Student Loans and Federal Taxes in 2025: What Arizona Borrowers Need to Know
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Written by Craig B

Student Loans and Federal Taxes in 2025: What Arizona Borrowers Need to Know

If you’re paying back student loans or waiting for help, it’s a good idea to know how those loans will affect your federal taxes in 2025. Tax laws about student loans have changed a lot in the last several years. As an Arizona taxpayer, it’s crucial to stay up to date so you don’t miss out on important deductions or be hit with surprise tax liabilities.

Let’s go over what’s new this year, what’s still the same, and how to answer tax inquiries about student loans with confidence.

1. Student Loan Interest Deduction

The student loan interest deduction is still available for 2025. Borrowers can deduct up to $2,500 in interest paid during the year. Even if you don’t itemize your deductions, this one can cut your taxable income.

To Be Eligible:

You can only use your loan for certain types of college costs.

You have to pay the loan back by law.

Your modified adjusted gross income (MAGI) must be less than the phase-out limits, which change every year to keep up with inflation.

The deduction slowly goes away if you make more than specified amounts. Most Arizona taxpayers with middle-class incomes still qualify. Your loan servicer will send you Form 1098-E, which shows how much interest you paid. Be sure to include it when you file.

2. Forgiveness and Cancelation

This is the largest transformation that has happened in a long time. Most federal student debt forgiveness, whether it’s through income-driven repayment (IDR) plans, Public Service debt Forgiveness (PSLF), or even some disability discharges, won’t be taxed at the federal level until 2025.

This implies that if you have an approved program that forgives your outstanding balance, the IRS won’t count it as taxable income. But if Congress doesn’t continue this rule, forgiven balances after 2025 may be taxable again.

Arizona is lucky since it follows the same rules as the federal government on this subject, thus state taxes usually won’t apply either. Always check before you file, because the rules in each state may change from year to year.

3. Refunds and Loans That Have Gone Bad

If you don’t pay back your student loans, the federal government can take some of your tax refunds to get the money back. This process, known as a Treasury Offset, applies to refunds like your income tax or even your Social Security payouts.

Offsets were put on hold during the COVID-era payment freeze. But as of 2025, routine collecting operations have started up again. If you think you might be at risk, get in touch with your loan servicer or go to studentaid.gov to learn more about rehabilitation or consolidation before tax season.

Tax Debt Advisors in Mesa, Arizona, often helps clients deal with or avoid offsets by talking to the IRS and setting up payment plans.

4. Tax and IDR Plans

Your monthly cost on an IDR plan is based on your income and the number of people in your family. You have to recertify your income every year, and you usually do this with information from your tax return.

Your payment amount may depend on your filing status:

When you file jointly as a married couple, both of your incomes are counted.

If you’re married and filing separately, only your income counts for most IDR plans.

Picking the appropriate file status can lower your monthly payment, but it could also raise your tax burden. This is where a professional can help. An Arizona tax advisor can model both results to discover the optimum balance.

5. Tax Experts Can Help

It’s not always clear how student loans and taxes are related. A professional who knows what they’re doing can:

Check to see if you may deduct the interest on your loan.

Find out if forgiveness will be taxable in your case.

If you’re behind on payments, keep your refund safe.

Advise on the best filing status for IDR recertification.

Tax Debt Advisors can help you figure out all the nuances so that your 2025 tax return shows all the benefits and avoids any unexpected debts if you live in Arizona.

In short, student loans can affect your taxes in several ways, such as how much you can deduct and how you plan to pay them back. If you know how the 2025 rules work, you’ll keep more money and follow both federal and Arizona tax regulations.

Keywords: student loans 2025, student loan interest deduction, student loan forgiveness taxes, student loan offset, IRS student loans, tax refund offset, Arizona tax help, Tax Debt Advisors, federal taxes and student loans, IDR plan taxes, Public Service Loan Forgiveness taxes, Arizona tax advisor, tax help Mesa AZ

Tax Settlement in Mesa, Arizona

If you need IRS Debt Help, Tax Debt Settlements or Tax Debt Advising in Phoenix, Mesa or anywhere else, Tax Debt Advisors can help! Give us a call at 480-926-9300 or fill out our contact form for a free consultation.

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Can You Add To Balance Regularly of a Certificate of Deposit
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Written by Craig B

What Are The Benefits Of A CD?

A Certificate of Deposit (CD) is a low-risk savings product offered by banks and credit unions. You deposit money for a fixed period (the “term”) and earn interest — typically higher than a regular savings account.

Here are the main benefits of a CD:

💰 1. Higher Interest Rates

  • CDs generally offer better returns than regular savings accounts or money market accounts.

  • Longer terms usually mean higher rates (e.g., 1-year vs. 5-year CD).

🔒 2. Safe and Low-Risk

  • CDs are FDIC-insured (up to $250,000 per depositor per bank), so your money is very safe — even if the bank fails.

🧘‍♂️ 3. Guaranteed Returns

  • The rate is locked in for the term, so your earnings are predictable and not affected by market swings.

⏳ 4. Discourages Impulse Spending

  • Since withdrawing early results in penalties, CDs can help you commit to saving and avoid dipping into your money.

🧩 5. CD Laddering Option

  • You can build a CD ladder (staggered maturity dates) for steady access to funds and still benefit from long-term rates.

📈 6. Good for Short-Term Goals

  • Useful if you’re saving for something in 6 months to 5 years — like a home down payment, car, or tuition — and want a risk-free return.

⚠️ Note: CDs do have downsides, like:

  • Early withdrawal penalties

  • No access to funds during the term

  • Lower returns than stocks or mutual funds over long periods

What Are 2025 CD Rates?

Here are the current Certificate of Deposit (CD) rates as of late July 2025, along with an outlook for the rest of the year:

📈 Current Highlights (July 31, 2025)

🏦 Where to Find Best Rates

  • Online banks and credit unions offer the highest yields—typically 4%–4.6% APY for CD terms of 6 months to 2 years cbsnews.com+5Bankrate+5Investopedia+5.

  • Smaller credit unions often pay more than larger national banks due to lower overhead and more aggressive rates NCUAexperian.com.

🔭 Rate Outlook for the Rest of 2025

  • The Federal Reserve has maintained the benchmark rate at 4.25%–4.50% through mid‑2025, keeping CD yields elevated Investopedia+3Forbes+3Investopedia+3.

  • Analysts expect at least one more rate cut by year-end, which means CD yields may start to decline soon—a window to lock in high rates now Investopedia+1Investopedia+1.

  • Bankrate’s forecast: national average 1‑year CD APY may fall to around 1.25%, and top competitive 1‑year CD rates may reach up to 3.70% by year-end, while top 5‑year rates may drift nearer 3.95% Bankrate.

💡 Quick Summary Table

Term Top APY (~) National Average APY
3–9 months 4.50% ~1.5–1.6%
~12 months 4.50%–4.60% ~1.6%
18–19 months ~4.60% n/a
3–5 years ~4.60% ~1.3–1.4%

✅ Takeaway

  • Best rates today: 4.5%–4.6% APY on CDs from online banks and credit unions (6–19 month terms).

  • National average CD rates remain low at ~1.6% for 1‑year CDs and ~2.5% across all terms.

  • Act now if you want to lock in top yields—rate cuts later in 2025 are likely to depress CD rates.

What Is a CD Ladder?

A CD ladder is a savings strategy that involves spreading your money across multiple certificates of deposit (CDs) with different maturity dates. It helps you:

  • Earn higher interest than a regular savings account

  • Maintain access to portions of your money at regular intervals

  • Reduce interest rate risk if rates drop

🪜 How a CD Ladder Works

Let’s say you have $10,000 to invest. Instead of putting it all in a 5-year CD, you divide it like this:

CD Term Amount Invested Maturity
1-year CD $2,000 1 year
2-year CD $2,000 2 years
3-year CD $2,000 3 years
4-year CD $2,000 4 years
5-year CD $2,000 5 years

Each year, one CD matures. You can either:

  • Withdraw the money if you need it

  • Reinvest it into a new 5-year CD at the (hopefully higher) rate

After five years, you have a rotating ladder of 5-year CDs maturing every year — giving you:

  • Long-term interest rates

  • Yearly liquidity

✅ Benefits of a CD Ladder

  • 📈 Higher returns than leaving all money in short-term CDs

  • 🧘 More flexibility than locking all funds for 5 years

  • 🔁 Reinvestment opportunity as rates rise

  • 💡 Reduces risk of locking in all money when rates are low

🧠 Who Should Use It?

  • Conservative savers who want safe, predictable income

  • Retirees looking for staggered access to cash

  • Anyone concerned about future interest rate changes

Tax Settlement in Mesa, Arizona

If you need IRS Debt Help, Tax Debt Settlements or Tax Debt Advising in Phoenix, Mesa or anywhere else, Tax Debt Advisors can help! Give us a call at 480-926-9300 or fill out our contact form for a free consultation.

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Common Tax Problems in Mesa AZ
Regular Post
Written by Craig B

Negotiating Tax Debt With The IRS

Negotiating tax debt with the IRS can be a way to reduce your burden and avoid harsh penalties or collection actions. Here’s a clear overview of how it works and options you might explore:

How to Negotiate Tax Debt with the IRS

1. Understand Your Debt

  • Get a current statement of your tax debt from the IRS by requesting a Tax Account Transcript.
  • Review the amount, penalties, interest, and collection notices.

2. Know Your Options

A. Offer in Compromise (OIC)

  • Allows you to settle your tax debt for less than you owe if you can prove paying the full amount would cause financial hardship.
  • Requires submitting Form 656 and a detailed financial statement.
  • Not everyone qualifies—IRS uses strict criteria based on your income, assets, and expenses.

B. Installment Agreement

  • A payment plan where you pay your debt in monthly installments.
  • Can be short-term (up to 120 days) or long-term (over 120 days).
  • Usually requires submitting Form 9465.

C. Currently Not Collectible Status

  • If you can’t pay anything now, you can request the IRS to temporarily delay collection.
  • Interest and penalties continue to accrue, but IRS pauses aggressive collections.

D. Penalty Abatement

  • You can request removal or reduction of penalties for reasonable cause (e.g., illness, natural disaster).
  • Penalties include failure-to-file and failure-to-pay.

3. Prepare Your Financial Information

  • Gather documentation: pay stubs, bank statements, monthly expenses, assets, debts.
  • Be honest and accurate—misleading the IRS can cause more trouble.

4. Communicate with the IRS

  • Contact the IRS early to discuss your options (call the number on your notice or visit IRS.gov).
  • Consider hiring a tax professional or attorney, especially for OIC negotiations.

5. Submit Your Application or Agreement

  • Complete the required forms carefully.
  • For OIC, include the application fee and initial payment unless you qualify for a waiver.

6. Stay Compliant

  • File all required tax returns on time.
  • Make all payments agreed upon.
  • Avoid new tax debts during negotiations.

7. If Your Offer is Rejected

  • You can appeal within 30 days.
  • Alternatively, consider other payment options or consult a tax professional.

Tips for Successful Negotiation

  • Be proactive—don’t ignore IRS notices.
  • Keep detailed records of all communications.
  • Don’t promise more than you can realistically pay.
  • Use IRS payment calculators to determine reasonable offers.

Tax Settlement in Mesa, Arizona

If you need IRS Debt Help, Tax Debt Settlements or Tax Debt Advising in Phoenix, Mesa or anywhere else, Tax Debt Advisors can help! Give us a call at 480-926-9300 or fill out our contact form for a free consultation. This family owned tax practice has been serving the public since all the way back in 1977!

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Can You Add To Balance Regularly of a Certificate of Deposit
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Written by Craig B

Can You Add To Balance Regularly of a Certificate of Deposit

No, you typically cannot add to the balance of a traditional Certificate of Deposit (CD) once it has been opened. CDs are designed as fixed-term, fixed-deposit savings products, meaning:

🔒 Key Characteristics of Standard CDs:

Feature Description
Initial Deposit Fixed at the time of opening
Additional Deposits ❌ Not allowed during the term
Interest Rate Locked in for the term
Term Lengths Usually 3 months to 5 years
Early Withdrawal Allowed but comes with a penalty (loss of interest or fees)

✅ Options If You Want to Add Money Regularly

If you’re looking to build savings gradually while still earning better-than-savings-account rates, consider:

1. Add-On CDs

  • Allow additional deposits during the term

  • Offered by select banks and credit unions (e.g., Ally, BECU, or local AZ credit unions)

  • Often have minimum add-on amounts and maximum contribution limits

2. CD Ladder Strategy

  • Open multiple CDs at different terms (e.g., 6 mo, 12 mo, 24 mo)

  • As each CD matures, you reinvest plus add more money

  • Provides liquidity and flexibility over time

3. High-Yield Savings Account (HYSA)

  • Interest rates competitive with short-term CDs

  • Flexible and allows unlimited deposits and withdrawals (ideal for growing funds to move into a CD later)

📍 Arizona Tip:

Credit unions like Desert Financial or Arizona Federal occasionally offer special add-on CDs, especially for seniors or members with checking accounts.

Would you like help finding:

  • The best add-on CD rates available now?

  • A CD ladder template to manage long-term savings?

The Best Add-On CD Rates Available Now

Here are the best add-on CD rates available now (June 2025), along with top regular CDs for comparison:

✅ Top Add-On CD Offer

  • Bank5 Connect 24‑Month Investment Add‑On CD

👉 Ideal for savers who want to continue adding funds while earning a solid fixed rate.

💼 Best Standard CD Rates (No Add‑On Feature)

Term Institution APY Min. Deposit
9 months Newtek Bank 4.60% — bank5connect.com+1bankrate.com+1
6 months First Internet Bank of Indiana 4.49% $1,000
3 months PonceBankDirect (via Investopedia) 4.50% —
1 year First Internet Bank of Indiana 4.40% $1,000
Variable Higher yields (up to 4.65%) available at smaller banks/credit unions

🔎 How to Choose

  • 💡 Need flexibility?
    → Go with an add-on CD, like Bank5 Connect’s 4.25% add-on CD. You can grow your balance while it’s locked in.

  • 💸 Want the highest rate?
    → Consider short-term standard CDs (like 6 or 9 months) with top-tier rates (4.49–4.60% APY).

  • 🔐 Prefer liquidity?
    → Check out no-penalty CDs offering ~4.0–4.3% APY, allowing early withdrawal without fees.

🧭 Next Steps

Tax Settlement in Mesa, Arizona

If you need IRS Debt Help, Tax Debt Settlements or Tax Debt Advising in Phoenix, Mesa or anywhere else, Tax Debt Advisors can help! Give us a call at 480-926-9300 or fill out our contact form for a free consultation.

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How To Stop IRS Wage Garnishment
Regular Post
Written by Craig B

How To Stop IRS Wage Garnishment

Here are some common and effective strategies to stop the IRS from garnishing your wages:

🛑 1. Contact the IRS Immediately

The sooner you contact the IRS, the more options you have. Wage garnishment often happens after repeated attempts to collect unpaid taxes, so opening communication can lead to better outcomes.

📝 2. Set Up a Payment Plan

Request an Installment Agreement:

  • Spread your tax debt over monthly payments.

  • Avoid further garnishments once approved.

  • Must stay current on future taxes and payments.

⚖️ 3. Submit an Offer in Compromise (OIC)

If you’re struggling financially, you may qualify to settle your tax debt for less than the full amount owed.

  • Must prove financial hardship.

  • Takes time to process but can remove garnishment once accepted.

📄 4. Apply for Currently Not Collectible (CNC) Status

If you can’t afford to pay your basic living expenses and taxes:

  • The IRS may pause collections (including garnishments).

  • Debt remains, but enforcement actions stop temporarily.

💼 5. File for Bankruptcy

  • Chapter 7 or Chapter 13 bankruptcy may eliminate or reduce tax debts.

  • Stops wage garnishment through an automatic stay.

  • Not all tax debts are dischargeable, so speak with a bankruptcy attorney.

👩‍⚖️ 6. Request a Collection Due Process (CDP) Hearing

  • If you recently received a Final Notice of Intent to Levy, you have 30 days to request a hearing.

  • At the hearing, you can dispute the debt or propose alternatives.

📞 7. Work with a Tax Professional

Tax attorneys, CPAs, or enrolled agents can:

  • Negotiate with the IRS on your behalf.

  • Help you choose the best resolution strategy.

  • Ensure your rights are protected.

Tax Settlement in Mesa, Arizona

If you need IRS Debt Help, Tax Debt Settlements or Tax Debt Advising in Phoenix, Mesa or anywhere else, Tax Debt Advisors can help! Give us a call at 480-926-9300 or fill out our contact form for a free consultation.

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How Do IRS Payment Plans Work
Regular Post
Written by Craig B

How Do IRS Payment Plans Work

Here’s a clear overview of how IRS payment plans work if you owe taxes and can’t pay them all at once:

💰 What Is an IRS Payment Plan?

An IRS payment plan, also known as an installment agreement, allows you to pay your tax debt over time in monthly installments.

🧾 Types of IRS Payment Plans

  1. Short-Term Payment Plan (120 days or less):

    • For balances under $100,000 (including taxes, penalties, and interest).

    • No setup fee.

    • Interest and penalties still apply.

  2. Long-Term Payment Plan (Installment Agreement):

    • For balances under $50,000 if using automatic withdrawals.

    • Setup fees apply:

      • $0: If you set up automatic payments online and qualify for low income.

      • $31: Online setup with auto withdrawals.

      • $130: Setup by phone/mail/in-person (or $43 for low-income taxpayers).

    • Monthly payments are required until the full amount is paid.

📱 How to Apply

You can apply:

  • Online at IRS.gov

  • By phone or mail using Form 9465

You’ll need:

  • Tax return filed

  • Your balance due

  • Bank account or card for payments

✅ Benefits

  • Avoids more aggressive collection actions like wage garnishment or bank levies.

  • Protects your credit from damage related to unpaid tax debt.

  • Flexible plans depending on your situation.

⚠️ Keep in Mind

  • Interest and late-payment penalties continue until your balance is paid in full.

  • Missing a payment can default the agreement.

  • Staying current with future tax filings is crucial.

Tax Settlement in Mesa, Arizona

If you need IRS Debt Help, Tax Debt Settlements or Tax Debt Advising in Phoenix, Mesa or anywhere else, Tax Debt Advisors can help! Give us a call at 480-926-9300 or fill out our contact form for a free consultation.

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How Do IRS Payment Plans Work
Regular Post
Written by Craig B

2025 Arizona Tax Brackets

As of 2025, Arizona employs a flat individual income tax rate of 2.5% across all income levels and filing statuses.

This flat rate was implemented in 2024 and continues into 2025.

For federal income taxes in 2025, the tax brackets are as follows:

  • 10%: For single filers with income up to $11,925; for married couples filing jointly, up to $23,850.
  • 12%: For single filers with income over $11,925; for married couples filing jointly, over $23,850.
  • 22%: For single filers with income over $48,475; for married couples filing jointly, over $96,950.
  • 24%: For single filers with income over $103,350; for married couples filing jointly, over $206,700.
  • 32%: For single filers with income over $197,300; for married couples filing jointly, over $394,600.
  • 35%: For single filers with income over $250,525; for married couples filing jointly, over $501,050.
  • 37%: For single filers with income over $626,350; for married couples filing jointly, over $751,600.
Please note that tax laws can change, and it’s advisable to consult the Arizona Department of Revenue or a tax professional for the most current information.

Arizona Tax Credits and Deductions

Arizona offers several tax credits and deductions to its residents. Here’s an overview of some key opportunities:

1. Credit for Contributions to Qualifying Charitable Organizations (QCO):

  • Purpose: Encourages donations to organizations that provide immediate basic needs to Arizona residents who receive temporary assistance for needy families (TANF) benefits, are low-income residents, or individuals with chronic illnesses or physical disabilities.
  • 2025 Contribution Limits:
    • Single Filers, Married Filing Separately, or Head of Household: Up to $495.
    • Married Filing Jointly: Up to $987.
  • Claiming the Credit: Donations made between January 1, 2025, and April 15, 2025, can be applied to either the 2024 or 2025 tax return. To claim the higher 2025 credit amount, the donation should be reported on the 2025 return filed in 2026.

2. Credit for Contributions to Qualifying Foster Care Charitable Organizations (QFCO):

  • Purpose: Supports organizations that provide immediate basic needs to at least 200 qualifying individuals in the foster care system.
  • 2025 Contribution Limits:
    • Single Filers, Married Filing Separately, or Head of Household: Up to $618.
    • Married Filing Jointly: Up to $1,234.
  • Claiming the Credit: Similar to the QCO credit, donations made between January 1, 2025, and April 15, 2025, can be applied to either the 2024 or 2025 tax return. To utilize the higher 2025 credit amount, report the donation on the 2025 return filed in 2026.

3. 529 Plan Contributions:

  • Purpose: Encourages saving for education expenses.
  • Deduction Details: Arizona provides an income tax deduction for contributions made to any state’s 529 plan. This deduction complements the federal tax benefits, where assets grow tax-free, and withdrawals are tax-free when used for qualified education expenses.

4. Work Opportunity Tax Credit (WOTC):

  • Purpose: A federal tax credit designed to incentivize employers to hire individuals from specific target groups that face barriers to employment.
  • Credit Amount: Ranges from $1,200 to $9,600 per eligible employee, depending on the target group and the number of hours worked.
  • Eligibility: Employers who hire individuals from designated target groups and ensure the new employee works a minimum of 120 hours in their first year.

Additional Considerations:

  • Federal Tax Credits: While not specific to Arizona, residents may also benefit from federal tax credits such as the Earned Income Tax Credit (EITC), Child Tax Credit, and education-related credits.
  • Stay Informed: Tax laws can change. It’s advisable to consult with a tax professional or refer to the Arizona Department of Revenue’s official website for the most current information.

By leveraging these credits and deductions, Arizona taxpayers can potentially reduce their state tax liability while supporting community initiatives and planning for future expenses.

Tax Settlement in Mesa, Arizona

If you need IRS Debt Help, Tax Debt Settlements or Tax Debt Advising in Phoenix, Mesa or anywhere else, Tax Debt Advisors can help! Give us a call at 480-926-9300 or fill out our contact form for a free consultation.

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What To DO If I DO Not Get My W2 By The End of January
Regular Post
Written by Craig B

What To Do If I Do Not Get My W2 By The End of January

If you don’t receive your W-2 by the end of January, here’s what you can do:

1. Check with Your Employer

  • Contact your employer’s HR or payroll department. It’s possible your W-2 was sent to the wrong address or delayed.
  • Ensure they have your correct mailing address and other contact details.

2. Check Online Access

  • Many employers provide W-2s electronically through payroll services like ADP, Paychex, or similar platforms. Log in to check if it’s available.

3. Contact the IRS

  • If you still haven’t received your W-2 by mid-February, call the IRS at 1-800-829-1040.
  • Be prepared to provide:
    • Your name, address, Social Security number, and phone number.
    • Your employer’s name, address, and phone number.
    • Your employment dates and an estimate of your wages and withholding amounts (you can use your last pay stub for this).

4. File Form 4852 (Substitute for Form W-2)

  • If you cannot get your W-2 in time to file your tax return, complete Form 4852 as a substitute.
  • Estimate your wages and taxes withheld using your last pay stub or other records.

5. Amend Your Tax Return if Necessary

  • If you receive your W-2 after filing with Form 4852 and the information differs, you may need to file an amended return using Form 1040-X.

Tips to Avoid Delays Next Year

  • Ensure your employer has your correct address by the end of the year.
  • Sign up for electronic delivery if your employer offers it.

Tax Settlement in Mesa, Arizona

If you need IRS Debt Help, Tax Debt Settlements or Tax Debt Advising in Phoenix, Mesa or anywhere else, Tax Debt Advisors can help! Give us a call at 480-926-9300 or fill out our contact form for a free consultation.

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Common Tax Problems in Mesa AZ
Regular Post
Written by Craig B

Preparing For Tax Season

Preparing for tax season can be a smooth process if you organize your financial records and understand the necessary steps. Here’s a guide to help you get ready:

1. Organize Your Financial Documents

Start by gathering all the paperwork you’ll need to file your taxes:

  • Income Records:
    • W-2s (for employees).
    • 1099 forms (for freelancers, contractors, or investment income).
    • Bank or brokerage statements for interest, dividends, and capital gains.
  • Expense Records:
    • Receipts for deductible expenses (e.g., medical bills, education, or charitable donations).
    • Business expenses if you’re self-employed.
  • Other Forms:
    • 1098 forms for mortgage interest or student loan interest.
    • Statements for contributions to retirement accounts (e.g., IRA).
  • Last Year’s Tax Return:
    • Helps ensure you don’t miss any deductions or credits.

2. Know Key Dates

Mark these critical tax deadlines:

  • Filing Deadline: Typically April 15 (or the next business day if it falls on a weekend/holiday).
  • Quarterly Estimated Payments (if applicable): January 15, April 15, June 15, and September 15.
  • Extensions: File Form 4868 by the tax filing deadline to get an extension until October.

3. Understand Recent Tax Law Changes

Stay informed about any changes in tax laws that may affect:

  • Standard deduction amounts.
  • Child tax credit or dependent care credits.
  • Limits on deductions or contributions to retirement accounts.
  • New benefits for small businesses or pandemic-related tax provisions.

4. Choose the Right Filing Method

  • DIY Filing: Use trusted tax software like TurboTax, H&R Block, or Cash App Taxes if your tax situation is straightforward.
  • Hire a Professional: Consult a certified public accountant (CPA) or enrolled agent for complex returns (e.g., owning a business, significant investments, or international income).

5. Check for Deductions and Credits

Identify deductions and credits you may qualify for:

  • Common Deductions:
    • Mortgage interest, state/local taxes, student loan interest.
    • Business expenses if self-employed.
  • Popular Credits:
    • Earned Income Tax Credit (EITC), Child Tax Credit, or Education Credits.

6. Review Your Withholding and Payments

  • If you’ve overpaid taxes through paycheck withholdings, you might get a refund.
  • If you underpaid, you may need to make an additional payment or adjust your withholding for the next year using Form W-4.

7. Contribute to Tax-Advantaged Accounts

Maximize contributions to accounts with tax benefits by the deadline:

  • Traditional IRA/401(k): Contributions may lower taxable income.
  • Health Savings Account (HSA): Tax-deductible contributions and tax-free withdrawals for medical expenses.

8. Plan for Refunds or Payments

  • Refunds:
    • Decide how to receive your refund (e.g., direct deposit or check).
  • Owed Taxes:
    • Prepare to pay any owed taxes by the filing deadline to avoid penalties.

9. Protect Yourself from Fraud

  • Beware of tax scams and phishing attempts.
  • Use the IRS website for official information and secure filing.
  • Shred sensitive documents you no longer need.

10. File Early

  • Avoid last-minute stress by filing as soon as you have all required documents.
  • Early filing reduces the risk of identity theft (where someone uses your SSN to file a fraudulent return).

Checklist for Tax Season Preparation

  • Gather all tax documents (W-2s, 1099s, receipts, etc.).
  • Review last year’s tax return for reference.
  • Update personal and contact information with your employer or bank.
  • Choose your filing method (self or professional).
  • Identify eligible deductions and credits.
  • Review recent tax law changes.
  • File before the deadline to avoid penalties.

 

 

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Common Tax Problems in Mesa AZ
Regular Post
Written by Craig B

Can You Compromise With the IRS?

es, you can compromise with the IRS through a program called the Offer in Compromise (OIC). This program allows taxpayers to settle their tax debt for less than the full amount owed if they can demonstrate that paying the full amount would create a financial hardship or if there is doubt about the liability or collectibility of the debt. Here’s how the process works:

1. Eligibility Criteria:

  • Inability to Pay: The IRS will consider an Offer in Compromise if you can demonstrate that you are unable to pay the full amount of your tax liability either in a lump sum or through a payment plan.
  • Doubt as to Liability: If you believe that the tax assessment is incorrect, you can file an OIC based on doubt as to liability.
  • Doubt as to Collectibility: This applies when there is doubt that the IRS can collect the full amount of the tax debt from you due to your financial situation.
  • Effective Tax Administration: Even if you can technically pay the full amount, you might qualify for an OIC if doing so would create an economic hardship or be inequitable.

2. Offer Amount:

  • Reasonable Collection Potential (RCP): The IRS evaluates your ability to pay by determining your RCP, which is the sum of your assets and future income. Your offer should generally be equal to or greater than the RCP.
  • Calculating the Offer: You’ll need to calculate your offer based on your income, expenses, and the value of your assets. The IRS provides forms (Form 433-A for individuals and Form 433-B for businesses) to help with these calculations.

3. Application Process:

  • Form 656: You must submit Form 656, Offer in Compromise, along with a $205 application fee (which may be waived for low-income applicants) and an initial payment.
  • Supporting Documents: You’ll need to provide detailed financial information, including income, expenses, and asset documentation, to support your offer.
  • Payment Options: You can choose to pay your offer amount in a lump sum or in installments. The IRS requires a down payment with your application—20% for lump-sum offers or your first monthly payment for periodic payment offers.

4. Review and Decision:

  • IRS Review: The IRS will review your offer, which may take several months. During this time, you must continue to comply with all filing and payment requirements.
  • Acceptance: If the IRS accepts your offer, you must comply with all terms, including filing and paying taxes on time for the next five years. If you fail to do so, the IRS can revoke the offer and reinstate the original tax liability.
  • Rejection: If your offer is rejected, you have the right to appeal the decision within 30 days using Form 13711, Request for Appeal of Offer in Compromise.

5. Considerations:

  • Impact on Credit: Unlike bankruptcy, an OIC is not public information and doesn’t directly affect your credit score. However, the IRS does file a Notice of Federal Tax Lien, which could impact your credit.
  • Not a Guarantee: The OIC is not guaranteed, and the IRS accepts less than half of all offers. Proper documentation and a realistic offer increase your chances of acceptance.
  • Professional Help: Given the complexity of the process, many taxpayers seek help from tax professionals to navigate the OIC application.

6. Alternatives:

  • Installment Agreement: If your offer is not accepted, you may still be able to set up an installment agreement to pay off your tax debt over time.
  • Currently Not Collectible (CNC) Status: If you are unable to make any payments, the IRS may temporarily halt collection actions by placing your account in CNC status.

In summary, the Offer in Compromise is a legitimate way to settle your tax debt for less than what you owe, but it requires careful preparation, documentation, and understanding of the IRS’s criteria. If successful, it can provide significant financial relief.

Tax Settlement in Mesa, Arizona

If you need IRS Debt Help, Tax Debt Settlements or Tax Debt Advising in Phoenix, Mesa or anywhere else, Tax Debt Advisors can help! Give us a call at 480-926-9300 or fill out our contact form for a free consultation. This family owned tax practice has been serving the public since all the way back in 1977!

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