cancelled this past year, you are required to report those amounts to the IRS. Generally, debt cancellations are considered income by the IRS and must be reported on your tax return. Whether you had a credit card debt eliminated or settled, or had a portion of your mortgage debt forgiven as part of a foreclosure or short sale, you must report this amount to the IRS using Form 1099-C. However, the IRS may not factor in the amount cancelled in a mortgage debt situation this year as part of the Mortgage Forgiveness Debt Relief Act.

What are my options if I owe the IRS money?

Even if you haven’t been saving money in the event you owe the IRS, there are still options available to help you repay your tax liabilities. The installment plan offers three different plans that can space out payments over a series of smaller payments. Generally, your tax debts can be paid in full in two years or less. If you are experiencing a financial hardship, the IRS may grant you a debt settlement known as an Offer In Compromise.

 

Legitimate Tax Debt Relief

April 4th

After much attention swarmed over the court troubles of TaxMasters last week, many consumers are left questioning the legitimacy of tax debt relief services. Although TaxMasters is in trouble for mismanaging funds and allegedly scamming customers, there are plenty of reputable tax debt relief services available. The trick is knowing what to look for and how to go about resolving your tax debts.

Finding The Right Help

TaxMasters was a key player for many years, providing one of the largest scaled tax debt relief operations in their area. Even though they advertised heavily on radio and television, consumers should not be automatically turned off by a company that has similar means of communicating with potential customers. The trouble most people encounter when attempting to resolve their debts is a lack of knowledge about their options.

Consumers should know that back taxes can be resolved directly with the IRS. There may not be a need to use the services of a third party company, but if additional help is desired consumers should consult with a tax attorney before deciding on how to proceed. Further, the programs offered by the IRS may also be claimed by certain third party companies. An Offer In Compromise or an installment plan is only legitimate if it is approved by the IRS. Anyone looking into one of these programs should ensure they always obtain written approval directly from the IRS and never assume a deal is negotiated on their behalf. Lastly, consumers should get to know the IRS better. Their website is full of helpful information that can better educate consumers about general tax information, laws and even ways to lower their tax liability.

 

 
 
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