What Do I Do if I Can’t Pay My Tax Bill?

Posted onCategoriesTaxes

Tax season is stressful enough for all of us. Trying to track down your receipts and records, making sure you have all of your information correct, worrying that you’re missing some little thing that could blow up in your face later, all thoughts that might be rushing through your head as your prepare to file your taxes. As the deadline swiftly approaches though, there’s one fear that leaves many taxpayers feeling like they shouldn’t be bothering with it at all. What if you can’t afford to pay? Especially with recent changes in the tax law, particularly with adjustments that were made to withholding by many employers, more taxpayers than usual are finding themselves owing money this year. For some, they may think it’s tempting to just not file, believing that if they don’t face the problem, it will wait. Unfortunately, the exact opposite is true. Ignoring it won’t make it go away, but tackling the issue as quickly as possible will give you the best chance to navigate the situation as smoothly as possible.

Get Help

The first thing to do is get help. This can be a long and complicated process, and having someone in your corner is the single best factor in making sure you get through this in an orderly manner. The IRS does have a help line you can contact that will explain your options to you. It’s important to remember though that these agents are working for the IRS, and their goal is not to save you money, but to help you get your bill paid in full. Our tax professionals can review your records and ensure you’re taking advantage of all of the deductions that should apply for you, as well as following the correct filing procedure to save you money. Because you pay us, we work for you and our incentive is to help you legally save as much as you can. We also offer IRS representation if needed.

Pay what you can

If you can’t pay the full amount you do owe, you’ll want to pay as much as you can. Any unpaid amount will be subject to compounding interest as well as late fees, so reducing this amount as much as possible will save you money. Because of the high interest rates, you’ll want to make sure whatever plan you have for paying the remaining balance moves as quickly as possible.

Make arrangements with the IRS

You’ll need to make some kind of arrangement to pay off the remaining balance that you owe. The IRS has a few options available, or you can go through a private lender for assistance. The IRS offers installment agreements that can apply, with different fees depending on if you can make the full payment within 120 days after the due date, or if it will require longer. The interest rate the IRS charges on your past due amount is usually lower than you’d find by paying the balance with either a personal loan or credit card, but depending on your personal situation, the fees the IRS charge may cause the final amount to pay to be higher. You’ll need to consider all of these factors when deciding, and because the IRS fees are different for some taxpayers due to income and financial situation, the answer may be different for everyone. Finally, you might be able to qualify for an Offer in Compromise, or OIC, in which the IRS will accept a lower amount, though the rules for this are very narrow and may not apply in your situation.

Regardless of the amount or status your tax bill, you can face it with the confidence of help from expert professionals if you work with us at Baker Business and Tax Solutions. Contact us today to set up an appointment!

What is the Earned Income Tax Credit?

Posted onCategoriesTaxes

The Earned Income Tax Credit (also known as the EITC or EIC) is a special benefit offered to low or middle income taxpayers. Unlike some other forms of income assistance, the EITC is only available if you have “Earned income.” That is, income you’ve received either from working for someone or by owning and operating a business of your own, income from sources like unemployment benefits won’t count. For some individuals, the EITC may not only reduce your tax burden, but can actually give you a larger tax return. This makes it a valuable income boost for some individuals and can benefit the economy at large, since the higher tax returns are then reinvested into the economy by paying past due bills or making larger purchases that the taxpayer may not have been able to otherwise afford. According to the Center on Budget and Policy Priorities, in 2016 the EITC lifted about 5.8 million people out of poverty, including about 3 million children.

The amount of the EITC that is received by a given tax payer is based on a number of factors, including their earned income for the year as well as the number of qualifying dependants they may have. While it’s true that taxpayers with children can expect a larger credit, you don’t necessarily have to have a child or other kind of dependant to receive the EITC. For the purposes of the EITC, dependants will need to fit a number of qualifications including filing status and living arrangements. Because of these varying qualifications, it can be difficult for the average taxpayer to know if they qualify for the Earned Income Tax Credit. The IRS does have an online assistant that can help you predict if you would qualify, but our certified tax professionals can review your entire tax situation and make sure that even if you don’t qualify for the EITC, you are receiving the full tax return that you should be qualifying for. Give us a call today!

The Benefits of Year End Giving

Posted onCategoriesAccounting, Personal Finance, Taxes

The end of the year is upon us, and for many, it’s time to make your final deductible donations for the year. This is a crucial practice that encourages responsible giving to worthy groups, while also allowing taxpayers to reduce their tax burden.

In order to take advantage of charitable deductions, you will need to itemize your deductions on your tax return. This means that taxpayers who instead will use the standard deduction will not benefit. If you are unsure of whether you will be using itemized deductions, we can assist with making some

 

While it’s true that most charities qualify for tax deduction in return for donations, not all do. So first, you need to verify the charity you are donating to qualifies. The IRS has an online tool that can be used to verify charities, which you can find here. It’s worth noting that some charities, like churches, group ruling subordinates, and governmental units will still qualify but not be listed.

 

You may also want to check on the effectiveness of your donation. Several organizations will offer background information or ratings of charities. GuideStar is a website that offers data drawn from public filings with the IRS on different charitable organizations for free. A premium membership will also grant you access to raw financial data, letting you see how the organizations spend the dollars they receive on things like marketing and salaries. The Better Business Bureau offers ratings on charities based on a set of benchmarks, and report when charities refuse to release requested data. GiveWell is a relatively new player in the realm of charity evaluations. They use financial analysis to identify how efficiently lives are saved by the dollars donated to different charities. They also offer full access to the research and data they use to make their determinations, and make suggestions of the charity that offers the highest life saving impact per dollar donated. (Currently, their highest rated charity is Malaria Consortium, which offers treatment to prevent malaria in children in sub-Saharan Africa.)

 

You may want to consider donating locally however. This has the additional benefit of allowing you to be more personally invested in the charity of your choice. Rather than just sending a check, you can also visit and volunteer. Local homeless shelters often need hands to help with laundry or meal service, or you can volunteer with local school programs for benefiting reading skills. Not only does this connect you more deeply with your community, the more holistic approach to giving can lead to a more satisfying experience in the long term.

 

No matter how you choose to give, we will work with you to make sure it’s reflected on your tax filings correctly to give you the best impact. Call us today to schedule time to review your financial plans.