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Tax

Back Tax Debt Relief Under the New Tax Law

Back Tax Debt Relief Under the New Tax Law

By on Feb 22, 2018 in Debt Relief, IRS, Tax | 0 comments

While specifics about the new tax laws are being reviewed and analyzed, you may be wondering how this will impact the back taxes that you already owe the Internal Revenue Service (IRS).  The tax bill that was signed into law in December of 2017 will impact all of us over the course of the next several months to a year. You may have heard that the tax law benefits the wealthy and/or corporations.  The fact is that you can also expect to see your monthly income rise a bit, as the government will take out less each month for taxes, which will be disproportionately low for lower income families.  The new tax bill will impact how you file your taxes in the coming years, but if you already owe back taxes to the government, you can consider one of the following options to resolve your debt and move forward once and for all. How to Settle Tax Debt Consider alternative payment options:  Interest and penalties add daily to your tax debt, so you may want to consider alternative ways to pay off debt if possible.  Look into no interest credit card options, low-interest loans from your local bank or even a family member or friend to help pay off your tax debt. Bankruptcy is another option for individuals that have exhausted other options. Government programs:  The Fresh Start Initiative was designed and implemented specifically to help those with back tax debt. If you are not able to pay off your debt in one lump sum, you can request what is known as an installment agreement that allows you to pay your debt over time. So, instead of paying the full amount you owe now, you can make monthly payments over the course of 3-5 years.  Additionally, if you are under significant financial hardship, you may qualify for an Offer in Compromise (OIC), an agreement that settles your debt for less than you owe. Tax Support: If you owe back taxes to the IRS, your tax situation is likely complicated and perhaps even overwhelming.  A reputable tax firm can help review your current tax situation and help you decide the best path forward, given your past returns and the new...

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How Can a Federal Tax Lien Affect Your Credit Score?

How Can a Federal Tax Lien Affect Your Credit Score?

By on Jan 15, 2018 in Credit Score, Filing Taxes, Tax | 0 comments

A loan can come in handy if you’re low on cash and need to pay for something right away. It also helps to pay for big purchases such as a house or car. Receiving a loan isn’t a hard process. However, it could be if you have bad credit. If you have a tax debt,you might have received a federal tax lien. A tax lien can have a negative impact on your credit score.   What is a Credit Score? A credit score is a specific number that is calculated based on information in a credit report. Every time you take out a loan or make a loan payment, it is recorded on your credit report. The leading credit score in the industry is FICO and ranges between 300-850. Your credit score determines how likely you are to get approved for a loan or not. It’s important to know that your credit score will follow you forever, and may affect your finances negatively or positively.    Why is a Good Credit Score Important?  Before you buy a house, sign a lease to rent an apartment or even apply for a credit card, your credit score will be checked. A good credit score indicates if you’re a trustworthy borrower or not, and can result in interest rate savings as well.   How Can a Tax Lien Affect My Credit Score? Someone who has an outstanding tax debt receives a federal tax lien by The Internal Revenue Service (IRS). A tax lien gives the IRS the right to claim certain property such as homes, cars, buildings, equipment, jewelry, money etc. The taxpayer is given 10 days after a letter is sent to follow-up with the intent to repay debt. If the taxpayer refuses to pay before the 10 days are up, a Notice of Federal Tax Lien is sent to creditors to inform them that the IRS has the right to possess taxpayer’s property.A federal tax lien can decrease your credit score, making it difficult to receive loans in the future. The best way to avoid this is to not have a tax lien in the first place because once it’s listed in your credit file it becomes public record. Regardless...

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IRS Installment Plan: Is It Your Best Option?

IRS Installment Plan: Is It Your Best Option?

By on Jan 10, 2018 in Tax | 0 comments

An IRS Installment Plan (sometimes also called an installment agreement) allows you to pay your tax debt back to the Internal Revenue Service (IRS) over a period of time, rather than in one lump sum.  It works a lot like a credit card, in that you agree to make monthly payments to the IRS to pay your debt over a period of time (usually several years).  For some, this is a great solution for paying back taxes, offering an alternative to paying a large bill to the IRS all at once.  Here are some things to consider about installment plans that can help you determine if it might be a good option for your situation. Tips to Determine if an IRS Installment Plan is Right for You: Can you can stick to the agreement? When you apply for an installment agreement, you have the opportunity to request a certain monthly payment and even sometimes the duration of the payments.  If this is approved, you should be very sure that making this payment is your top priority.  If you default on the agreement, the IRS will charge you additional penalties and fees, making your problem even worse.  You should be sure when you sign on the dotted line that you will be able to pay the full amount in the extended timeframe allowed. Penalties and interest still accrue: Just because you have a negotiated installment agreement with the IRS does not mean that you are exempt from paying interest and penalties.  Like a credit card, you are still responsible for interest and penalties on top of the debt that you owe.  Typically, the IRS will charge a penalty of 0.5% of the total debt amount each month, plus an additional penalty on taxes due that have not yet been filed. This penalty is usually 5% of the total amount of unpaid taxes each month, but the IRS can charge a maximum of 25% penalty on unpaid and/or unfiled taxes. Will you qualify? If you owe $10,000 or less and have filed your previous returns on time and have not applied for an installment agreement previously, your payment plan will most likely be accepted.  If you owe more than $50,000, you...

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