Tax Relief Solutions

How to Remove Tax Lien from Credit Report

A new tax lien policy recently approved by the IRS gives hope to many taxpayers plagued by the stigmas long attached to their negative credit reports. In this article, we’ll discuss how to remove tax lien from credit reports.

New Tax Lien Policy

It’s a well-known fact that federal tax liens have a habit of sticking around on credit reports like the inevitable albatross around debtors’ necks for the entire time it takes to pay off the loan, plus an additional seven year penance (thank you Fair Credit Reporting Act!). Purgatory some may say, others indentured servitude, but the awful reality is they have been here to stay, no matter what way one looks at it.

Enter the new policy recently passed, announcing that federal tax liens are now approved for removal and will be erased from credit reports faster than any other detrimental issue. How? The process by which the IRS has termed “withdrawal.” Withdrawal occurs when the taxpayer’s lien is paid in full, OR the taxpayer signs up for a payment program that is scheduled for periodic installments until the account is up to date and closed.

How To Remove Tax Liens From Credit Reports?

Either of these scenarios can now result in the IRS formally withdrawing a tax lien, along with the stigma mark on one’s credit report. In order to achieve this, the taxpayer must make a formal request to the IRS (using IRS Form 12277, also known as Application for Withdrawal of Filed Form 668(y), Notice of Federal Lien). Once this request is filed, the IRS will return a form 10916(c), which is the magic word to open the door to cleared credit.

It is important to note that this new policy does not include tax liens held at the state levels. These liens will still be evident on your credit reports. Also not subject to complete withdrawal are tax settlements. Such settlements, commonly called “offers in compromise,” are present when a taxpayer and the IRS settle on terms of a lien where less than what is actually owed is considered adequate payment. Due to this not being an exact repayment in full, the IRS grants what they call a “release” rather than an actual withdrawal. As such, unfortunately, the credit report will still show such releases for a full seven years after the date paid.

A Win-Win

On all counts, it seems that this new policy is a win-win situation. The IRS benefits because debtors who may have normally attempted to settle their debts may now be more willing to step up to the plate to pay, since now such actions could help their credit. The taxpayers, obviously, reap the reward of having not having a black cloud of doom hanging over their credit reports when applying for credit in the future.

Tax Tip: Move to a Cheaper State

Facebook co-founder Eduardo Saverin gave up his United States citizenship last year in favor of citizenship in Singapore to avoid the increase in federal income taxes mandated by the end of the Bush-era tax cuts for the top tier of income earners. You may not be willing to give up your American passport to avoid taxes, but what if you were to move to a cheaper state? Between 2000 and 2010, Illinois, New York and Ohio lost millions in population while Texas, Florida and Arizona all gained residents, according to the Tax Foundation.

During that period, New York State lost $45.6 billion in income as workers moved to other states. California lost $29.4 billion, Illinois lost $20.4 billion, New Jersey lost $15.7 billion and Ohio lost $14.7 billion. By contrast, during the same period, Florida gained a whopping $67.3 billion in income, Arizona gained $17.7 billion and Texas gained $17.6 billion in income as workers migrated into those states.

Cold Weather, Heavy Tax Burdens

No doubt, there were several factors involved, including the loss of heavy manufacturing jobs, along with cold weather climates in states like New York and Illinois, contrasted to warm-weather states like Florida, Arizona and Texas. Nonetheless, a primary motivator for many of these interstate moves was a desire to reduce state tax burdens.

Heavy regulatory burdens and a hostile business tax climate also figured into the equation. The Mercatus Center at George Mason University ranks New Jersey forty-eighth in business tax burden and last among the fifty states in freedom from excessive regulation. California ranks forty-fifth in tax burden and last in regulatory freedom and New York ranks dead last in tax burden and forty-seventh in freedom from excessive regulations, according to the Mercatus Center.

A Tax Deduction for Moving Expenses

If you decide to pull up stakes and move from your high-tax state to a state with a lower tax burden, you’ll incur significant expenses, not the least of which being the actual move to your new location. You may be able to reduce the financial bite through federal tax deductions. To be eligible for the deduction, you must satisfy two tests: the distance test and the time test.

The distance test requires your new workplace must be located at least fifty miles further away from your old home than the distance between your old workplace and your old home. If you were unemployed before the move, your new job location must be at least fifty miles away from your old home. This test is the same whether you work for an employer or you are self-employed.

The time test requires employees to work full-time at a job for at least thirty-nine weeks during the first twelve months immediately following the move. If you are self-employed or a small business owner, you must work full-time for at least thirty-nine weeks during the first twelve months after your move and a total of seventy-eight weeks during the first twenty-four months after your move.

To take the deduction, you will need to complete Form 3903 (Moving Expenses) and submit it with Form 1040. Your moving expenses will count as an adjustment to your income. Publication 521, Moving Expenses, distinguishes deductible from nondeductible expenses and provides instructions on how to properly complete Form 3903 so that you can claim the greatest amount of legitimate deductions.

If you live in a state with high taxes and heavy regulation for businesses and you’re ready to make a move, it’s clear that you’re in good company. If you are financially and personally able to move to a cheaper state, and doing so will improve your circumstances, few people would blame you for getting out of dodge. Just be smart about making your move. Besides scouting out job opportunities and neighborhoods, let Uncle Sam ease the financial burden of your relocation if possible.

Photo: Great Beyond

Is Your State Making a Big Tax Change?

Via LearnVest By Cheryl Lock ~

Unless you’ve been living under a rock, you know it’s tax time. This season, while you’re gathering up your papers and receipts and your W-2s, DailyFinance is reporting that eight states either already have passed or could soon be passing changes to their state income tax codes.

California

In the sunny state of California, the approval of Proposition 30 ushered in two different tax increases. The first is a quarter-percentage-point increase in sales tax, along with an income-tax increase for taxpayers who file as single and make more than $250,000, and for joint filers making $500,000 or more. An additional 1 to 3 percentage points will be added to the existing top tax bracket through 2018.

Kansas

This year the top tax bracket has been reduced from 6.45% to 4.9% in Kansas. The law also eliminates income taxes on small business income for hundreds of thousands of businesses.

Louisiana

Although it hasn’t passed yet, Governor Bobby Jindal’s tax swap would get rid of the state’s income and corporate taxes in exchange for higher sales taxes.

Maryland

In a law effective for the 2012 tax year, new tax rates on high-income residents means higher taxes for single filers making more than $100,000 and for joint filers making $150,000 or more.

Massachusetts

A proposed new tax plan for the state would boost the income tax rate one percentage point to 6.25% but lower sales taxes from 6.25% to 4.5%.

Minnesota

Governor Mark Dayton of Minnesota is attempting to raise the state income tax rate in order to lower sales and property taxes. The lack of support Gov. Dayton has received for his proposal has many thinking he’ll drop parts, if not all, of his tax reform plan.

Nebraska

The great state of Nebraska would like to get rid of its income tax entirely, thank you very much. Gov. Dave Heineman has said he would scale back sales-tax exemptions to finance the reduction in income-tax.

North Carolina

In North Carolina, legislators would also like to see the state’s income tax eliminated in order to keep them competitive for individuals and businesses that may be looking to relocate.

 

 

LearnVest is the leading lifestyle and personal finance website for women.

The post Is Your State Making a Big Tax Change? appeared first on SuperMoney!.

What to Do if You Can’t Afford to Pay Your Taxes

Via LearnVest By Alden Wicker ~

If you owe money to the IRS for taxes this season, but you don’t have enough cash in your bank account to cut the check, all is not lost. First things first: Make sure to file your return. That way, you avoid the failure-to-file penalty.

Next, decide how much you can pay. The more you pay down now, the less you will pay in interest and the monthly late payment penalty.

Then, depending on your circumstances, you can request an extra 120 days to pay, either through the Online Payment Agreement application or by calling 800-829-1040.

It’s important you address this now, because if you don’t pay or get an extension, the IRS will send you a bill for the amount you owe, which starts the collection process, somewhere you don’t want to be–both for your emotional and financial state.

If you don’t think you can make the deadline, you have several options:

If You Owe …

Less Than $300: Put It on Your Credit Card

This is the easiest way to do it. If you are just waiting for a paycheck and can pay it off at the end of the month, there’s no reason not to put it on your credit card. If you think you will be carrying a balance if you use your credit card to pay, use this calculator to figure out how much it will cost you to pay the interest on it. A good rule of thumb is that if you owe the IRS less than $300 and you plan on paying it off within the year, this is a good option.

Between $300 and $1,000: Take Out a Loan

You could consider taking out a personal loan, but make sure you are getting it from a good source such as a credit union, which can give you a loan at about 11%. This is a good choice if what you owe to the IRS is less than $1,000 and you’re planning on paying it back within the year. You’ll pay about $88 a month to pay it off over a year, adding up to $56 in interest.

More Than $1,000: Set Up an Installment Plan

The IRS will charge you a fee for setting up an installment program, so we only recommend this if you owe more than $1,000 or so. If you do a direct debit agreement, where regular amounts are transferred directly from your financial institution, the fee is $52. If you do a standard agreement or payroll deduction, the fee is $105. Or, if your income is below a certain threshold based on the federal poverty guidelines, it will cost you $43. You’ll have to apply to qualify for the reduced fee.

If You Can’t Pay at All

If you are unable to pay the IRS at all for what you owe, you may request a temporary delay in the collections process or apply for an Offer in Compromise. You can only use these options if there is doubt as to whether the amount you owe is correct, what you owe is larger than your assets and future income together or you are currently suffering economic hardship. Call the IRS using the number on your bill to talk to a representative about doing this, or find all the forms here.

Whatever your situation, don’t ever just ignore your tax bill!  Contact the IRS right away so that you don’t get nailed with big penalties on top of what is owed, and you’ll have one less stress in your life!

LearnVest is the leading lifestyle and personal finance website for women.

The post What to Do if You Can’t Afford to Pay Your Taxes appeared first on SuperMoney!.

Who to Turn to When You Have Tax Problems As An Independent Contractor

One of the biggest headaches facing anyone that chooses to be an independent contractor is dealing with their taxes.  Because you do not work for any company but your own, you are responsible for making sure everything is paid on time and, in turn, things could get a little hectic as April 15th draws near.  If you keep these simple things in mind, however, you will be able to get your taxes taken care of with little to no hassle.

File every quarter of the year.

  • This is a commonly known requirement when it comes to being an independent contractor.  Many self employed individuals and businesses have to pay every three months of the calendar year to avoid penalties.  Whether you are required to or not, it is smart to do this not only to avoid fees but as a way to stay organized and on top of your taxes.

Make sure you deduct enough from your paycheck.

  • This is something that many independent contracts do not anticipate when they start taking out taxes from their paycheck.  It is a general rule of thumb to take out 30% of your check for taxes and the like so that you are covered no matter how much your taxes comes out to.  This will keep you safe once tax time rolls around.

If all else fails, file for an extension.

  • This should be a last ditch effort, but filing for a tax extension that elapses in October is a great way to buy time so you can save the money that you did not have in April.  This should not be done all the time but is a good way to get a little extra help when your back is to the wall.

If you are interested in getting more tax help, please contact us.

 

The post Who to Turn to When You Have Tax Problems As An Independent Contractor appeared first on Debt America.

Have IRS Problems? Know Your Tax Resolution Options

When the Federal Income Tax deadline draws near, there are some circumstances that can lead us to being underpaid or underwithheld by an amount that simply isn’t within our budget to hand over all at once. If you are in this situation, it is not necessarily time to panic or even expect some form of IRS harassment or audit. The IRS only seriously investigates flagrant attempts to commit W-2 fraud or hide income. An honest mistake on a form or forgetting to update a W-2 is simply penalized by the fact that there is an amount owed, plus applicable late fees and interest.

There are options for you to be able to tackle this financial hurdle from the IRS. If the amount owed is similar to what you could afford as a loan within your income level and you can not secure any low-interest credit, an installment agreement may be of help to you. This option has the following pros and cons:

Pros:

  • You Are Dealing Directly With the IRS Rather than Creditors. Your liability is tracked in detail with each payment. If you opt to use the Electronic Federal Tax Payer System (EFTPS), you can pay online and see exacly what you have outstanding in terms of principle and interest. The IRS tends to be willing to accomadate you – within reason – given your financial situation.
  • The Amount Owed Per Month is Fixed. When the agreement is first made a fixed monthly payment will be set. This can be as high or as low as reasonable provided it will pay off the total amount owed within 120 days. It will not change under you without notice and the terms of the agreement will be well defined.
  • You May Re-Negotiate the Agreement. If the payments do not fit within your budget, it is possible to reach a new installment agreement with the IRS. Though they are not guaranteed to approve your request, they will see to it that you reach a repayment option that is suitable for your economic circumstances.
  • Penalties and Interest May Be Less that That of Consumer Credit. This of course depends on your credit score and access to financing, but compare %11 percent with penalties to the %22+ percent some creditors charge, plus late fees and hidden fees. Since the IRS is concerned more with you repaying than with you locked in a cycle of debt, this may be a better option. However, if your credit is good and you have the means a personal loan, line of credit, or credit card may turn out to be better. However, just consider this: if you receive a tax refund as a result of your return, you have essentially given the IRS an interest free loan. They owe you no interest if you pay to much, but you owe them interest if you pay too little. Do research on your financing options and see what works best for you.

Cons:

  • You Are Dealing Directly With the IRS Rather than Creditors. Yes, this was the first pro listed, but taken from another perspective it may be a con. If things do not go according to plan with your installment agreements you will have to speak and answer directly to the IRS – exposing you and your finances to their scrutiny. Though you may have nothing to hide, always take care when speaking to them.
  • The Agreement has no Grace Period. If the installement agreement is even a day overdue it is considered delinquent. Though the IRS may give you some leeway, the monthly date of payment set forth in the agreement must be met or you will be considered in violation of the terms – and may potentially be liable for the total amount due all at once unless there is a reasonable explanation for the failure to pay by the agreed montly date.

Do I Qualify for the IRS Fresh Start Initiative?

Earlier this year, the Internal Revenue Service (IRS) rolled out its Fresh Start Initiative, aimed at helping struggling taxpayers. The initiative allows qualified taxpayers to avoid the IRS Failure to File penalty. This penalty is usually placed on unpaid tax balances, with accrued interest. Qualified individuals can request a six-month payment extension in which no penalties will accrue. Late payment penalties will be charged if the balance is not paid by October 15. Secondly, Fresh Start provides a different installment structure, allowing taxpayers to avoid financial reviews and Federal liens.

Recognizing the need for tax relief, IRS Commissioner Doug Shulman said, “This new approach makes sense for taxpayers and for the nation’s tax system, and it’s part of a wider effort we have underway to help struggling taxpayers.” Do I Qualify for the IRS Fresh Start Initiative? is the logical question being asked by many taxpayers. Consider the qualifications below.

  • You must have been unemployed for a minimum of 30 consecutive days during 2011 or before April 15 2012.
  • Married couples filing jointly need to have only one spouse that meets the qualifications.
  • Individuals who are self-employed need to be able to show at least a 25 percent drop in their net income.
  • Taxpayers must not earn more than $200,000 per year for married couples or $100,000 per year for individuals.
  • Fresh Start is also limited to taxpayers whose tax balance was not more than $50,000 at the end of 2011.
  • Taxpayers must file Form 1127A, which is not available electronically.

IRS Levy and Back Taxes: Tax Problems that Can be Resolved

A levy is the seizure of your property to pay a tax debt.  If you receive notice that you are subject to an IRS Levy due to back taxes, this is a problem that can be resolved.

Before seizing your property, the IRS will send you a notice giving you 30 days to respond.  According to the IRS, if you don’t respond and make payment arrangements they can levy your assets, your income, and your social security benefits.

The IRS has two methods to levy social security benefits.  In an Automated Federal Payment Levy Program, the IRS can take up to 15 percent of your benefits each month until the debt is paid in full.  Under the Manual levy, there is no cap on the amount they can take.  They do, however, say that they “take into account money for reasonable living expenses”.  The IRS will not levy children’s benefits, SSI, or lump sum death benefits.

The IRS can also levy your bank account.  Any account with your name on it is subject to levy, even joint accounts.  Once your bank receives a Notice of Intent to Levy, the bank will freeze all of your checking, savings, CDs, and any other accounts in your name.  The bank holds the funds for 21 days, giving you time to work out a payment arrangement with the IRS.  After the money is turned over to the IRS, you won’t be able to get it back even if you later work out an agreement.  Only the funds on deposit at the time of the levy are affected.  Money deposited afterwards, such as if your paycheck is directly deposited, is not subject to the levy.

If the IRS levies your paycheck, it is immediate and it will continue until the debt is paid.  Typically called a wage garnishment, your employer will send a portion of your pay to the IRS each pay day.  Some of your pay will be exempt; the amount depends on your filing status and number of exemptions you claim.

 

The post IRS Levy and Back Taxes: Tax Problems that Can be Resolved appeared first on Debt America.

Tax Resolution 101

In today’s harsh economy, ever increasing income tax problems are pushing more individuals, businesses, and corporations to the edge of financial insolvency. Ascending unemployment rates, the unavailability of liquid assets, and rising interest rates-the kiss of death in a weakening economy- can all contribute to our current financial problems. As we confront hazy economic times, more and more taxpayers are unable to meet their tax obligations. When businesses go under, they can wind up owing thousands of dollars in unpaid corporate taxes. When individuals face a hardship and strain to pay all of their bills, they may defer paying income and/or business taxes. Bankruptcy is often considered, but unfortunately, federal and state taxes are rarely dischargeable under U.S. Bankruptcy law. All the while, late penalties and interest will continue to add up at a very high rate. The longer taxpayers take to address IRS tax resolution, the more money they will owe Uncle Sam.

If you find yourself in trouble with the IRS and feel lost trying to figure it all out, there is good news for you. First, you are not alone. Second, you have options. Third, you have come to the right place. At Optima Tax Relief, there are a number of tax resolution options that we can review with you. While taxpayers may try to represent themselves in front of the IRS, many turn to professional tax. Professional Resolution experts know taxpayer rights, know who to speak with at the IRS, and can increase the chances of success dramatically.

These are actions we can take to prevent the IRS from taking action against you to collect on your tax liabilities:

  1. Filing our Power of Attorney with the assigned Collection IRS Agent
  2. Pull your complete IRS transcript
  3. Bring Taxpayer into Compliance
  4. Offer in Compromise
  5. Certified Non Collectible
  6. Establish Appropriate Installment Agreement

If you are unsure of what IRS tax solution would work for you, it would be smart to sign up for a free consultation at Optima Tax Relief. Our team of expert tax attorneys, CPAs, and Tax Resolution Specialists will assess your individual case and give you professional advice on which avenue to take. If the below scenarios apply to you, please give us a call!

  1. Wage Garnishment
  2. Bank Levy
  3. State or Federal Tax Lien
  4. Unfiled Returns
  5. Collection Letters (State or IRS)

Tax Relief for Taxpayers Affected by Natural Disasters

With hurricanes, floods, wildfires, earthquakes and other natural disasters affecting so many people throughout the United States every year, many are wondering what comes after the clean up.

First, you have to deal with the insurance companies. Then you need to look at what federal tax relief assistance programs might be available.

If you find yourself in the middle of a major disaster area, you generally have two options. You can file an amended tax return and claim the damages on your prior federal tax form. That will probably net you a refund. Moreover, it gets money into your hands sooner. Or you have the option of waiting until next tax season to file a casualty claim.

However, the Internal Revenue Service (IRS) generally offers other tax relief options as well, such as tax-free assistance from programs like FEMA and extended tax-filing deadlines. Additionally, there is the Mortgage Forgiveness Debt Relief Act of 2007 that protects homeowners from higher taxes when they refinance their homes.

Though the Act isn’t for the exclusive use of families in disaster areas, it does provide additional tax relief for those already under great duress. It acts to protect you from higher taxes when you refinance your home. Available through 2012, the law creates a temporary change to the tax code by eliminating taxes you may face if your lender forgives a portion of your outstanding mortgage debt.

Whether you have weathered the storm of past natural disasters or are preparing for what might lay ahead, click here for more federal tax relief information for natural disaster victims.