Category: tax planning

Prepaid Debit Cards for Income Tax Refunds

Don’t look now but prepaid debit cards are making their way into our income tax system. Several State Governments and now the Federal Government are experimenting with ways to refund taxpayers directly to reloadable debit cards instead of the usual tax checks. I guess we shouldn’t be surprised.

For a few years now several government agencies on all levels – all the way down to the county and municipal levels – have been trying feverishly to cut costs. Well, it turns out that one of the more expensive things they do is cut checks in order to pay out benefits and tax refunds. And they can save a load of cash by switching over to debit cards.

A prepaid debit card is a natural for these kinds of transactions. The agencies don’t have to pay for the cost of producing or distributing the cards because many prepaid card companies are more than happy to do that. The companies foot that bill because they’re able to put their product in the hands of lots and lots of new customers. The prepaid companies figure that many of these new customers will end up being repeat customers so they stand to gain some long-term business. It’s a big win for them.

And of course it’s a big win for the government agencies too. They save a lot of money because their processes get more streamlined. Plus, they’re able to do it all more quickly too. That’s why you’re seeing such things as unemployment benefits, railroad pension benefits, and more being distributed via prepaid cards.

It’s even a win for the citizens who receive the refunds. That’s because each government agency is usually able to cut a nice deal with the card companies so the refund recipients pay no fees on the cards – so they get the cards for free. And the cards are immediately usable so there’s no check cashing necessary. It’s a pretty sweet deal all around.

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Advantages of Incorporating in Nevada

Nevada has spent the last several years revising its corporate code to become more suitable to small, privately held companies to incorporate in.

Nevada boasts no corporate taxes, maximum privacy and protection of private assets.  Other benefits include; many tax advantages, total privacy of shareholders, nominal annual fees, and no minimum initial capital requirements to incorporate.

Some of the tax benefits include no state corporate taxes, no franchise tax, no tax on corporate shares, and no personal income tax.

Probably the most appealing advantage is the protecting to your personal assets when you incorporate your business in Nevada.  The way a corporation is set up completely separates your assets from that of the business.  The business becomes its own entity even if you are the only owner.  In the case of a sole proprietorship, if a lawsuit is filed against your business your personal assets may be seized also.  Incorporating in Nevada provides you with a corporate veil that is almost iron-clad.  In the last 30 years the corporate veil has only been pierced twice.

The law that Nevada has established to protect personal assets from individual business owners also protects corporate officers and directors from any person liability.  As long as the company acts in a lawful manor Nevada offers unbeatable corporate protection.

State residency or the need to hold meetings in the state of Nevada is not necessary.  Stockholders, directors and officers do not need to be residents of Nevada.  They don’t even need to be U.S. citizens.

Nevada is the one of the best states to do business in. If you set up your business and incorporate it in the state of Nevada you will be able to take advantage of all the tax benefits and be protected in every way possible, there is no better way to run your business.

By: Shannon John

Marketing Manger, Laughlin Associates, Inc.

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American Tax Relief, A Consumers Story

In October of 2008 I received notice from the IRS that a tax audit was being done on my 2006 tax year filing. After you get a notice like this from the IRS you then set up an appointment to see the tax examiner who will be handling your case. My appointment was scheduled for November at the Deerfield Beach IRS office in Florida and I was told which documents to bring for the auditor to look at. I had not reported my entire income on the Form 1040 and that is what had triggered the examination. I would not have had to face this situation if I had not totally relied on TurboTax without checking things adequately. If you have to face an ordeal like this, remember that the IRS wants your money, not your excuses.

The IRS sent my adjusted tax return in January of 2009 and told me that I owed more than $20,000 dollars in unpaid taxes. That did not even include the 8 percent interest on top of a $3,200 dollar penalty. When I read that I began to feel very desperate.

I had been seeing these TV commercials for a company called American Tax Relief which had very well known people selling the idea that this company could help you reduce any tax liability you might have. I called the number on the screen and spoke with one of their slick sales people whose name was Bill. I told him my story and he confidently assured me that his company could greatly reduce my tax liabilities. What a relief! In order to get their service started, and also get the IRS off of me, they faxed me a power of attorney that I was supposed to sign and return to them. I gave them my bank account number and all the necessary information to handle the one-time 3,900 dollar fee. I told them to go ahead and fax me the paperwork and I agreed to the service.

Even though I had already agreed to hire them, I began to have second thoughts and went online to see if there were any complaints against American Tax Relief. I was really surprised to find hundreds of complaints against them. You can visit www.ConsumerComplaints.com to see it for yourself. The Better Business Bureau has given them an “F” rating in Southern California. After I read the complaints I put an immediate stop payment on the telephone check that I had given to American Tax Relief. Then I got a call from Bill who wanted to know why my fax of the power of attorney had not reached them. I let him know that I no longer wanted their service and that put an end to that situation.

IRS Tax Consequences If A Creditor Forgives Your Debt

If a creditor writes off your debt, or even if you settle that debt with your creditor, the IRS may still count the amount as taxable income.

If you work out a deal to settle with a creditor for any less money than the exact amount that you owe, or if the creditor writes off the debt, the IRS may still regard you as owing money. The IRS will consider the forgiven amount of the debt as income, and you will continue to owe income taxes on it.

How does this work? Creditors will often wait for a pre-determined period of time after a default – one year, for example, or two years – to write off the debt. At this point, the creditor will stop all efforts to collect the debt, declare it as noncollectable, and in order to reduce the tax burden, will declare the uncollected amount to the IRS as what is considered lost income. This same standard is used when debt reductions are negotiated. The amount left unpaid will be reported by the creditor to the IRS also as lost income.

However, the IRS will naturally still want this money taxed, and it will expect the forgiven debtor to pay those taxes. Because the amount of the debt was reduced, and you are no longer expected to pay the forgiven amount, the IRS will treat that amount as gained income, and expect you to pay your income taxes on it.

This standard is also in operation for those debts that you owe after a property repossession or a foreclosure on a house. The law can seem inordinately cruel in these situations. Someone who has lost their home due to foreclosure not only has to suffer through the loss, but will be expected to pay income taxes on an amount of the forced sale. This amount, called the deficiency, is the difference between the amount that was originally owed to the lender, and the amount for which the lender was finally able to sell the property.

However, a 2007 congressional resolution eased this standard for some loans that were forgiven in whole or in part between the years of 2007 and 2012. If the amount of the deficiency arises from the sale of a primary residence (your current home), then the law will offer you some tax relief. These are the rules for when this does or does not apply:

Loans used for a primary residence – if you secured the loan through your primary residence, and used the loan to buy or to improve the house, you will be able to exclude as much as two million dollars of the forgiven debt. You will not have to pay taxes on the amount of the deficiency.

Loans on any other real estate – If a mortgage is secured through any property that is not your own home (like a vacation home, for example), and you default on this, you will continue to owe a tax on the amount of the deficiency.

A default on a loan secured through a primary residence but not used to buy it or to improve it will still leave you owing taxes on a deficiency.

If you find yourself not qualifying for any of the tax exceptions under these standards, there may be other relief available to you. If you can show proof that you were not legally solvent, you will not be held liable for paying taxes.

File Back Taxes

The time has come and gone to file federal taxes and even if you haven’t yet filed with the IRS, it is still possible that backs taxes be filed for your benefit.

Obviously, it’s best to pay off IRS back taxes as quickly as you can. The current approach of the government is to allow each tax payer to file their returns voluntarily. However, this doesn’t mean that payment of those taxes isn’t mandatory. While participating in the voluntary filing of taxes, on time or otherwise, the tax payer has the option of applying a number of deductions and Earned Income Credit to their paperwork. If you do not participate in voluntary filing, the IRS has the option to file for you, and without any exemptions or qualified deductions. This means that the substitute return filed can hit your finances twice as hard. The estimated amount is probably going to be higher than the return you would’ve filed yourself. The IRS may then put liens on any property you own, or levys on your financial accounts and even wages until the amount owed is paid off.

When paying IRS back taxes, any form of credit card and loans are accepted, and you may even negotiate an installment account with them. When considering your options, the IRS recommends a bank loan or credit card payment, as the installment plan will usually end up costing more. The limit is three years to file IRS back taxes, starting from the day they were due to receive refunds. After this three year limit, your refunds will expire, so it is a good idea to file as soon as you can. Any refunds owed to you can even be used as payments toward IRS back taxes you may owe.

Not all of the IRS back taxes require payment. It is understood that sometimes people are late simply because of life occurrences or because they assumed they would owe money and then find out they don’t. Whatever the case, it is important to file all back taxes with the IRS quickly. Remember that the processing of back taxes doesn’t take place at every IRS location, so know the address where you need to send your returns or you may receive further penalties and interest in a mail delay. If you happen to have an official IRS notice about your back taxes, send your return to the address listed on that notice for fastest processing. The website www.irs.gov has prior instructions and forms dating as long ago as 1990, and the information on where to mail returns.

Filing taxes is always a fairly tiring experience, but uncertainty does not need to cause a delay in your filing. The IRS offers assistance for low to moderate income households via a Volunteer Income Tx Assistance Program. Also, all tax payers over the age of 60 can find help with a Tax Counseling for Elderly program. These two programs are of course free for anyone who qualifies, and offer you IRS tax filing training. This way, you can avoid filing IRS back taxes completely.

Fast Tax Refund? Find out How

Who would not want to have a tax refund straight away? Every tax payer would love to know that their income tax will be refunded soon. What is a tax refund by the way? It is when the tax you owe is less than the total amount of refundable tax credits claimed and the amount of withholding paid. Individual taxpayers commonly receive their federal tax refund through Earned Income Credits, or through paying more than the required tax from previous years.

There are taxpayers who use their Internal Revenue Service tax refund saving plans and continue to get much of their money back every single year. Having an IRS refund is much better than owing money to the government. There are several options which you can use to get a refund on your taxes. Examples are electronic filing which has a direct deposit feature, standard paper filing, and through rapid refunds. IRS with the help of the fast paced advancement in technology is able to deliver quickly to the electronic filing. With the help of online facilities, income tax returns are presently filed easier and faster compared to the old system of paper tax filing. Other than that, refunds are also made quicker.

Fast tax refunds using the electronic method will allow you to receive your IRS refund in a matter of 10-14 days compared to the old system where you should anticipate getting your refund in about six weeks. This is the reason why many taxpayers these days file their income tax using the electronic tax preparation software programs, for them to deposit their funds directly to their bank accounts in less than 10 days.

If you are a taxpayer, all you have to do is to find and choose the proper method of filing your taxes. Filing your tax return precisely and accurately plus the tax deduction that you only qualify for will give you a lesser chance of being needlessly audited by the Internal Revenue Service. It is a must that you correctly prepare your papers because the IRS is firm on any sort of fraudulent acts. If you are caught being deceitful with your documents, you will be required to pay additional taxes and face penalties for this unlawful act.

The advantages of filing your taxes online include getting a confirmation notice from the IRS within a period of 48 hours. Submitting your returns through e-file before your deadline will guarantee that your file will be processed much earlier. Furthermore, submitting your tax return in a form of electronic file will be easier for the IRS because they don’t need to re-type your forms, which will save time for both of you. In addition, the Direct Deposit option is the best choice to get a fast tax refund directly into your bank account.