Reduce Debt, Pay Back Taxes and Avoid IRS Problems – Tips for Filing Tax Returns
With tax season quickly approaching, Americans who owe the IRS back taxes they can't afford to pay will need to know how to swiftly and effectively reduce tax debt while also resolving financially crippling IRS liens and levies.
As the economy begins to slowly rebound, there are some 26 million Americans plagued with some type of tax problem. And with the IRS collection efforts on the rise supported by a record enforcement budget of$5.5 billion, many Americans are a potential target of the IRS and will need to know these tax tips to avoid IRS problems and protect their financial futures.
Tip for Filing Tax Returns #1: Avoid IRS Problems at All Cost If you can't afford to pay you tax bill in this troubled economy, know that the IRS offers payment options for struggling taxpayers. You can contact the IRS directly for tax help, however, it's best to consult with a highly qualified tax relief professional first, especially if you owe $25,000 or more, have multiple years of unfiled returns or the IRS wants to audit you, who can help you increase your chances of potentially reducing what you owe and avoiding further IRS penalties.
Another myth is that if you make under a certain amount you will not be audited. Levels of income bear no effect on an audit being issued. It simple comes down to randomly getting audited no matter how much you make or if the IRS believes you are evading taxes in any way, they will issue an audit.
Tip for Filing Tax Returns #2: File Your Tax Return On Time No Matter What Even if you don't have the money to pay your tax bill, you should still file your return on time to avoid the 25% failure to file penalty right off the bat. What many people don't understand is that filing an extension just puts off the inevitable, because it's not an extension of time to pay, it's just an extension of time to file. If you owe the IRS back taxes that you can't afford to pay come April 15th, you can file your returns and send a money order or cashiers check for $10. This does two important things: first, it takes the large 25% failure to file penalty off your shoulders; and second, it creates a computerized record at the IRS showing that you filed on time and you made a good faith effort to pay some of that money you owe. This will lessen your IRS penalties and may make your negotiations for a tax debt settlement easier later on.
Tip for Filing Tax Returns #3: If You Already Have IRS Problems, Stop Procrastinating The worst thing you can do is ignore your tax problems. And with tax hikes planned for 2011, you need to get your own house in order now. If you have unfiled tax returns and/or you currently owe the IRS money, deal with it now before the new tax hikes kick in. Once you are liable for higher taxes, your penalties and interests will only increase with any subsequent unpaid taxes. If you have failed to file taxes in the past and feel like the IRS is breathing down your back, there is tax relief available. Regardless of what you've heard, you have the right to file your original tax return, no matter how late. With the rising deficit and growing tax gap, collecting funds through more aggressive collection tactics by the IRS will be politically more appealing than raising taxes - so taxpayers beware! Not to mention, the IRS will not entertain any type of tax debt settlement or payment plan to settle your back taxes until you have filed all legally required tax returns
Inflating the value of expenses or assets if not advisable. This is a sure fire way to get into tax trouble. That also includes the money you donate to church and charities.
If you have opened an overseas bank account or, you are thinking about it, don't. People are getting caught and given a large fine as restitution for this. Do your homework on ways to prevent tax trouble, and always seek tax guidance from a tax professional.
Harris Smith is a writer on personal finance education. Her article tackles the pros and cons of home equity line of credit
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