Tax Tips

Advantages of Saving Your Tax Refund

One of the things taxpayers look forward to every year is the tax refund. Not that all taxpayers really get them, but one could only hope. That’s like windfall—money that you did not take into account (unless you are that fastidious about your earnings). The average individual would spend tax refund like money they didn’t earn. That’s how you are supposed to deal with a windfall. But here’s a thought: why don’t you save your tax refund? Here are advantages to saving your tax refund: 

You get to start or increase your emergency fund 

Americans are too dependent on credit cards. But every time you swipe your card, it’s a debt you have to pay. It entails finance charges and debt interest when you don’t pay for the amount by the time the credit card company bills you. So when an emergency comes, you swipe your card and your credit card debt balloons. Save your tax refund. Imagine if you get a refund of $2,000 this year, and almost the same amount next year—that’s $4,000 of “easy money.” Take note of the quotation marks because essentially, you did slave for that money, it just didn’t feel that way because that money was unexpected brought about by your over payment of taxes. You also have to take into account that the money you saved will earn interest. Over the years, as long as there is no emergency, that money will balloon along with interest. You might just wake up one day realizing that you can already afford a car, or make a down payment for a house, with your tax refund over the years.  

You may even get an incentive 

There is a movement to save your tax refund via A collaboration between Commonwealth and America Saves, this movement aims to teach Americans to save their tax refund—a part of it at least—by giving an incentive when they save. The website teaches you to split your tax refund in two parts—one for spending and the other for saving. When you save your refund, you will be eligible to win money from the companies behind the website. The website was started because in a survey, it was learned that 62 percent of Americans experience at least one financial crisis within a year. More than half of them don’t have emergency savings.  

“Commonwealth and America Saves are offering SaveYourRefund as a simple, innovative, and fund program focused on a crucial and universal but often stressful moment in people’s lives—filing taxes,” the website stated.  

You may pay your debts 

According to a report, the average American is about $38,000 in debt in 2018. The figure is up by $1,000 from the previous year. Most Americans have credit cards, student loans, car loans and mortgages, so this is understandable. So when you do get a tax refund, rather than spending it on trivial things like people usually do with unexpected money, pay your debt! 

What Americans don’t usually take into consideration are the interest rates and finance charges on credit cards. This plastic money has become a big part of the lives of Americans that they don’t scrutinize credit card bills anymore. Credit card is a business, so of course the companies need to earn from it. Imagine if you don’t have to pay 10 to 15 percent in interest charges—that’s already savings on your part. So saving your tax refund to pay off credit card debt is actually more savings for you as you save on having to pay those interest rates. The same goes for every other debt you have. The longer you pay off a debt, the longer you have to pay interest rates.  

You can start an investment—trade or stocks 

If you don’t have that much of a problem with debts, then it’s time to take the next step in financial maturity: investing. Your tax refund will seem like a lot considering that you get it one-shot, but imagine how much it will turn out when invested. It doesn’t even take that much to invest. For online stock broker, for example, you can already start trading for as low as $10. Investing in stocks via phone may cost around $35, and $45 when you get a broker to assist you. Just make sure you research about where to invest in order to protect your money. Having a personal broker would help you very much but if you are not going to invest a large amount of money, having one may be a tad expensive. After all, these brokers earn about 4.5 percent of your investment as commission. For online trades, the fee is just minimal—around one percent.  

You may invest in your future 

If you are employed, then you most probably have a 401K through your employer. But you can still open your own IRA or individual retirement account. This is a great investment because it is for your future. The 401K will not be enough to live on for the future if you want to live a life of travels and fun activities. The 401K may just be enough to fund your maintenance medications. So make sure you will enjoy your retirement but investing in it now. 

You can invest in yourself 

Is there a course you’ve always wanted to take but thought that it’s too expensive? Perhaps there is a self-improvement seminar that you really wish to attend but thought that the expense is unnecessary. If you think any of these will expand your character growth, then by all means, invest in yourself. Advancing yourself is the best form of investment that your tax refund could make.  

You can start a business 

You may put aside your tax refund for a possible business venture in the future. Most Americans don’t want to take the plunge of starting a business because of the capital investment. So spend your tax refund wisely by building a future. A business is wise investment if you studied it well enough. Having a business means no longer depending on paychecks, but it also means that you have to take a risk about earnings because a business is a win or lose kind of thing. However, there are endless limits to starting a business. Who knows, you might start the next Facebook revolution? Or you can start small; you can still start a business while still enjoying the perks of employment.  

What you have to remember is that the most important thing is you save your tax refund for something worthwhile rather than things that will only get you through the night or some nights. Save your tax refund and spend it on something solid that you can live on in the future.  

Tax Tips

How Long Should You Keep Tax Records?

It is very helpful when you keep your tax records. This, especially when you are self-employed, or are employed but working with a side hustle. Your tax records will give you an idea of your finances over the past few years, whether you are employed or not. They are also very helpful when questions of your finances arise. And they are of utmost importance if the Internal Revenue Services (IRS) comes knocking and decides to audit you. Yes, these records are very helpful, but they can also be fire hazards. Keeping so many papers at home will be dangerous since these light up pretty easily in case of fire emergencies. Not only that, papers are messy. They can easily clutter the house.

So you have to get rid of these papers somehow. But how long should you keep tax records?

There are two sides to this issue. There is a train of thought rendered on the statute of limitations, and another that believes in eternity.

Statute of limitations

First, let’s ponder on a set of people who just want to get rid of clutter. If you have to be practical about it, you might not need a specific tax return when it is already 10 years old. A tax audit won’t ever get that far back. In fact, as far as tax audit goes, the chance of being audit is slim—granting that there are no discrepancies in your tax return. The IRS only really looks at people with large tax dues or those whose tax return largely differ from his tax due in the previous years. In other words, the IRS would love to examine closely those tax returns that seem a little out of the ordinary. For regular taxpayers, the odds of being audited are just one in 25 people. The IRS does that randomly too. However, it is still best to be prepared.

A tax audit is really just the best reason why you have to keep tax records for longer than necessary. For other reasons, there are statutes of limitations, which you can use as the rule of thumb when deciding when to lose tax records. Even the IRS assures: “The length of time you should keep a document depends on the action, expense, or event which the document records. Generally, you must keep your records that support an item of income, deduction or credit shown on your tax return until the period of limitations of that tax return runs out.”

Here are some periods of limitations for tax records as enumerated by the IRS:

  1. You should keep tax records for at least three years from the date you filed your original tax return or two years from the date you paid your tax if you aim to file a claim for credit or refund after filing the return.
  2. But keep records for at least seven years if you intend to file a claim for a loss from worthless securities or bad debt deduction. Sometimes, you don’t realize that you need to file such claim or that you can—so you might not have this intention when you filed your tax return. So in order to be in the safe side, you might as well keep tax records for at least seven years.
  3. If you don’t report income that you should report and it’s more than a quarter for the gross income reflected in your return, then you should at least keep records for six years.
  4. But if you have never ever filed for a tax return, then you should keep records indefinitely.
  5. Employment tax records are advised to be kept for at least four years.

Basically, the IRS is saying that you should not dispose of your tax return and other tax records in the next seven years. But if you are not thinking of making claims and other uses for the records, then you can keep them for at least three years. That is the general rule of thumb for tax audits: three years. But you have to consider that while it may be the general rule, it is not a national mandate. The period of limitations may differ from one state to the other.

While the IRS generally do not audit people for tax returns filed over three years ago, some states assess additional tax obligations four years after the filing of the tax return or the due date, whichever is later. Among the states that use the four-year rule of thumb are Arizona, California, Colorado, Kentucky, Michigan, Ohio and Wisconsin. In Tennessee, you might have to keep your tax records for at least five years. This is because the state could still make an audit three years after you have filed your tax return or its due date; but this could turn into three and a half years if you want to claim a refund; five years if the IRS changes your federal return. Still, in Louisiana and New Mexico, the standard is three years but the counting starts on Dec. 31 in the year your tax was due. In Kansas, the statute of limitations is three years after the date of the filing of the original return or the date when the return is due or when tax was paid. Taxes may also be assessed within 12 months after an amended return is filed. Minnesota’s statute of limitations is three and a half years after the date of filing of the return or the due date of the return, whichever is later. For the same provision, the length is five years in Montana, and three years in Oregon. All in all, it may be safe to just keep tax records for at least seven years—no state has a statute of limitations that go beyond seven years anyway.

Notice that we usually mention tax records rather than just the more specific tax return—this is because you should store and keep every piece of document that would relate to your tax and tax return. Here are among the records that you should keep along with your tax return:

  1. Income forms: W-2, 1099, K-1, among others (The W-4 is not included in this because this is something you should update regularly—at least every year).
  2. Investment records including 1099
  3. Property tax and mortgage interest (1098)
  4. Expense records
  5. Donation receipts
  6. Retirement account documentations: 1099-R, 5498, 8606

The side of caution: Forever

There are people, though, who are more cautious than others. Whether you belong to this group or not, it may be more prudent to listen to the arguments of the other side anyway, the side that tells you to keep tax records indefinitely. While there are statute of limitations on tax records, and even the IRS itself has given recommendations on how long to keep records, all these maximum number of years will go out the window when fraud comes into play. The IRS will order a tax audit even if the tax in question date as far back as 15 years ago if the agency believes there was fraud involved—that and if you have never filed a tax return before. Notice the string of words: if the agency believes there was fraud involved. It doesn’t have to mean that you were actually involved in fraudulent activities, but if the IRS thinks so, then an audit will take place whether you still have records from a decade ago or not. This is why some tax experts advise to keep tax returns and other pertinent tax records in perpetuity. Just in case it happens to you.

But they are fire hazards, aren’t they? Yes, we have already established that keeping loads of paper is dangerous—good thing this is not the Stone Age. Save it in the cloud! Digitize your records and save them in cloud storage like Google Drive, which is free. You may also pay a monthly storage fee for an iCloud storage for very minimal payment. Make a folder that you could update every year. By doing this, you have erased the problem of keeping fire hazard materials at home and you will be decreasing clutter at home. Also, there will be no danger of losing these documents or having them inadvertently destroyed by fire or by virtue natural disaster. No one could steal them, too.

The great thing about saving them in the cloud is that you could actually check on the records anytime you want.

Since we are on the issue of the cloud, don’t just limit cloud storage to tax documents. Keep all kinds of documents in the cloud—titles from house, insurance documents, court papers, property records and everything of utmost importance. Consider the cloud your own steel cabinet where you can keep similar files in one folder. You may even label them, too. That’s the most important thing—labels. Just because it’s up there in the cloud doesn’t mean that records could not be messy. The organizing part still falls on your shoulder even with the digital age. But the best thing about technology is that everything is just easier and the documents are way more accessible.

Tax Tips

How to File for Tax Extension

Nobody enjoys paying taxes—but it is essential that we do. However, there is something even less enjoyable than paying taxes—paying penalty! So always file your tax return on time as well as pay your tax on time. If you are not prepared to file your tax return, then you must file for an extension to file a tax return.  

It is actually better to file for an extension to file tax return rather than haphazardly file it. The danger here is that you may not be able to maximize tax benefits and credits under the tax law. You actually need time in order to correctly fill out your tax return. You also need the pertinent information and knowledge about your taxes and the tax relief that are due you. In fact, if you can hire assistance, that would be best—they know best about these things.  

In other cases, you may be unable to timely file tax return because you are still waiting for a document that will help you get a tax benefit or credit. If you really need this document in order to be able to enjoy your right to a tax relief, then you file for an extension to file a tax return. There is no penalty to filing for an extension, but there is a penalty if you are unable to file a tax return.  

However, there is one thing that you need to remember: while the Internal Revenue Service (IRS) is open to giving taxpayers extension to file their tax returns, it is not exactly open to given taxpayers extension to file their tax. In other words, you may file your tax return at a later date, but you cannot be late in paying your tax! 

You may ask: But how do I know how much I owe the IRS if I have not done my tax return? Well, you have to estimate how much you owe the government. It is better to make a large estimation than a small one. Anyway, that’s why the IRS also does tax refunds—although, you won’t be getting that refund anytime soon. Another option is to enter into an installment agreement with the IRS so that you don’t have to pay a large chunk of the tax. Although, this is not going to be easy peasy, as you have to prove to the IRS that you cannot afford to pay the total amount of your tax due. Another option is to pay at least 90 percent of your estimated tax due to avoid getting interest charges and being billed for penalty. The interest and penalty will really hurt because there are things that you shouldn’t be paying anyway if you were just being meticulous about your taxes. By the way, you can pay your tax in a quarterly basis so it won’t be too heavy financially. 

In case you are not privy to the tax details, the deadline of the filing of tax returns is April 15. That is also the deadline to file for extension to file tax return. Typically the IRS gives an extension of six months starting April 15 for taxpayers to file their tax returns if they were able to timely submit the extension request.  

There are a few U.S. groups, though, who get automatic tax exemptions despite not filing for them. If you are any of the following, then you don’t need to file for an extension:  

  • Military men deployed in combat zones. Obviously, they deserve this kind of special treatment. They are allowed to pay their tax dues 180 days after leaving a battle zone. 
  • American citizens outside the country. But the deadline is not much. They have until June 15 to file their tax returns. So if you have plans of going on a trip outside the country, you should think of some arrangement for your tax return or tax payment especially if you will be out of the country between April 15 and June 15. Besides, the IRS would not mind early payments or early filing of tax return.  

  • People who were unfortunate enough to be affected by a natural disaster. But since this is something that nobody foresees, it is the IRS that sets a deadline. 

Now that you have all those details, what do you need in order to file for an extension to file a tax return? IRS Form 4868. This is the official document that you will need. If you believe that you don’t actually owe money to the IRS because you merit a tax refund, you could just Free File your tax return along with Form 4868. This is for free and is available via the government website: This is tax-preparation-and-filing software, so basically, you will be e-filing your tax return. But if you have any tax due, then you pay for it along with your Form 4868. You can still e-file your tax return, but you can no longer use the Free File. You may also pay your tax due online. There are three ways to do this: credit or debit card, the IRS Direct Pay and the Electronic Federal Tax Payment System. When you pay online, make sure you indicate that it is for Form 4868. Don’t worry, it will appear during processing, you just need to click it. You may also file your tax return through regular mail, along with your check.  

So, what happens if you don’t pay your tax on time or file your tax return on time?

We already established that there will be a penalty—but how bad is it? There will be an interest charge for non-payment of tax, which compounds daily. The rate of the interest will be determined every quarter, usually at a federal short-term rate, plus three percent. A late tax payment will also be billed a penalty fee, which is half of one percent of the tax due. It is charged monthly until such due is paid off. There is a separate penalty charge for the late filing of tax returns, including the extended ones. The penalty is five percent of your tax due every month that the return has not been filed. But the maximum penalty stops at 25 percent. For returns that are 60 days late, there is a minimum penalty of $135 or the balance of the tax due on the return—whichever is smaller.  

Business Taxes Tax Tips

Tips for Investors to Minimize Taxes

It’s that time of the year again when U.S. citizens have to file their tax returns and pay their taxes. For the first time, taxpayers will also contend with changes in the law through the Tax Cuts and Jobs Act of 2017. Since the law, which amended the Internal Revenue Code of 1986, was passed in the late 2017, its effects and implications will be for the 2018 tax year, which will be filed this year.  

When tax season comes, taxpayers scramble to get the most benefit from the tax refunds and tax credit provisions under the law. For individuals, the tax is pretty much cut and dry. It becomes more complicated with the individual have other entanglements like marriage, children and a business. Everybody wants to pay less. But with investors, there is always that mindset of wanting to spend as little money as possible while earning a lot. There are many strategies that could keep investor taxes at a minimum—legal strategies at that. Don’t even try doing an illegal maneuver or you will end up paying more than you should if caught. Or worse, you may even end up in jail.  

If you are an investor and you want to keep tax at the barest minimum, you will want to get acquainted with the tax-loss harvesting strategy. This will also help you have increased long-term returns. Businessmen usually resort to this approach to taxes when their investments become less than the purchase price. But this strategy is a complicated matter because it has to be countered with other tax rules. 

Here are some things you need to consider when figuring out how to minimize tax due: 

Offset your capital gains 

Based on the tax-loss harvesting strategy, a long-term capital loss could be used to cancel out a long-term capital gain. A long-term investment is assets including bonds, stocks, real estate and cash that a person holds or owns for more than a year. On the other hand, a short-term loss will be considered to offset a short-term capital gain. Those that will be considered as short-term investments are assets owned for less than a year. Excess loss from either short-term or long-term investment could be canceled out by either of the capital gains. Every year, there is about $3,000 in losses that could be applied to a person’s ordinary income. If there is an excess of loss from that, it could be rolled over in the next few years.  

Better tax results from tax-loss selling 

When an investment outperforms a particular index or the overall market, an alpha is created. Additional alpha could be conceived during tax-loss harvesting when a businessman is expected to have better tax results. One may be able to sell stocks or funds via losses. This will offset profitable sales from an earlier period.  

Wash-sale rule 

When an investor sells or trades a security for a loss but then buys a similar stock or security within a month after the sale, a wash-sale occurs. Basically, the purchase washes out the sale that the person was forced to make. Take note of the use of the word “similar” because the Internal Revenue Service (IRS) frowns upon investors selling a security and buying an identical security within a month of the sale. In fact, frowns may be the wrong word as the IRS actually imposes a penalty on that. This is a means to prevent anyone from just making up losses in order to enjoy some tax benefits.  

How tax-loss harvesting could minimize tax due 

Businessmen don’t really need capital gains in order to take advantage of the tax-loss harvesting approach. As earlier mentioned, there is that rule that allows the offsetting of $3,000 in losses from ordinary income. Using that same amount, say an investor sells stock but via losses. That loss could then be utilized for the reduction of taxable income by $3,000. So let’s say a businessman loses a security but sells an asset to cover for the loss. He will then reduce taxable income worth $3,000 for the year and will then let additional losses roll over for the next few years.  

On the other hand, this may also help create greater returns for the taxpayer. So if the businessman saves some amount in taxes every year by using the tax-loss harvesting scheme, he could use those savings and invest them in other forms of assets like in the stock market. Every year, the amount will see interest and would then increase to a hefty sum. In 25 years, your few hundred dollars of savings could already make tens of thousands of dollars.  

There is a caveat though. Earning a hefty sum from tax-loss harvesting would only work for a certain range of income. Experts say tax-loss harvesting is not appropriate for an individual with less than $40,000 in taxable income as well as in a married couple with a joint taxable income of less than $80,000. Records indicate that for individuals making just around $38,600 a year and $77,200 for spouses filing jointly, the capital gains rate is zero.  

Another thing, tax-loss harvesting is not applicable to the 401 (k) or the individual retirement account or other retirement accounts because losses from these accounts cannot be deducted.  

Analyse first before selling stocks 

There is a danger when an investor is only looking at the immediate solution and singling out the tax-loss harvesting strategy as an easy way out. There is a tendency that you sell a stock but within the month, the security rebounds. So always give yourself time to analyze stocks and funds and other related assets. Keep up with earnings calendar or the official public announcement of a company’s profitability over a time period. Never sell around earnings releases because profit reports from every company will immensely affect prices of assets. Give yourself time to analyze the market after earnings releases. Discuss your intention to sell with an expert over coffee. Some experts will definitely welcome the discussion without you wondering if you have to pay for that expert opinion.  

Municipal bonds 

This is one way to hide your money from tax in a very legal way. Very is put there for emphasis because a municipal bond is a debt obligation issued by a government. You basically put in money for the government to roll. Basically, you are allowing the government to loan some money from you. In return, your bond will earn interest. But the best part is, the amount you put in will not be taxed. There are also taxable bonds but why make that option when there are bonds that are not tied with federal, state and local taxes? But it also begs the question: Why is there an option for a taxable bond? Because the income from that type of bond is generally higher.  

There are two types of municipal bonds: general obligation bonds or GOs and revenue bonds. The former is issued in order for government to have money to cover regular operational expenses. The latter is issued in order to fund infrastructure projects. Low-risk investors enjoy these kinds of investments because they will definitely earn from it—after all, nothing can bankrupt the government. It is also another way to minimize tax bill.  

Health Savings Account 

This is another way to have reduced taxes. Since this is for your health, the government is not inclined to pose taxes on any contributions to the Health Savings Account. If you put in the maximum amount possible, the account will grow and you don’t have to worry about tax. Of course, there may be a time that you will need the fund, say an emergency medical expense or even a scheduled medical procedure, withdrawals from such account will not be taxed as well.  

Get an expert opinion 

When you go through the IRS website, you will realize that there are so many tax credits that you could take advantage of that will help you reduce your taxes. Who knows better about these tax credits and forms of tax relief than tax experts like a certified public accountant, tax lawyer or an enrolled agent. Hire an expert to help you get maximum tax credit in order to minimize tax due. You should not worry about the professional fee because for sure, it would be offset—yes, that word is repeated over and over because that’s an important word when talking about minimizing tax—by the possible savings you will get in the end.  

Taxes are never easy—paying them and calculating them. During tax season, many people are left scratching their heads over the simplest tax matters as filling out the forms. But the most headache-inducing part of tax season is the actual paying of taxes. Because it is usually a one-time thing—unless of course you apply for some sort of tax relief—it is a heavy burden. Other countries deduct taxes from an person’s regular income, making it less burdensome for the taxpayer both financially and mentally. But since that is not Uncle Sam’s way, taxpayers have to endure every year in what is known as tax season. It is an obligation that every American must settle if people want to continue enjoying the perks of living in the Land of Opportunity. 

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Tax Tips

How to pay taxes using a credit card

With all the necessary expenses that you need to cover within a particular calendar year, it would be somewhat of a miracle to have budgeted for your tax obligations. More often than not, this seems to be the cited expenditure that most taxpayers conveniently forget to set aside some funds for when the season comes around. Don’t be caught trying to empty out your pockets when this inevitable bill comes due.

Ideally, in a perfect setup, after all the amounts have been withheld from your paycheck, there should be enough left to cover your taxes. But, this may not be the case especially if other pressing and urgent matters take precedence. There may be some huge tuition amount that needs to be paid, or an emergency medical expenses, that just happened out of the blue. Fear not, there are some options available for you to satisfy pending tax obligations.

Let’s try to review some possible scenarios wherein you are unable to pay in a timely fashion. Some examples may be:

  • The IRS accepts late payments. However, there will be a penalty incurred. This monthly late fee is usually pegged at one percent of whatever is owed. So, if the amount owed is a thousand dollars, the late fee charged will be ten dollars. Don’t let this amount increase because as your debt grows so will the imposed penalties follow accordingly.
  • The IRS is open for payment plan for you to settle your tax debt. There probably would be a one-time fee charged amounting to about $195. Monthly interest will also be part of what’s due.
  • The IRS also considers payments for taxes through a credit card. With this option, the terms and conditions of your credit card agreement come into play. So, consider the advantages and disadvantages at the onset before paying your taxes with your credit card.


What are the benefits of paying your taxes through credit card?

If your credit limit is quite substantial on your credit card, you just might be able to settle your outstanding taxes. With flexible payment terms, which depends on your credit card provider, you have some choices on how to effectively settle this debt. In some sense, owing the issuer of your credit card may feel somewhat less anxious then dealing with the IRS. The following highlight some advantages in using your credit card to address tax payments:

Reward points can be earned.

With a rewards credit card, rewards can be accumulated on your balance. Should this be the case, the benefits can follow when your taxes are placed on the credit card that may be returned to you through some rewards points. Please review what restrictions the credit card may have. This usually focuses on the type of purchases and some minimum charges accumulated before the rewards can be enjoyed.

There may be a longer time period to settle your tax obligation.

Filling out of additional forms may not be required because you are using your credit card. You can go beyond the April 15 filing deadline when you pay your taxes with this option. With the traditional method, the IRS allows filing after April 15, but there are documents that still need some legwork.

Interest charges may be avoided

But this happens if you have a credit card with a long 0% introductory rate on purchases and can pay off the credit card balance before the introductory period ends. You need to scrutinize it thoroughly.

What are the drawbacks of using a credit card for paying taxes?

Gaining some rewards points on your credit card and having more than ample time to pay it off may be a good thing, but beware of some drawbacks that can crop up.

There’s interest to settle on tax owed

When you are not able to pay off your balance in full and this debt grows over time, the interest will incrementally increase as well. The monthly charges can be minimized with a low-interest rate credit card or one that carries a promotional interest rate.

Convenience fees will most probably be charged

The IRS will charge a convenience fee of 2.49% of your tax bill when using the credit card option. For a $1,000 tax bill, the convenience fee may amount to almost $25. The more taxes you owe, the more convenience fee will be charged.

The debt cannot be bankrupted.

One of the types of debt that you can’t bankrupt is income tax. If a personal financial crisis hits, declaring bankruptcy will have no effect on credit card debts accumulated due to taxes.

The credit card provider may tag you as a possible risk.

When you use your credit card to pay for your tax obligations, the credit card provider may tag you as someone who is in financial distress. There shouldn’t be a reason to use your credit card if you are able to fully comply with your tax debt. Interest rates may be raised by the issuer, and your credit card limit may be lowered or canceled altogether.

Go over some assessments of the risks of using a credit card

You’ve only transferred your tax debt to your credit card instead of the IRS. So, you are still subject to any charges incurred on your credit card. Pay this off in a timely manner and you shouldn’t have any problem. Any late payments will go to your credit card report that may adversely affect your credit rating.


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Tax Tips

How to Resolve IRS Tax Issues: What To Do, What Not To Do

Are you in tax trouble? You better deal with it right away to not exacerbate the problem. The job of the Internal Revenue Service (IRS) is to collect taxes, and it is very good at that job. So if there are people who fail to settle their tax problems, best believe that the IRS will go after them.

How to resolve tax issues? Here are three right ways to deal with it.

Contact the IRS immediately

Do not dilly-dally when it comes to dealing with the IRS. The consequences of not dealing with your tax problem could be dire. You should not fear dealing with the IRS because as long as you show that you are intent on paying your tax obligation, the IRS will listen. The government can still be merciful and it is reasonable.

Know the payment options

As mentioned, the IRS is not unreasonable. It will listen to you and it will give you a chance to pay off your debt. You just have to show your willingness to pay. The IRS can offer you options that will not bankrupt you. In fact, the payment options are usually pretty reasonable. Usually, the IRS will allow you to pay in installment. However, you have to prove that you are cash-strapped and cannot pay your debt in full. The amount you pay every month will also depend on the documents you will submit to the IRS. The documents will determine the amount you can afford to pay every month.


When uncertain, hire a tax professional

It’s understandable that if you have tax debts you would be hesitant to spend your money on a professional—there is a reason why you are in debt after all. However, hiring a professional may be able to save you some money. Professionals know how to deal with tax issues. They know how to get the best payment options and, in some cases, even get the debt forgiven. Hiring an expert could be a practical move. Just make sure you get someone accredited with the IRS so that he can save you the hassle of directly dealing with this government entity.


Now, if there are right ways of dealing with the IRS, then certainly there are also wrong ways. So here are three ways on how not to deal with the IRS.

Do not volunteer information to the IRS

You want to prove that we could not afford to pay off our debt in one go. You need a payment plan. So make sure you don’t volunteer information to any IRS employee that could endanger a possible lean payment option. When you deal with the IRS, an employee will interview you. Answer only what is asked. Do not give anything more.

Do not answer what you don’t understand

Tax is confusing and could be a bit tricky. So if there is something you don’t understand while dealing with the IRS, do not answer. Allow the IRS to explain the matter to you. Just tell them that you don’t know or you can’t remember.

Do not lie to the IRS

While you want to get the best payment option when dealing with your tax problem, it is not a license to lie to the IRS just to prove that you cannot afford to pay off your debt. Remember that the IRS has enough resources to verify your lie.


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What are the Pros and Cons of Using Tax Automation Tools?

Perhaps, our first encounter with financial automation would be the automated teller machine or ATM. We just want to place our access card into the slot, check our remaining balance, and withdraw funds with as little fuss as possible. Hopefully, that convenience of sorts can be done with tax automation tools. The pros of using tax automation tools are undeniable

The computer is not the main protagonist in automation because human intervention will still be necessary. You just need to make sure the consultants who will implement these tax automation solutions can adapt and adjust to the tax requirements of a particular business. So, the ones who are tasked with the automation of tax calculations and remittances should also be familiar with the nuances of the tax code. The machine will only provide results based on the input, just like the ATMs.

Let’s take a closer look at how tax automation tools can help or hinder your business needs especially when tax season comes around.


Pros of  Using Tax Automation Tools


 The coverage for calculations is from end-to-end calculations

You won’t have to rely on particular apps and charts to put your taxes in order. The tax automation can organize what needs to be done and will execute accordingly. Rate tables are uploaded automatically and tax disbursements can be remitted as scheduled. Each transaction will follow the qualifying tax rate and this helps reduce common errors in the long run.

The reporting becomes more precise

With prebuilt address verification and geolocation algorithms, which define what taxation rules are relevant to your business, that only means compliance gets followed to the letter. Upon signing up, there is an automatic validation of your address and the applicable rates are adapted almost in an instant. A single schedule summarizes all the payments that need to be processed, which makes the reporting more transparent.

The integration to current systems can be conducted in a seamless manner

Because of the digital setup of most companies, compatibility and integration can be a hindrance. But, tax automation tools are designed to integrate with every available software architecture. All functions through ERP, POS, e-commerce and CRM solutions should function seamlessly once the updates have been installed.

The data gets protected and the maintenance gets automated

Data entered into the system lessens or even eliminates any outside intervention. This corporate data must be protected at all cost due to its sensitive contents. The maintenance gets done automatically saving you on expensive updates. Having paid the license to use the software, these features are already integrated.

You have a whole team to support you

Even if the entire tax process gets automated, a team is always there to assist you with any other concerns. You can email them your current issue. You may also call them. They also can keep you abreast with the latest tax advisories and rate adjustments that can help bring in more savings.


Cons of  Using Tax Automation Tools


Most Tax automation Services are available for companies, not individuals

Corporations are the main clientele, so these software applications may not be applicable for those in small-scale industries.

Various business types have no fixed payment rates

This may also include promotions for beneficiary organizations. The rates still fluctuate due to quote-based or a fixed price scheme. Startups may have the advantage because the payment can be quote-calculated.