Monday, October 27, 2008

Tax Debt Information

Tax is the word that gives jitters. And the condition gets worse when we fail to pay the taxes by the end of tax day. The condition is faced when:
  1. People fail to deposit the forms on time.
  2. Pay less tax.
  3. Are not in the financial position to pay their taxes, have heavy tax burden and have to pay loans which are again taxable in nature.
  4. Avoid accountant to save on their fees and end up in filling the form incorrectly paying less taxes.
  5. Throw away the receipts and bills which might be helpful as a proof for tax deductions.
There are certain ways to get out of this debt situation. But they are few and can be as follows:
  1. If you are already in tax debt situation then try to analyze the whole situation from the scratch. Look into your tax debt and consult a professional in the field who can suggest you the possible steps.
  2. Consult a professional while filling up the form. The form contains some legal terms which may not be clearly understood resulting in incorrect filling of the information which ultimately results in tax debt.
  3. Keep a tax book or guides on taxation which can be referred from time to time and contain the tax information in easy to understand manner.
  4. Keep all the receipts and bills which you can require as a proof while filling the tax returns.
  5. Ask your tax consultant what part of the form you can fill on your own so that you can save on some money which you pay to your consultant who charges their fees on hourly basis.
  6. Avoid taking loans to pay off your tax debt. This may even worsen your financial situation.
  7. Always make it a point to pay your taxes before the final date for payment of taxes.
  8. IRS has some solution to the tax debt problem in the form of Offer in Compromise (OIC). In OIC the IRS offers the person with tax debt to pay off the debts by either paying a certain amount or paying in installment according to a short term installment plan. For OIC, form 656 is to be filled which is given by IRS. Certain conditions are laid down for OIC which are :
  • When person declares that he will not be able to fill the whole tax debt.
  • For handicaps and elder people who provide the proof that paying the tax debt may make their living conditions tough.
But the best thing is to avoid tax debt by filling and filing the form correctly and on time under the consultation of an expert in this field.

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