Stimulus Checks In 2022
Regular Post
Written by Craig B

Student Loans and Federal Taxes 2024

Student loans can have various implications for federal taxes, including potential deductions, credits, and consequences for repayment. Here are some key points to consider regarding student loans and federal taxes:

  1. Student Loan Interest Deduction: Taxpayers who have paid interest on qualified student loans may be eligible to deduct up to $2,500 of the interest paid on their federal income tax return. This deduction is available even if the taxpayer does not itemize deductions, making it accessible to many taxpayers. However, there are income limitations and other eligibility criteria that must be met to claim this deduction.
  2. Education Tax Credits: Taxpayers who are paying for higher education expenses, including student loan interest, may be eligible for education tax credits such as the American Opportunity Tax Credit (AOTC) or the Lifetime Learning Credit (LLC). These credits can help reduce the amount of tax owed or result in a refund if the credits exceed the taxpayer’s tax liability.
  3. Income-Driven Repayment Plans: Borrowers who are enrolled in income-driven repayment plans (IDRs) for their federal student loans may have a portion of their outstanding loan balance forgiven after making qualifying payments for a certain period. However, the forgiven amount may be considered taxable income in the year it is discharged, potentially resulting in a higher tax liability for the borrower.
  4. Taxability of Loan Discharges: In certain circumstances, such as total and permanent disability or death, federal student loans may be discharged, meaning the borrower is no longer required to repay the remaining balance. However, the discharged amount may be considered taxable income unless an exception applies.
  5. Employer Student Loan Repayment Assistance: Some employers offer student loan repayment assistance as a benefit to employees. Under current law, employer contributions to employee student loans of up to $5,250 per year may be excluded from the employee’s taxable income, providing potential tax savings.
  6. Tax Withholding Adjustments: Borrowers who expect to have a significant tax liability due to forgiven student loan debt or other factors may need to adjust their tax withholding or make estimated tax payments to avoid underpayment penalties.

It’s important for borrowers to understand the tax implications of their student loans and to consult with a tax professional or financial advisor for personalized advice based on their individual circumstances. Additionally, tax laws and regulations may change over time, so borrowers should stay informed about any updates that may affect their tax situation.

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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Stimulus Checks In 2022
Regular Post
Written by Craig B

Student Loans and Federal Taxes 2023

Student loans can have several implications for federal taxes in the United States. Here’s how they work with federal taxes:

  1. Student Loan Interest Deduction: One of the primary ways student loans affect federal taxes is through the student loan interest deduction. Borrowers who are repaying qualified student loans may be eligible to deduct the interest they’ve paid on those loans during the tax year. As of my last knowledge update in 2022, this deduction allows eligible taxpayers to reduce their taxable income by up to $2,500 per year, subject to income limitations. The loan must have been used for qualified education expenses, and there are income phase-out limits.
  2. Taxable Forgiveness: In some cases, if you have federal student loans that are forgiven through income-driven repayment plans or Public Service Loan Forgiveness (PSLF), the forgiven amount may be considered taxable income. This means you could owe taxes on the amount forgiven. However, certain forgiveness programs, like PSLF, offer tax-free forgiveness after 120 qualifying payments.
  3. Income-Driven Repayment Plans: Under income-driven repayment plans (e.g., Income-Based Repayment, Pay As You Earn, Revised Pay As You Earn), your monthly loan payments are calculated based on your income and family size. These plans can help make your payments more manageable, but they can also affect your tax liability. If your monthly payments are reduced, you may have a higher taxable income because your discretionary income is lower. This could result in a larger tax bill in some cases.
  4. Tax Credits for Education Expenses: While not directly related to student loans, there are federal tax credits available, such as the American Opportunity Credit and the Lifetime Learning Credit, that can provide tax benefits for qualified education expenses. You can’t double-dip by claiming these credits for the same expenses that you used to deduct student loan interest.
  5. State Tax Implications: In addition to federal taxes, it’s important to consider how student loans may impact your state income tax liability. State tax laws vary, and some states offer their deductions or credits for student loan interest.

It’s important to keep accurate records of your student loan payments, interest paid, and any relevant documents related to your loans. When it comes to tax matters related to student loans, it’s advisable to consult with a qualified tax professional or use tax software to ensure that you take advantage of available deductions and credits and understand the potential tax consequences of loan forgiveness. Additionally, it’s essential to stay informed about changes in tax laws and regulations that may affect student loans and tax liability.

Are you able file your taxes or comprehend what you owe Uncle Sam? There is a strong chance you’re confused about tax regulations. On the bright side, we’ve compiled a list of answers to 5 common tax questions you may be asking — including if you should hire a tax preparer, if you should file if you’re a college student, when you’ll receive your tax refund and more.

  1. Should I hire a tax preparer?

If you choose to hire a tax professional is subject to your comfort level with the tax-filing procedure and the convolution of your return. If you’re seeking a tax preparer with a greater degree of experience, consider a CPA or E.A. Both professionals are required pass specific exams to get licensed.

  1. What is the standard deduction?

The standard deduction is an allocated amount of money of which you aren’t taxed. The total of the standard deduction that you claim is subject on your tax status and the year that you’re filing. Taxes filed in 2019, the standard deduction $12,000 for filing single and $24,000 for married couples filing together.

  1. When will my tax refund get to me?

When your tax refund will get to you is subject on how and when you filed. According to the IRS 90% of federal tax refunds are distributed within twenty-one days, and details are usually available within a day from when the IRS receives an e-filed tax return or 4 weeks following them receiving a traditional paper return. Utilize the IRS Where’s My Refund? device and the IRS2Go app to track it.

  1. Should I file taxes if I’m enrolled in college?

Prior to you filing taxes as a student going to college, think about your income and if your parents will claim you as a dependent on their taxes. Students that earn less than $12,000 don’t need to file a tax return but might still gain from filing if taxes were withheld from their paycheck or want to claim specific tax benefits like the American opportunity tax credit.

  1. How can I get the largest tax refund this year?

To receive the largest tax refund this year, begin to think about your tax circumstances early, preferably prior to the tax year ending. Next, consider how to make the most out of deductions through itemizing if you’re able to, declare tax credits and deductions in which you qualify for and give to your retirement accounts. When your tax situation is convoluted, think about working with an experience tax preparer.

  1. How do I select the preferable tax-filing software?

When evaluating the preferable tax-filing software for your circumstance, think about the costs and services offered. A great place to begin is with the dozen software businesses that work alongside the IRS-affiliated Free File Alliance. They are IRS approved and satisfy specific security and privacy conditions.

  1. Who is established as a dependent on my taxes?

Dependents may include qualifying children, family members and other people that you support. Dependents need to satisfy certain age, income and housing conditions.

  1. How can I evade IRS tax scams?

Evade typical IRS tax scams by handling suspicious or out of left field communications from alleged IRS officials with a healthy suspicion. The IRS will usually reach out by regular mail first, so be cautious of e-mails, any texts or phone calls insisting to be from the IRS. Additionally, be vigilant for poor grammar, threats of calling the police and demands for payments through gift cards or wire transfers.

  1. Should I choose direct deposit?

Yes, when you want to get your tax refund as fast as possible, choosing direct deposit can be faster than, for instance, petitioning a check to be mailed out.

  1. Can I decrease my chances of getting audited?

To decrease the chance of a tax audit, make sure there are no errors, disclose all of your income, retain correct records and stay away from illegal or inappropriate tax moves like exaggerating charitable donations.

Whereas these answers to common tax questions may help you begin in fulfilling your tax responsibilities, you might still have questions as you start to file your return. If you see any questions you do not see on this list, contact us and we will be more than happy to answer them.

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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IRS Online Payment Plans 2022
Regular Post
Written by Craig B

IRS Online Payment Plans 2023

If you are a qualified taxpayer or authorized representative (Power of Attorney) you can apply for a payment plan (including installment agreement) online to pay off your balance over time. Read on to learn more. You can a payment plan at: https://www.irs.gov/payments/online-payment-agreement-application

Qualification

Your specific tax situation will determine which payment options are available to you. Payment options include full payment, a short-term payment plan (paying in 120 days or less) or a long-term payment plan (installment agreement) (paying monthly).

You may qualify to apply online if:

  • Long-term payment plan (installment agreement): You owe $50,000 or less in combined tax, penalties and interest, and filed all required returns.
  • Short-term payment plan: You owe less than $100,000 in combined tax, penalties and interest.

If you are a sole proprietor or independent contractor, apply for a payment plan as an individual.

Note: Setup fees may be higher if you apply for a payment plan by phone, mail, or in-person. Get more information on other payment plan options and fees.

Payment Plan Applications

  • Name exactly as it appears on your most recently filed tax return
  • Valid e-mail address
  • Address from most recently filed tax return
  • Date of birth
  • Filing status
  • Your Social Security Number or Individual Tax ID Number (ITIN)
  • Based on the type of agreement requested, you may also need the balance due amount
  • To confirm your identity, you will need:
    • financial account number or
    • mobile phone registered in your name or
    • activation code received by postal mail (takes 5 to 10 business days)
  • If you previously registered for an Online Payment Agreement, Get Transcript, or any Identity Protection PIN (IP PIN), you should log in with the same user ID and password. You will need to confirm your identity by providing the additional information listed above if you haven’t already done so.

Costs

Pay Now

  • $0 setup fee
  • No future penalties or interest added

Pay amount owed in full today directly from your checking or savings account (Direct Pay)  or by check, money order or debit/credit card.
Fees apply when paying by card.

Short-term Payment Plan (120 days or less)

  • $0 setup fee
  • Plus accrued penalties and interest until the balance is paid in full

After applying for a short-term payment plan, you can pay the amount owed directly from your checking or savings account (Direct Pay) or by check, money order or debit/credit card.
Fees apply when paying by card.

Long-term Payment Plan (Installment Agreement)  (Pay monthly)

Pay monthly through automatic withdrawals

  • $31 setup fee (low income: setup fee waived)
  • Plus accrued penalties and interest until the balance is paid in full

Pay amount owed through Direct Debit (automatic payments from your checking account), also known as a Direct Debit Installment Agreement (DDIA). This is required if your balance is more than $25,000.
Pay each month (non-Direct Debit)

  • $149 setup fee (low income: $43 setup fee that may be reimbursed if certain conditions are met)
  • Plus accrued penalties and interest until the balance is paid in full

After applying for a long-term payment plan, pay amount owed through non-Direct Debit (not automated) monthly payments, including payments directly from your checking or savings account (Direct Pay) or by check, money order or debit/credit card.
Fees apply when paying by card.

Revise an Existing Payment Plan (Installment Agreement) or Reinstate After Default

  • $10 fee, which may be reimbursed if you are identified as low income and certain conditions are met.

IRS payment plans, also known as installment agreements, offer several advantages for taxpayers who owe back taxes but are unable to pay the full amount immediately. These payment plans are designed to help individuals and businesses fulfill their tax obligations while managing their financial circumstances. Here are some key advantages of IRS payment plans:

  1. Affordable Payments: Payment plans allow taxpayers to spread their tax debt over a specified period, making it more manageable to budget for regular payments. The IRS considers your financial situation when determining the monthly payment amount, which helps prevent financial hardship.
  2. Avoid Collection Actions: Entering into an IRS payment plan can help prevent more aggressive collection actions, such as wage garnishment, bank levies, or asset seizures. As long as you meet the terms of the agreement, the IRS generally suspends collection activities.
  3. Maintain Good Standing: Complying with an installment agreement helps you remain in good standing with the IRS. It demonstrates your commitment to resolving your tax debt and can positively impact your credit score and financial reputation.
  4. Flexible Terms: The IRS offers different types of payment plans, including short-term (120 days or less) and long-term (more than 120 days) plans. Taxpayers can choose the plan that best fits their financial situation.
  5. Reduced Penalties: If you enter into an installment agreement, you may be eligible to request a reduction in certain penalties, such as the failure-to-pay penalty. While interest continues to accrue on the unpaid balance, penalty relief can result in cost savings.
  6. Avoid Additional Costs: Failing to pay your tax debt on time can lead to additional costs in the form of penalties and interest. By entering into an IRS payment plan, you can stop the accrual of some penalties, potentially saving money in the long run.
  7. Structured Approach: Payment plans provide a structured approach to resolving your tax debt. You’ll have a clear payment schedule and a set date by which your debt will be fully paid, helping you stay on track.
  8. Avoid Negative Impact on Credit Score: While a tax lien may be filed when you enter into a payment plan, it’s typically not reported to credit bureaus. This means that your credit score may not be negatively affected, as long as you make your payments as agreed.
  9. Easier to Budget: Knowing the exact amount and due date of your monthly payments makes it easier to budget and plan your finances accordingly.
  10. Temporary Financial Relief: Payment plans can provide temporary financial relief, allowing you to address other financial priorities while still meeting your tax obligations.

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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2024 arizona tax brackets
Regular Post
Written by Craig B

What Are Tax Audits?

A tax audit is when the IRS chooses to look into your tax return a little more comprehensive and verify that your income and deductions are true. Usually, your tax return is selected for audit when something you entered on your return is not common. There are 3 main kinds of IRS audits: a mail audit, an office audit and a field audit.

Mail Audits

No matter what kind of audit the IRS chooses to carry out, you will get notification of it through mail. A mail audit is the most straightforward kind of IRS review and doesn’t require you to meet with an auditor personally.

Usually, the IRS petitions for additional documentation to prove different items you reported on your return. For instance, if you claim $5,000 in philanthropic deductions, the IRS might send you a letter calling for evidence of your donations. Typically, submitting adequate evidence will complete the audit in your favor if the IRS is content.

Office Audits

An office audit is a face-to-face audit carried in a local IRS office. This type of audit is usually more detailed than a mail audit and typically comprise of questioning by an audit officer about details on your return. You will be requested to bring particular information to an office audit, like the books and records for your company or your personal financial institutional statements and receipts. You additionally have the right to bring a CPA or attorney to represent you during the audit.

Field Audits

A field audit is the most comprehensive kind of review that the IRS carries out. In such a situation, an IRS agent will carry out the audit at your home or business. Usually, field audits are done when the IRS is double checking more than one deduction. A field audit is typically very detailed and will cover a lot, if not all, issues on the return.

Potential Results of an Audit

There are three potential results of an IRS audit. When the IRS is content with your explanations and the documents you submitted, then they won’t change anything on your return. If the IRS suggest changes to your tax return, you could either agree and approve the changes or question the agent’s evaluation. If you are in agreement, you will sign an review report or other document offered by the IRS and establish some kind of payment agreement. When you are in disagreement with their findings, you can schedule a meeting with an IRS supervisor to further examine your case or you can petition for a formal appeals meeting.

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.

Back Taxes, Debt, Federal Tax Lien, Property Taxes, Tax Lien, Tax Questions, taxes, Uncategorized
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Stimulus Checks In 2022
Regular Post
Written by Craig B

Tax Frequently Asked Questions 2023

Are you able file your taxes or comprehend what you owe Uncle Sam? There is a strong chance you’re confused about tax regulations. On the bright side, we’ve compiled a list of answers to 5 common tax questions you may be asking — including if you should hire a tax preparer, if you should file if you’re a college student, when you’ll receive your tax refund and more.

  1. Should I hire a tax preparer?

If you choose to hire a tax professional is subject to your comfort level with the tax-filing procedure and the convolution of your return. If you’re seeking a tax preparer with a greater degree of experience, consider a CPA or E.A. Both professionals are required pass specific exams to get licensed.

  1. What is the standard deduction?

The standard deduction is an allocated amount of money of which you aren’t taxed. The total of the standard deduction that you claim is subject on your tax status and the year that you’re filing. Taxes filed in 2019, the standard deduction $12,000 for filing single and $24,000 for married couples filing together.

  1. When will my tax refund get to me?

When your tax refund will get to you is subject on how and when you filed. According to the IRS 90% of federal tax refunds are distributed within twenty-one days, and details are usually available within a day from when the IRS receives an e-filed tax return or 4 weeks following them receiving a traditional paper return. Utilize the IRS Where’s My Refund? device and the IRS2Go app to track it.

  1. Should I file taxes if I’m enrolled in college?

Prior to you filing taxes as a student going to college, think about your income and if your parents will claim you as a dependent on their taxes. Students that earn less than $12,000 don’t need to file a tax return but might still gain from filing if taxes were withheld from their paycheck or want to claim specific tax benefits like the American opportunity tax credit.

  1. How can I get the largest tax refund this year?

To receive the largest tax refund this year, begin to think about your tax circumstances early, preferably prior to the tax year ending. Next, consider how to make the most out of deductions through itemizing if you’re able to, declare tax credits and deductions in which you qualify for and give to your retirement accounts. When your tax situation is convoluted, think about working with an experience tax preparer.

  1. How do I select the preferable tax-filing software?

When evaluating the preferable tax-filing software for your circumstance, think about the costs and services offered. A great place to begin is with the dozen software businesses that work alongside the IRS-affiliated Free File Alliance. They are IRS approved and satisfy specific security and privacy conditions.

  1. Who is established as a dependent on my taxes?

Dependents may include qualifying children, family members and other people that you support. Dependents need to satisfy certain age, income and housing conditions.

  1. How can I evade IRS tax scams?

Evade typical IRS tax scams by handling suspicious or out of left field communications from alleged IRS officials with a healthy suspicion. The IRS will usually reach out by regular mail first, so be cautious of e-mails, any texts or phone calls insisting to be from the IRS. Additionally, be vigilant for poor grammar, threats of calling the police and demands for payments through gift cards or wire transfers.

  1. Should I choose direct deposit?

Yes, when you want to get your tax refund as fast as possible, choosing direct deposit can be faster than, for instance, petitioning a check to be mailed out.

  1. Can I decrease my chances of getting audited?

To decrease the chance of a tax audit, make sure there are no errors, disclose all of your income, retain correct records and stay away from illegal or inappropriate tax moves like exaggerating charitable donations.

Whereas these answers to common tax questions may help you begin in fulfilling your tax responsibilities, you might still have questions as you start to file your return. If you see any questions you do not see on this list, contact us and we will be more than happy to answer them.

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.

Back Taxes, Debt, Property Taxes, Real estate Taxes, Retirement, Tax Lien, Tax Questions, taxes
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Can The IRS Take Your 401K
Regular Post
Written by Craig B

What Is The IRS Fresh Start Program?

You may have heard about the Internal Revenue Service’s “new start” program and wondered if you might use it to pay off your tax obligation. But what is the Fresh Start program precisely, and how does it work?

The Fresh Start program is meant to allow taxpayers to pay off their debts in full within six years without incurring significant financial hardship. It is open to any taxpayer with a tax obligation of $50,000 or less owed to the IRS. The IRS started the program in 2008 and expanded it in 2012 to help people with their credentials and financial constraints.

The Fresh Start program streamlines the process of repaying a big tax obligation while also removing some of the hassles that come with owing the IRS large quantities of money, such as liens, levies, wage garnishments, and penalties. An extended installment plan, tax lien withdrawals, and the Offer in Compromise are the three repayment options available under the program.

The extended installment agreement is the most prevalent of these alternatives, and it is meant for taxpayers who owe $50,000 or less. This option allows taxpayers to pay off their tax obligation over a six-year period without incurring any further fines or interest. Wage garnishments, tax liens, and tax levies will all be put on hold by the IRS. This program requires the taxpayer to make monthly payments in an amount determined by their income and the value of their assets. The goal is for the payments to be affordable to the taxpayer so that they may be made on time and without financial hardship.

Taxpayers can use a direct debit payment option to pay off their debts under the tax lien withdrawal. Once this is in place, the taxpayer can request that any tax liens on their accounts be removed by the IRS. This also prevents the tax lien from being disclosed to the three consumer credit reporting organizations.

The Offer in Compromise, or OIC, program is the final option. Taxpayers who participate in the OIC program may be able to settle their debt for less than they owe. The taxpayer submits an offer based on the worth of assets that can be liquidated to pay off the debt. In calculating what the IRS believes the taxpayer can reasonably repay, the IRS will take into account the taxpayer’s ability to pay, current income and costs, and any asset equity. Because an OIC must be negotiated with the IRS and can take months to get, you may wish to enlist the services of a tax professional to walk you through the process and negotiate with the IRS on your behalf. Even then, only a small percentage of taxpayers will be successful in settling their debt for a lower sum, and if the IRS accepts the offer, their assets will be severely diminished.

Of course, there are certain extra requirements in order to be eligible for the Fresh Start program. To begin, you must be current on all of your tax returns, including those from previous years. If you have any unfiled returns, you cannot apply for the Fresh Start program, and you must file timely taxes for any subsequent years.

For many taxpayers, dealing with the IRS collections department is a terrifying prospect, but you don’t have to go it alone. If you’re not sure whether Fresh Start program is ideal for your particular tax debt situation, you should seek counsel from a specialist Acting today, whether you decide to handle your tax burden on your own or with the help of a professional, is the best way forward. Tax issues do not go away on their own, and they can cause a great deal of stress in your life and relationships. With the Fresh Start program, you know you’re on your way to getting rid of this load.

The Fresh Start Program includes the following key components:

  1. Expanded Offer in Compromise (OIC) Eligibility: One significant aspect of the Fresh Start Program is the expanded eligibility for the Offer in Compromise program. An Offer in Compromise allows taxpayers to settle their tax debts for less than the full amount owed if they meet certain criteria. Under the Fresh Start changes, the IRS revised its calculation of a taxpayer’s reasonable collection potential, making it more accessible for financially struggling individuals to qualify for an OIC.

  2. Streamlined Installment Agreements: The IRS increased the threshold for streamlined installment agreements. Taxpayers who owe less than $50,000 can enter into installment agreements without submitting detailed financial statements or extensive documentation. These streamlined agreements simplify the process of paying off tax debt over time.

  3. Reduced Tax Lien Filings: The IRS raised the threshold for the automatic filing of tax liens. The Fresh Start Program increased the minimum tax debt amount that triggers a tax lien filing, reducing the number of liens imposed on taxpayers. A tax lien can negatively affect a taxpayer’s credit and financial standing.

  4. More Flexible Offer Terms: The IRS extended the time frame for taxpayers to pay off their accepted Offer in Compromise amounts. This extension allows taxpayers more time to satisfy their negotiated tax debt settlements.

  5. Suspension of Collection Activities: In certain cases, the IRS may temporarily suspend collection activities for taxpayers facing economic hardship. This gives taxpayers additional time to stabilize their financial situations.

  6. Easier Penalty Abatement: The Fresh Start Program introduced more lenient criteria for requesting the abatement of certain penalties, such as the failure-to-pay penalty. Taxpayers who have a good compliance history and can show reasonable cause may be eligible for penalty relief.

It’s important to note that while the Fresh Start Program offers relief options to taxpayers, the IRS still expects taxpayers to fulfill their tax obligations. These initiatives are designed to help taxpayers who genuinely need assistance due to financial hardship.

If you owe back taxes to the IRS and are struggling to meet your tax obligations, it’s advisable to consult with a tax professional or seek assistance from the IRS to explore the options available to you under the Fresh Start Program or other tax relief programs. Keep in mind that tax laws and IRS policies can change over time, so it’s essential to stay informed about the latest updates and requirements.

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!

More Articles About Taxes

 

 

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Why Do I Owe Taxes
Regular Post
Written by webtechs

Why Do I Owe Taxes?

There are many reasons why you might owe the Internal Revenue Service this year. It’s certainly possible to owe taxes even when you have withheld money from your paycheck all year.

5 Reasons Why You May Owe Taxes This Year

Because everyone’s situation is unique, there are several different reasons why you may owe money on your taxes. Five common reasons are outlined below.

1. Failing To File

Failure to file on time is a common reason why you’ll end up owing taxes. State tax dues will vary. Whenever you file late and don’t apply for an extension on time, you can incur late fees and interests that will increase your tax bill. If you are wondering why you still owe taxes this year, it’s certainly possible that you submitted a tax return after the due date.

2. Not Withholding Enough From Your Paycheck

The amount that’s taken out of your paycheck each year is an estimate of what you will owe when it comes time to file taxes. You will receive a tax refund if you overpay. If you do not pay enough throughout the year, though, you will end up with a bill come tax season.

3. Tax Code Changes

Recent tax code changes will undoubtedly impact how much you’ll owe in taxes. If you expect to receive a refund each season, it may not be the case with new tax laws put in place. When the IRS updated its tax brackets, it’s possible you were put into a new category, altogether.

4. Changes In Deductions

If you didn’t qualify for typical deductions and credits you expected, then you may owe taxes this year. For instance, the earned income tax credit comes with annual limits. If you have made more money this year than in previous tax years, you may not qualify. Many parents will take advantage of the child tax credit, which comes with income limits and age restrictions.

5. Higher Income

Receiving higher pay this year will mean you are going to pay more in taxes. If you worked more hours while getting paid hourly or a salary gets raised, you could have been bumped into a higher tax bracket.

What To Do If You Owe Taxes

Thankfully, there are numerous options if you cannot pay your entire tax bill when it’s due. Here are a few payment options for you to consider:

  • Sign up for an IRS installment plan.
  • Apply for a full-time agreement if you are able to pay taxes within 120 days.
  • Make an offer in compromise.
  • Consider a loan or other financing options to make tax payments.

Additional Reasons For Owing Taxes

  1. Underreporting Income: Failing to report all of your income on your tax return is a common reason for tax debts. This can result from unintentional errors, such as forgetting to report freelance income or investment gains, or intentional efforts to hide income.
  2. Failure to Pay Estimated Taxes: If you’re self-employed or have income not subject to withholding, you are generally required to make estimated tax payments throughout the year. Failure to make these payments or underestimating the amount owed can lead to a tax debt when you file your annual return.
  3. Changes in Tax Laws: Tax laws can change from year to year, and sometimes taxpayers are unaware of new deductions, credits, or changes in tax rates. Failing to take advantage of available tax breaks can result in a higher tax bill.
  4. Tax Credits or Deductions Disallowed: The IRS may disallow certain tax credits or deductions if you don’t meet the eligibility criteria or if you can’t provide adequate documentation to support your claims. This can result in a higher tax liability.
  5. Tax Penalty Assessments: The IRS can assess various penalties for non-compliance, such as late filing, late payment, or underpayment of estimated taxes. These penalties can significantly increase your overall tax debt.
  6. Tax Audits: If the IRS audits your tax return and identifies discrepancies or errors, it may lead to additional taxes, penalties, and interest. Audits can be triggered by various factors, including red flags on your return or random selection.
  7. Unpaid Payroll Taxes: If you’re a business owner, failing to withhold and remit payroll taxes for your employees can result in substantial tax debts. The IRS takes payroll tax compliance very seriously.
  8. Tax Fraud: Engaging in fraudulent activities to evade taxes is illegal and can lead to severe penalties, including criminal charges. Tax evasion can result in substantial tax debts and legal consequences.
  9. Inheritance or Windfall: Receiving a large inheritance or windfall may lead to unexpected tax liabilities, especially if you’re not prepared for the tax consequences of the transaction.
  10. State Tax Debt: In addition to federal taxes, you may owe state taxes. State tax debts can occur for similar reasons as federal tax debts, including underreporting income, failing to pay estimated taxes, or non-compliance with state tax laws.

It’s crucial to stay informed about your tax obligations and ensure accurate and timely filing and payment of taxes. If you find yourself owing taxes, it’s advisable to address the issue promptly by filing your return or payment, seeking professional tax assistance, or exploring options such as installment agreements, Offer in Compromise, or penalty abatement if you’re unable to pay the full amount owed.

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 is a Tax Lien?
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Written by webtechs

What is a Tax Lien?

Federal tax liens are the government’s legal claim toward your property if you disregard or fail to pay your tax debt. The lien safeguards the government’s involvement in all of your property, comprising of real estate, private property and financial assets. Federal tax liens exist following:

The IRS:

  • Posts your overdue balance on the books (evaluates your liability);
  • Mails you a notice explaining the amount you owe (22 CFR § 34.8); and

You:

  • Disregard or decline to entirely pay the debt in time.

The IRS files public paperwork, known as Notice of Federal Tax Lien, to give notice to creditors that they legally have rights to your property.

How to Be Free of Your Tax Lien

Paying your tax debt – entirely – is the ideal way to be free of your federal tax lien. The IRS discharges your lien within 30 days following you having paid the tax debt owed by you.

When circumstances are in the best interests of both you and the government, other options for decreasing the effect of a lien exist.

Discharge of property

A “discharge” withdraws the lien from particular property. There are numerous Internal Revenue Code (IRC) requirements that establishes eligibility.

Subordination

“Subordination” doesn’t eliminate the lien but enables other creditors to move in advance of the IRS, in which could make it easier to obtain a loan or mortgage.

Withdrawal

A “withdrawal” eliminates the public Notice of Federal Tax Lien and asserts that the IRS is not in competition with additional creditors for your assets; nevertheless, you are still responsible for the amount owed.

2 added Withdrawal alternatives were the consequence of the Commissioner’s 2011 Fresh Start initiative.

One option may permit withdrawal of the Notice of Federal Tax Lien following the lien’s discharge. Common eligibility comprises of:

Your tax liability has been fulfilled and your lien has been discharged; and also:

  • You are in accordance with the prior 3 years in filing – every individual return, business return, and informational return;
  • You are up to date on your approximated tax payments and federal tax deposits, as relevant.

The other alternative may permit withdrawal of your Notice of Federal Tax Lien if you have entered in or modified your regular installment contract to a Direct Debit installment contract. Common eligibility comprises when:

  • You are a qualifying taxpayer (such as individuals, businesses having income tax obligation only, and out of organizations with any kind of tax debt)
  • You owe twenty-five thousand dollars or less (When you owe more than twenty-five thousand dollars, you could decrease the balance to twenty-five thousand dollars before petitioning withdrawal of the Notice of Federal Tax Lien)
  • Your Direct Debit Installment Contract is required to fully pay the amount owed by you inside of sixty months or prior to the Collection Statute expiring, whichever comes first
  • You are fully compliant with other filing and payment obligations
  • You’ve carried out three direct debit payments in a row
  • You cannot have defaulted on your present, or any prior, Direct Debit Installment contract.

How a Lien Impacts You

  • Assets — A lien is attached to each of your assets (like property, stocks, vehicles) and to future assets obtained throughout the length of the lien.
  • Credit — After the IRS has filed a Notice of Federal Tax Lien, it could limit your capacity to obtain credit.
  • Business — The lien is attached to all business property and to every right to business property, including assets.
  • Bankruptcy — When you are filing for bankruptcy, the tax debt owed, lien, and Notice of Federal Tax Lien could continue following the bankruptcy.

Avoid a Lien

You can avoid federal tax liens simply by filing and paying each of your taxes in full and when they are due. If you aren’t able file or pay when they are due, don’t disregard the letters or communication you receive from the IRS. If you are unable pay the full amount owed, payment options are available to assist you in settling your tax debt in due time.

Lien vs. Levy

Liens are not levies. A lien attains the government’s involvement in your property when you fail to pay your tax debt. A levy is going to take the property to pay the tax debt. If you fail to pay or make arrangements for settling your tax debt, the IRS could levy, seize and sell any kind of tangible or personal property that you are owner of or have an interest in.

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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