Tag Archives: Debt

How An IRS Debt Relief Program Can Get Your Taxes Back On Track Again

IRS Debt Relief Program

The IRS is well known for pulling strong-arm tactics on those who do not pay their taxes, but to be honest, they do have a softer side for those who have a legitimate reason for being late with their payments. To make it easier for you the taxpayer, as well as the IRS, they have developed programs for you to use, to get your tax payments back on track again, and in their good books again, as it were.

IRS Form 1040X, 2005 revision

IRS Form 1040X, 2005 revision (Photo credit: Wikipedia)

Installment agreement is an IRS debt relief program aimed at those who owe a large amount of money. Basically, they let you pay off the money in even installments, until the debt is fully paid. Interest will still accumulate on these late payments though, so the bigger the payment you make each month, the better.

Then there is the Penalty Abatement Program which, if you can prove without a doubt, that you have a viable reason for not being in a position to pay your taxes, will have the IRS do away with the penalties to reduce your debt to them.

The Non Collectible Status IRS debt relief program, is for those who are barely existing on their wages and just do not have the money to pay their late taxes. For these people, the taxman will stop taking any action against them, until their circumstances have improved. Again, interest will still accumulate on any money owed to the IRS, so it is a good idea to get it paid off as soon as possible.

Anyone considering using an IRS debt relief program, is can call an Enrolled Agent at IRS Tax Relief who will guide them through the whole process of getting their tax payments back on track again.

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U.S. tax reform – Effect of decrease in the tax code’s bias for debt

The much awaited tax reform has at last arrived to reduce the tax code’s bias for debt. As per the recent announcements, the U.S. corporate tax rate may reduce to 25% from 35%. The non-financial corporations will be allowed a deduction of nearly 65% of their gross interest expense, whereas the financial corporations will be allowed a deduction of up to 79%. Some special rules and regulations have also been implemented for the corporations who have stated a malfunction in the tax purposes.

Interest Rates

Interest Rates (Photo credit: 401(K) 2013)

According to various financial experts, the general strategy is to reduce the corporate tax while restraining the interest rate deduction. This strategy may be helpful in reducing the tax code’s bias for debt. Consequently, the investments projects may get more lucrative for U.S. in the near future.

Debates are on regarding whether the situation will really improve or not. Doubts have been raised whether the tax code’s bias for debt will actually be modified or not. Well, there are justified reasons behind these doubts and debates. The reduction of tax code’s bias has both benefactors and oppositions. If the bias gets corrected, then it may be helpful for numerous debt finances. On the contrary, some organizations which were used to take advantage of this bias may face serious hike in the tax burden. They may encounter difficulties to pay off taxes.

However, the evaluation of the tax reform proposal must not be done by judging only individual interests. If the tax reform may help in overcoming the economic obstacles in U.S., then it should be received positively. It’s being assumed that the tax deductions may lead to efficient distribution of resources. Many corporations may avoid issuing debts because of interest rate deduction. This will ensure that the organizations will not make financial decisions due to tax purposes. Rather, the decisions will be influenced by economic reasons. This may be beneficial for an overall economic growth in U.S.

As per some financial analysts, the application of interest cap to the pre-existing debt is not an excellent idea. To make the reformation successful a few other steps must also be taken by the U.S. government. If the tax reformation permits grandfathering of accessible debts, then the corporations may rush for issuing long-maturity debts. The rush to pay off taxes must be reduced too. For the reduction of the rush the U.S. government must take some fortified step. Only then the corporate taxes may be controlled and the reformation may turn out to be really effective.

There are arguments regarding what should be the nature of tax reformation. Many financial experts believe that the interest cap must be applied only to the net interest expenses and not to the gross interest expenses. This opinion has faced much criticism. The application of interest cap to the net interest expenses may raise the amount of revenue. As per the reports of the Congressional Research Service, the reduction in the corporate taxes may reach the 15% notch.

The restriction of net interest rate deduction may even increase the effective marginal tax rates on the vital debt-financed investments. So it’s better to concentrate on applying the interest cap on net interest expenses rather than targeting gross interest expenses.

The U.S. tax reforms may have reduced the tax code’s bias for debt but it’s not yet clear how effective this is going to be. Unless the tax reforms turn out to be completely revenue-neutral, it can’t be effective enough.

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IRS Tax Relief Programs

IRS Tax Relief Programs

The Internal Revenue Service building in Washington D.C., one of the targets of Hubbard’s “Snow White Program” (Photo credit: Wikipedia)

The Internal Revenue Service (IRS) has several programs that offer tax relief for persons who have outstanding back taxes.

One IRS tax relief program is the Installment Agreement which allows people who are financially unable to make the payments to pay their tax debt over time. Monthly payments can be made until the entire tax debt if paid off. There is also an Offer in Compromise (OIC) program which allows taxpayers to settle their tax debt for a lesser amount than what they owe. This program works well for persons with limited means.

There are also situations where the IRS may abate penalties for taxpayers who were unable to pay taxes because of a special hardship. Persons who match this criterion may have their penalties forgiven by the IRS. However, this abatement of interest is very limited and hardly is ever granted.

You are able to apply for an Installment Agreement, penalty abatement or an OIC on your own. However, if you wish for someone to represent you, there are only a few persons that can assist you.

If you are unable to pay your taxes, look at the various programs for one that you can qualify for. Then contact the IRS to see if they can help you.

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Taxes: 5 Easy Ways to Save

Everyone wants to save some money on their taxes. Many people wait until their tax returns are being prepared to scramble for ways to save. By focusing a keen eye on your tax situation throughout the fiscal year, savings are much easier to take advantage of. Below are five uncomplicated ways you can lower your tax bill or increase your return.

Education
The cost of your higher education can help you save on taxes. Student loan interest deductions and student tax credits may apply to you if you are enrolled in enough credit hours to qualify. Keep careful track of college expenses in order to claim these credits.

Save for Retirement
Not only can a retirement savings plan protect your future lifestyle, it can help you save on your taxes. In many cases, contributions made to a retirement savings or investment account, like a 401K, will not count toward your taxable income. A lower taxable income means a lesser tax obligation. Another tax benefit of investing in a retirement fund is the tax-free growth of the invested money. Unlike other investments, dividend profits from retirement investments do not need to be claimed on income taxes.

Claim Correct Withholding
A surprising number of people do not claim the right withholding on their W-4 forms from their employer. New-hire paperwork packets can be tedious and it is easy to breeze through a W-4, filling in the same withholding number you always have. If you find yourself with a large income tax bill instead of a return, you may have claimed an incorrect withholding level. Check your W-4 and consider increasing your withholding.

Home Equity Loan
The interest paid on a home equity loan, like that of a mortgage, can be claimed as a deduction. For this reason a home equity loan can be more cost effective than paying for a big purchase on a credit card. Credit card interest is seen by the IRS as part of your consumer debt and can never be claimed on your income tax return as a deduction.

Flexible Savings Account
Another way to lower taxable income and your income tax obligation is to have a portion of your paycheck placed into a flexible savings account. Employers who offer medical insurance benefits often have flex accounts available for employees to pay for medical expenses that aren’t covered.

These five strategies can help you save on your taxes. By planning ahead you can save a lot of money when tax season comes around. Organization and attentiveness go a long way toward lowering your yearly tax obligations.

Teresa has over 15 years of experience helping others who are in need of IRS tax help.  If the IRS is withholding money from your paycheck, Teresa can help stop IRS wage garnishments and get you out of debt.

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