6

What To Do If You Cannot Pay Your Taxes In Full.

Every year thousands of working Americans pay numerous bills and then realize they have little left to pay what they owe in taxes. Owing the IRS can be scary because if taxes go unpaid and unresolved you can potentially face some of the harshest collection mechanisms. Many taxpayers avoid the IRS because they cannot pay and are scared of what may happen when the IRS finds out they can’t pay. Understand that the IRS allows individuals to resolve their taxes that they cannot pay in various ways, no matter how bad their financial situation is. Before considering a tax payment plan or some other form of tax settlement is a smart idea to double check and make sure you have taken all possible deductions that you could have taken. If you have not done so already, you should have a tax professional take a look at your return to see if there is anything you missed. Every year there are new tax credits that become available that the average taxpayer is not aware of. It is also a good idea to check past tax returns as well. You will still be able to claim a refund up to 3 years from your filing deadline or 2 years from your last tax payment. So if you have missed deductions in the past you can file an amended tax return to offset what you owe this year.

Once you realize that you cannot pay your taxes at all or in full it is important to act quickly (be proactive) to find the best resolution. The IRS handles similar situations everyday and they are fairly accommodating to taxpayers that are unable to pay but yet communicative. When it comes to picking the right method you first have to analyze your present financial situation and anticipated future financial situation to determine which method is best for you. The IRS will not allow you to use a method that your financial standing is “too good for.” So it is important to be honest with yourself. Below are 5 solutions to not being able to pay your taxes and a description of when that solution should be used.

1. IRS Installment Agreement: An installment agreement is the most common way for individuals to resolve their taxes that they cannot pay. An installment agreement allows taxpayers to pay back taxes over a series of monthly payments (36-60 months). When you setup an installment agreement it is almost like having a loan that you have to pay back. The great thing about it is that the interest rate you receive can be less than you would receive if you used a credit card or obtained another type of loan outside of the IRS. Like any other loan, the longer you take to pay it off, the more you will end up paying in interest. Typically this method is best when a taxpayer has a financial situation that permits a monthly tax payment what at the same time leaving enough for necessary living expenses.

2. Part Pay Installment Agreement: A part pay installment agreement is available to individuals that cannot afford to make the required monthly payments on a regular installment agreement (discussed above). The IRS offers this payment alternative to those individuals that would not be left with enough funds to pay their normal living expenses with a regular Installment Agreement. The IRS has certain guidelines they follow as to what expenses are considered “necessary.” They will not take the initiative to see if your income is below these requirements, you must prove it to them.

3. Hardship Status: Hardship status is when you get temporarily declared “Uncollectible” by the IRS. When this happens the IRS does not take collection actions against you until your financial situation improves in the future. Being declared “Uncollectible” does not resolve your taxes owed but it does buy you time to resolve your financial problems. In order to be placed under hardship status you will be required to show the IRS that you cannot pay your taxes. If you remain under hardship status for a long enough period the taxes owed can expire when the statute of limitations is reached on these debts (typically 10 years).

4. Offer in Compromise (OIC): This is a way for taxpayers to resolve tax liabilities for less than the amount owed. This type of resolution will be accepted by the IRS if it is in the best interest’s of both the IRS and the taxpayer to promote future compliance with all tax payments and filings. The IRS mainly only accepts OICs if they feel that they may never be able to collect the total amount of taxes owed and the offer that is made is greater than or equivalent to what they believe they would be able to collect. The IRS makes sure that only qualified individuals receive this form of relief. This is a highly sought after form of tax relief but it is rarely granted (10-12% approved). This method can be right for you if you do not have the money to currently pay your taxes and you do not expect to have the money in the future. It can also be a good if you may have the money now but that money needs to be used for necessities and you don’t expect to have stable income in the near future.

5. Family and Friends: Having family and friends help you is the last method you should consider. It is always an excellent idea to keep family and friends out of your financial issues, especially tax issues. There are only a few instances where this maybe be considered an OK idea. It can be an OK idea to have family or friends help if you know you will receive some money in the near future and that money can be used to pay back your family or friend right away. If you are not 100% sure of being able to pay them back quickly, it is a better idea to go with one of the other methods listed above.

If you are unable to pay your taxes owed the most important thing you can do is act quickly to find a solution. The IRS actually does have great resolution methods and they try their best to make methods that fit each person no matter what their financial and personal situation looks like. If you are unsure of what the best resolution for your situation you can either call the number on the bill you received from the IRS, call the taxpayers advocacy hotline, or reach out to a tax professional such as a tax attorney, enrolled agent, or a CPA to receive unbiased help with your tax problems.

The above is a guest post from Manuel Davis. Manuel is a tax accountant and writer who has been helps individual taxpayers with various IRS back taxes related problems.

7

Start the New Year Off Right – How to Organize Your Finances.

With the arrival of 2010, I thought a quick post and link to some info about organizing your finances could be of some use. In the past, I used to have my paperwork everywhere, and I could never find anything without spending hours digging through file cabinets, paper boxes, the desk, the bookcase…everywhere. And come tax time, forget it. I was never the type to get my shoebox out in January and fill it all year long with tax documents like donations to charity or Goodwill. All that changed in the last year for me, and it has made quite a difference. So, from LifeOrganizers.com, I wanted to share with you these 5 ways to start organizing your finances so that 2010 will be a smoother year than 2009 was.

1. Consolidate your credit cards.
Rather than having a bunch of different credit cards, consolidate all of your expenses on one single credit card, preferably one that has a low finance rate, and perhaps one that offers cash back or airline mileage on every dollar you spend. This can result in less confusion over which card to use, it can give you a better idea of how much debt you’re accumulating, it may give you more back for your dollar, and you’ll only have to write out one payment check per month.

This is DEFINITELY the way to go. I only use 1 card for everything… my Amtrak rewards card from Chase. I was using my American Express Gold Rewards card as well, but decided the annual fee wasn’t worth it for what I charge to it. This makes record keeping much easier, transactions easier to find, and as an added bonus, I get Amtrak miles.

2. Use a bill paying system.
As soon as you get bills in the mail, they should immediately be placed into a bill paying system. All of your ending bills are then ready to be paid once a week, or once every 2 weeks, etc. Use that same bill paying system to store paid bill summaries, being sure that each category is in its own folder or envelope. Doing this makes it very simple to look something up when necessary.

Even better than this, use online bill paying. All of my bills that cannot be charged to my Chase card, except rent, are sent directly to Bank of America (for now, as am in the middle of switching to Schwab) and they tell me when they get the bill. I hop online, schedule the payment, and I am done. No more stamps, envelopes, going to the post office, nothing. It is a quick process now to pay the bills, and after years (knock on wood) of using this system, I have yet to have even one payment not get to the destination on time.

3. Organize your expenses, as you spend.
Want to know how much you spend each month, so you can determine your monthly spending budget? As you spend, just record that expense. This can be called your Expense Summary. A computer program like Quicken or a simple spreadsheet is great for this purpose, or you can certainly do this with paper and pen.

I say go for the paper and pen. If you must keep track of every penny you spend, physically writing it down as you spend it might make you think twice next time.

4. Balance your checkbook monthly.
In order for you to have a good idea of how much money is sitting in your checking account, which checks have cleared, and any errors that you or your bank may have made, you must balance your checking account. It really doesn’t take that long if you balance your checkbook the same day your statement and canceled checks arrive back from the bank each month. In fact, if you use a computer program like Quicken, you can do this task more quick.

As much as I would like to tell you to do this…I have a confession. I don’t balance my checkbook anymore. I know, I know…but I went a few (read: 8) months not doing it and now I would never catch up even if I wanted to. So yes, please do it. Even though I don’t. I look at my statements, check for weird charges and stuff, but I don’t balance it. Thank you, BofA, for not stealing money from me yet.


5. Keep your tax-related stuff together.
Before tax season, you’ll start to receive tax related information from your job, your bank, etc. Keep all of these tax-related papers in a labeled file folder. This way, when you’re ready to do your taxes, you won’t have to search for the papers you need.

As I referenced at the beginning, it is best to have a place to store any and all documents you might think you will need come tax season next year. It makes life a LOT easier when its time to file.

If you have more ideas on how to better organize your financial files, I would love to hear them. And if you want to read more from Life Organizers, just head on over to the site!

4

Buy Rechargeable Batteries To Save Money And The Environment.

Two years ago, I wrote about buying rechargeable batteries for everything in my house that needs them – and I have to say that it was definitely one of my better purchases…ever. I got 36 batteries for less than $30…24 AA batteries and 12 AAA ones. There are so many things around my house that use batteries of this size – remote controls, computer mice, smoke detectors, kitchen timers, flashlights – that the purchase has turned out to be a no-brainer. I used to buy multiple packs of AA batteries all year, only to throw them in recycling a few months after the purchase. But now, after my one time purchase, I just plug them and in 30 minutes, I have a brand new set ready for use.

so24aa12aaa.jpg

At my local Walgreens store, a pack of 12 AA batteries runs from $7.00 – $10.00, depending on sales and what brand you buy. So that makes them each about a dollar, give or take. Even buying just 2 of these packs a year will cost you $20 or so in AA batteries alone, never mind any other sizes you might need. The rechargeable ones cost me less than a dollar each, and I can re-use them over and over again. Plus, as I mentioned earlier, I also don’t have get tons of batteries recycled each year.

Being home for the holidays reminded me that most people don’t use rechargeable batteries for one reason or another. My mom’s reason is that she thinks they are still like they were in the 1980’s – not reliable. But today’s rechargeables are far and away much better than the batteries of old, so if you haven’t tried them lately you should give them a shot. They don’t heat up or lose their charge after a few days like they used to. And at only a dollar or less per battery, the prices are just about the same as name brand single-use batteries. I bought mine from a company called All-Battery (you can search for the website or check my old post) and could not be happier. So the next time you need to buy batteries, you might want to think about picking some up, as they can save you a lot of money and help keep batteries out of the recycling bin and/or landfills!

5

Checking In On Your Financial Health.

Wondering just how you are doing financially? You probably are if you are like the majority of people. While I don’t necessarily worry about it or spend too much time focusing on how much money I have, it’s nice to check in once in a while to see how I am doing compared to how I am “supposed” to be doing. And since 2009 is coming to a close in a few days, I wanted to revisit a quick little test I found last year over at CNN/Money that asks questions about how much you make, your age, your housing and debt costs, retirement information, etc and tells you how you are doing. While not an exact science, it can give you a good overview of your situation. It only takes a few minutes, so give it a shot!

test

4

Avoid Headaches & Save Money On Holiday Air Travel.

It’s that getting to be that time again – time to fill up the highways, airports, and railways with people on their way to visit relatives for the holidays. I took off last week via car to the east coast and made it with no problems, right before the blizzard hit. Good thing I drive fast! For those of you just starting to think about what you are going to do this year (Maybe a little late?), there are a few ways to both save money and save yourself some headaches in the process.

Of course, the first place to start looking for tickets for any travel is the internet. But there are probably hundreds if not thousands of sites to search for tickets on! I have narrowed down the ones I have used to the following, which I have had the most luck with in terms of saving some cash/getting the dates I wanted:

1. Kayak.com
2. Sidestep.com
3. Travelocity.com
4. Whatever airline I would be using (my airline of choice was American Airlines, but I no longer fly)

Fun at the Airport
Creative Commons License photo credit: lunchtimemama

When you are search for tickets, be sure to keep in mind that you need not fly out of the closest or biggest airport – you might find a better bargain driving an extra 30 minutes to a different airport. I know that sometimes when I flew, I ended up flying into other airports a little further from home because it is cheaper. So be sure to check out any and all surrounding airports – my family back east has the luxury of checking out not only Logan in Boston, but also Manchester, NH and Providence, RI.. You never know where the cheapest flight will be. And try to have some flexibility in your dates – leaving on Fridays or Sundays around the holidays are usually the most expensive. Also, look out for those pesky airline fees – they can really add up.

Once you have your tickets, you are going to want to pack lightly. Many airlines are now charging not only for heavy bags, but for any bags! It used to be that you could bring a few bags with you as long as you didn’t go over the weight limit, but not anymore – the following airlines are charging for each bag you bring:

American Airlines – $20 for your first bag, $30 for your second bag
Northwest Airlines – $20 for your first bag, $30 for your second bag
United Airlines – $15 for your first bag, $50 for your second bag
Continental Airlines – $20 for your first bag, $30 for your second bag
Southwest Airlines – Bags fly free

And those prices are for bags that weigh under 50 pounds…if you go over that weight limit, you will be paying anywhere from $25 all the way up to $125 – so be sure to pack lightly!

OK, so you are all packed and ready to go, right? Not so fast – the fun part has only just begun! Now you get to deal with angry airline workers, hundreds of thousands of other travelers, flight delays, long lines, misplaced baggage… I need not go on, you know the drill. But there are a few things you can do once you are ready for your trip to help make the travel process a little less painless.

First of all, make sure you check in at home for your flight before you go to the airport. Go online to the airline’s site that you are flying, check in, and print out your boarding passes. You are going to be standing in lines all day, so printing these out ahead of time will spare you from doing it at the airport.

Before you head for the airport, call the airlines automated flight status line to make sure you are still leaving today. Nothing like getting to the airport to discover your flight was delayed/canceled and you aren’t leaving until tomorrow now!

Show up early. I have been in lines over the holidays for HOURS, and the last thing you want to do is miss your flight. Some have been in lines for DAYS this season already!

Once at the airport, check in at the curb if you can. Sure, the lines might be long but they are probably longer inside. Also, doing so might prevent you from having to go stand in another line to have your luggage scanned. I know at Los Angeles I always had to stand in that line as well no matter what, but not all airports require it.

Keep the carry-on personal possessions to a minimum. The more crap you carry through checkpoints, the more problems you are going to have. Wear slip-on shoes, avoid bringing liquids and personal care products, and be nice to the TSA agents – they can and will make your life miserable if you aren’t!

Air travel during the holidays can be a real bear if the weather doesn’t cooperate and/or you didn’t plan in advance. If you are traveling to somewhere pretty nearby that you could drive to in less than a day, consider doing that instead. Not only will it be cheaper, but you won’t have to deal with all the passengers in a hurry to get home! I hate the airport during the holidays, so I would rather drive any distance than fly during them. Or, you can look into doing what I did last year – take the train. Sure, it costs a little more than flying does, but it is quite an adventure – you get our own bedroom, you get three meals a day included, and you get to escape into the landscape and books for a few days. I view it as part of my vacation, not just the means to get where I am going. You get to meet interesting people and see parts of the country that you never see while flying at 35,000 feet – it’s quite a nice time.

Better late than never! I meant to run this article last week, but I totally forgot about it – so here it is. The original version of this article ran a year ago, but I wanted to republish it with changes/additions for the holiday season in 2009. Hope it comes in a little handy!

Page 32 of 347« First...1020...2930313233343536...506070...Last »

css.php