Tax Relief Solutions

Via LearnVest By Alden Wicker ~

If you owe money to the IRS for taxes this season, but you don’t have enough cash in your bank account to cut the check, all is not lost. First things first: Make sure to file your return. That way, you avoid the failure-to-file penalty.

Next, decide how much you can pay. The more you pay down now, the less you will pay in interest and the monthly late payment penalty.

Then, depending on your circumstances, you can request an extra 120 days to pay, either through the Online Payment Agreement application or by calling 800-829-1040.

It’s important you address this now, because if you don’t pay or get an extension, the IRS will send you a bill for the amount you owe, which starts the collection process, somewhere you don’t want to be–both for your emotional and financial state.

If you don’t think you can make the deadline, you have several options:

If You Owe …

Less Than $300: Put It on Your Credit Card

This is the easiest way to do it. If you are just waiting for a paycheck and can pay it off at the end of the month, there’s no reason not to put it on your credit card. If you think you will be carrying a balance if you use your credit card to pay, use this calculator to figure out how much it will cost you to pay the interest on it. A good rule of thumb is that if you owe the IRS less than $300 and you plan on paying it off within the year, this is a good option.

Between $300 and $1,000: Take Out a Loan

You could consider taking out a personal loan, but make sure you are getting it from a good source such as a credit union, which can give you a loan at about 11%. This is a good choice if what you owe to the IRS is less than $1,000 and you’re planning on paying it back within the year. You’ll pay about $88 a month to pay it off over a year, adding up to $56 in interest.

More Than $1,000: Set Up an Installment Plan

The IRS will charge you a fee for setting up an installment program, so we only recommend this if you owe more than $1,000 or so. If you do a direct debit agreement, where regular amounts are transferred directly from your financial institution, the fee is $52. If you do a standard agreement or payroll deduction, the fee is $105. Or, if your income is below a certain threshold based on the federal poverty guidelines, it will cost you $43. You’ll have to apply to qualify for the reduced fee.

If You Can’t Pay at All

If you are unable to pay the IRS at all for what you owe, you may request a temporary delay in the collections process or apply for an Offer in Compromise. You can only use these options if there is doubt as to whether the amount you owe is correct, what you owe is larger than your assets and future income together or you are currently suffering economic hardship. Call the IRS using the number on your bill to talk to a representative about doing this, or find all the forms here.

Whatever your situation, don’t ever just ignore your tax bill!  Contact the IRS right away so that you don’t get nailed with big penalties on top of what is owed, and you’ll have one less stress in your life!

LearnVest is the leading lifestyle and personal finance website for women.

The post What to Do if You Can’t Afford to Pay Your Taxes appeared first on SuperMoney!.

One of the biggest headaches facing anyone that chooses to be an independent contractor is dealing with their taxes.  Because you do not work for any company but your own, you are responsible for making sure everything is paid on time and, in turn, things could get a little hectic as April 15th draws near.  If you keep these simple things in mind, however, you will be able to get your taxes taken care of with little to no hassle.

File every quarter of the year.

• This is a commonly known requirement when it comes to being an independent contractor.  Many self employed individuals and businesses have to pay every three months of the calendar year to avoid penalties.  Whether you are required to or not, it is smart to do this not only to avoid fees but as a way to stay organized and on top of your taxes.

Make sure you deduct enough from your paycheck.

• This is something that many independent contracts do not anticipate when they start taking out taxes from their paycheck.  It is a general rule of thumb to take out 30% of your check for taxes and the like so that you are covered no matter how much your taxes comes out to.  This will keep you safe once tax time rolls around.

If all else fails, file for an extension.

• This should be a last ditch effort, but filing for a tax extension that elapses in October is a great way to buy time so you can save the money that you did not have in April.  This should not be done all the time but is a good way to get a little extra help when your back is to the wall.

If you are interested in getting more tax help, please contact us.

The post Who to Turn to When You Have Tax Problems As An Independent Contractor appeared first on Debt America.

When the Federal Income Tax deadline draws near, there are some circumstances that can lead us to being underpaid or underwithheld by an amount that simply isn’t within our budget to hand over all at once. If you are in this situation, it is not necessarily time to panic or even expect some form of IRS harassment or audit. The IRS only seriously investigates flagrant attempts to commit W-2 fraud or hide income. An honest mistake on a form or forgetting to update a W-2 is simply penalized by the fact that there is an amount owed, plus applicable late fees and interest.

There are options for you to be able to tackle this financial hurdle from the IRS. If the amount owed is similar to what you could afford as a loan within your income level and you can not secure any low-interest credit, an installment agreement may be of help to you. This option has the following pros and cons:

Pros:

• You Are Dealing Directly With the IRS Rather than CreditorsYour liability is tracked in detail with each payment. If you opt to use the Electronic Federal Tax Payer System (EFTPS), you can pay online and see exacly what you have outstanding in terms of principle and interest. The IRS tends to be willing to accomadate you – within reason – given your financial situation.
• The Amount Owed Per Month is FixedWhen the agreement is first made a fixed monthly payment will be set. This can be as high or as low as reasonable provided it will pay off the total amount owed within 120 days. It will not change under you without notice and the terms of the agreement will be well defined.
• You May Re-Negotiate the AgreementIf the payments do not fit within your budget, it is possible to reach a new installment agreement with the IRS. Though they are not guaranteed to approve your request, they will see to it that you reach a repayment option that is suitable for your economic circumstances.
• Penalties and Interest May Be Less that That of Consumer CreditThis of course depends on your credit score and access to financing, but compare %11 percent with penalties to the %22+ percent some creditors charge, plus late fees and hidden fees. Since the IRS is concerned more with you repaying than with you locked in a cycle of debt, this may be a better option. However, if your credit is good and you have the means a personal loan, line of credit, or credit card may turn out to be better. However, just consider this: if you receive a tax refund as a result of your return, you have essentially given the IRS an interest free loan. They owe you no interest if you pay to much, but you owe them interest if you pay too little. Do research on your financing options and see what works best for you.

Cons:

• You Are Dealing Directly With the IRS Rather than CreditorsYes, this was the first pro listed, but taken from another perspective it may be a con. If things do not go according to plan with your installment agreements you will have to speak and answer directly to the IRS – exposing you and your finances to their scrutiny. Though you may have nothing to hide, always take care when speaking to them.
• The Agreement has no Grace PeriodIf the installement agreement is even a day overdue it is considered delinquent. Though the IRS may give you some leeway, the monthly date of payment set forth in the agreement must be met or you will be considered in violation of the terms – and may potentially be liable for the total amount due all at once unless there is a reasonable explanation for the failure to pay by the agreed montly date.

The post Have IRS Problems? Know Your Tax Resolution Options appeared first on Debt America.

The IRS Fresh Start Initiative, rolled out and expanded on this year by the Internal Revenue Service (IRS), targets struggling taxpayers. As the name indicates, the initiative’s goal is to give taxpayers a fresh start by means of waived penalties, new installment guidelines and balance compromise.

How exactly will Fresh Start affect taxpayers? Here’s a look at the IRS Fresh Start Initiative.

Waived Penalties

Qualifying unemployed taxpayers can apply to have Failure-to-Pay penalties waived for six months. This gives individuals until October 15, 2012 to pay 2011 taxes with no penalties. However, taxpayers are still responsible for accrued interest.

The six-month extension is available to individuals who have been unemployed for at least 30 consecutive days during 2011 or prior to tax day in April 2012. Additionally, self-employed taxpayers can qualify if they can show a 25 percent decrease in business income during 2011. Couples earning more than $200,000 annually or individuals earning more than $100,000 annually do not qualify. Lastly, if a person’s tax balance was greater than $50,000 at the end of 2011, they are disqualified. Qualifying individuals need to submit IRS Form 1127A.

New Installment Guidelines

Previously, if an individual’s tax balance reached $25,000, the IRS conducted a financial analysis of the person’s income and expenses. Next, the IRS would determine the amount the taxpayer must pay each month. Plus, a Notice of Federal Tax Liens was usually filed. Under Fresh Start, the trigger for this process is $50,000.

More taxpayers will now be able to avoid having to enter a formal agreement with the IRS, having a financial analysis and the burden of Federal Liens. Balances must be paid within a six-year period, and qualifying individuals must agree to have payments automatically deducted from their bank account.

Balance Compromise

Fresh Start expands the IRS Offer in Compromise (OIC) program to include more taxpayers. OIC is a program that allows the taxpayer to settle his or her debt with the IRS for less than the full amount owed. The IRS will still look at each individual and situation to assess the person’s ability to pay. Persons wanting to be considered for a balance reduction can fill out Form 656-B.

Earlier this year, the Internal Revenue Service (IRS) rolled out its Fresh Start Initiative, aimed at helping struggling taxpayers. The initiative allows qualified taxpayers to avoid the IRS Failure to File penalty. This penalty is usually placed on unpaid tax balances, with accrued interest. Qualified individuals can request a six-month payment extension in which no penalties will accrue. Late payment penalties will be charged if the balance is not paid by October 15. Secondly, Fresh Start provides a different installment structure, allowing taxpayers to avoid financial reviews and Federal liens.

Recognizing the need for tax relief, IRS Commissioner Doug Shulman said, “This new approach makes sense for taxpayers and for the nation’s tax system, and it’s part of a wider effort we have underway to help struggling taxpayers.” Do I Qualify for the IRS Fresh Start Initiative? is the logical question being asked by many taxpayers. Consider the qualifications below.

• You must have been unemployed for a minimum of 30 consecutive days during 2011 or before April 15 2012.
• Married couples filing jointly need to have only one spouse that meets the qualifications.
• Individuals who are self-employed need to be able to show at least a 25 percent drop in their net income.
• Taxpayers must not earn more than $200,000 per year for married couples or $100,000 per year for individuals.
• Fresh Start is also limited to taxpayers whose tax balance was not more than $50,000 at the end of 2011.
• Taxpayers must file Form 1127A, which is not available electronically.

It’s important to note that the Fresh Start Initiative applies only to 2011 tax returns.

A levy is the seizure of your property to pay a tax debt.  If you receive notice that you are subject to an IRS Levy due to back taxes, this is a problem that can be resolved.

Before seizing your property, the IRS will send you a notice giving you 30 days to respond.  According to the IRS, if you don’t respond and make payment arrangements they can levy your assets, your income, and your social security benefits.

The IRS has two methods to levy social security benefits.  In an Automated Federal Payment Levy Program, the IRS can take up to 15 percent of your benefits each month until the debt is paid in full.  Under the Manual levy, there is no cap on the amount they can take.  They do, however, say that they “take into account money for reasonable living expenses”.  The IRS will not levy children’s benefits, SSI, or lump sum death benefits.

The IRS can also levy your bank account.  Any account with your name on it is subject to levy, even joint accounts.  Once your bank receives a Notice of Intent to Levy, the bank will freeze all of your checking, savings, CDs, and any other accounts in your name.  The bank holds the funds for 21 days, giving you time to work out a payment arrangement with the IRS.  After the money is turned over to the IRS, you won’t be able to get it back even if you later work out an agreement.  Only the funds on deposit at the time of the levy are affected.  Money deposited afterwards, such as if your paycheck is directly deposited, is not subject to the levy.

If the IRS levies your paycheck, it is immediate and it will continue until the debt is paid.  Typically called a wage garnishment, your employer will send a portion of your pay to the IRS each pay day.  Some of your pay will be exempt; the amount depends on your filing status and number of exemptions you claim.

The post IRS Levy and Back Taxes: Tax Problems that Can be Resolved appeared first on Debt America.

In today’s harsh economy, ever increasing income tax problems are pushing more individuals, businesses, and corporations to the edge of financial insolvency. Ascending unemployment rates, the unavailability of liquid assets, and rising interest rates-the kiss of death in a weakening economy- can all contribute to our current financial problems. As we confront hazy economic times, more and more taxpayers are unable to meet their tax obligations. When businesses go under, they can wind up owing thousands of dollars in unpaid corporate taxes. When individuals face a hardship and strain to pay all of their bills, they may defer paying income and/or business taxes. Bankruptcy is often considered, but unfortunately, federal and state taxes are rarely dischargeable under U.S. Bankruptcy law. All the while, late penalties and interest will continue to add up at a very high rate. The longer taxpayers take to address IRS tax resolution, the more money they will owe Uncle Sam.

If you find yourself in trouble with the IRS and feel lost trying to figure it all out, there is good news for you. First, you are not alone. Second, you have options. Third, you have come to the right place. At Optima Tax Relief, there are a number of tax resolution options that we can review with you. While taxpayers may try to represent themselves in front of the IRS, many turn to professional tax. Professional Resolution experts know taxpayer rights, know who to speak with at the IRS, and can increase the chances of success dramatically.

These are actions we can take to prevent the IRS from taking action against you to collect on your tax liabilities:

1. Filing our Power of Attorney with the assigned Collection IRS Agent
2. Pull your complete IRS transcript
3. Bring Taxpayer into Compliance
4. Offer in Compromise
5. Certified Non Collectible
6. Establish Appropriate Installment Agreement

If you are unsure of what IRS tax solution would work for you, it would be smart to sign up for a free consultation at Optima Tax Relief. Our team of expert tax attorneys, CPAs, and Tax Resolution Specialists will assess your individual case and give you professional advice on which avenue to take. If the below scenarios apply to you, please give us a call!

1. Wage Garnishment
2. Bank Levy
3. State or Federal Tax Lien
4. Unfiled Returns
5. Collection Letters (State or IRS)

With hurricanes, floods, wildfires, earthquakes and other natural disasters affecting so many people throughout the United States every year, many are wondering what comes after the clean up.

First, you have to deal with the insurance companies. Then you need to look at what federal tax relief assistance programs might be available.

If you find yourself in the middle of a major disaster area, you generally have two options. You can file an amended tax return and claim the damages on your prior federal tax form. That will probably net you a refund. Moreover, it gets money into your hands sooner. Or you have the option of waiting until next tax season to file a casualty claim.

However, the Internal Revenue Service (IRS) generally offers other tax relief options as well, such as tax-free assistance from programs like FEMA and extended tax-filing deadlines. Additionally, there is the Mortgage Forgiveness Debt Relief Act of 2007 that protects homeowners from higher taxes when they refinance their homes.

Though the Act isn’t for the exclusive use of families in disaster areas, it does provide additional tax relief for those already under great duress. It acts to protect you from higher taxes when you refinance your home. Available through 2012, the law creates a temporary change to the tax code by eliminating taxes you may face if your lender forgives a portion of your outstanding mortgage debt.

Whether you have weathered the storm of past natural disasters or are preparing for what might lay ahead, click here for more federal tax relief information for natural disaster victims.