If you want to settle your taxes with a professional at BC Tax Colorado, you might be a little overwhelmed with the number of options you have. Most people think that there is a cookie-cutter system for settling tax payments, but that is not the case. Every person, business, and organization has a unique set of needs that have to be addressed, so you can’t assume that you will settle your taxes like anyone else would. Your options may be entirely different than those of other people you know. Here are some quick tips to help you find the best tax solutions for your situation.
Assess Your Financial Abilities
Do you know how much money you have to pay back your tax debts every month? If not, now would be a good time to start thinking about it. You need to figure out how much money you can afford to make in monthly payments so you can come up with a plan that fits in your budget. There is no sense in making a settlement you can’t afford in the first place.
Think of Short and Long Term Savings
Your two main options for tax settlements will involve short term and long term savings. You can either save money now by setting up small payments, or you can save money later by paying as much of your debt off now as possible. Figure out when you want to save money, and choose a settlement solution that reflects that choice.
Let the professionals at BC Tax Colorado go over your options with you so you can find the perfect tax settlement solution for you. If you go through a proper assessment from the start, you should be able to find a great option that you can live up to.
How to Spot Tax Resolution Scams
You can be scammed doing just about anything nowadays. It’s hard to know who to trust. In the world of tax resolutions, there are a few key factors that separate the scammers from the professionals. You need to know what to look for before you lose money unnecessarily. Here are some easy ways to spot a tax resolution scam:
- The company makes promises before talking to you. There is no way for a tax resolution firm to know what can and cannot happen with your taxes until they assess your situation. Don’t get looped in with false promises.
- The company guarantees your success. Tax professionals can do everything possible to make your case look appealing, but the IRS has the final say for approval.
- You are expected to pay for services upfront with no agreement. While there may be partial payments made upfront, you should be able to work out milestones instead.
- The company refuses to provide references. Some companies will say they do that for confidentiality reasons, which may be true. However, they should be able to show at least a few testimonials or IRS forms proving their success.
Keep your eyes peeled at all times, and you’ll be able to get the resolution services you need.
Self-Employment Tax at a Glance
A lot of people quit their jobs to start their own business because they assume they can make more money that way. While it is true that self-employed people typically earn more money at first, these individuals also pay a lot more in taxes every year than traditional workers pay. Employees only have to pay for half of their taxes because the government pays for the other half. Self-employed people have to take care of everything. Before you get shell shocked by the site of your tax debt next year, you need to have a clear understanding of self-employment tax. Here is some information that should help you file for taxes in the future.
Calculating Self-Employment Tax
Self-employment tax was recently reduced from 15.3% of a person’s income to 13.3%, which means that you will have to pay roughly 1/7 of your income to the government at the end of the year. You can save some money by deducting the cost of fuel, business equipment, rent, and utilities from your taxable income, but you’ll still need to pay a decent chunk of your company profits to the IRS no matter what.
Filing Self-Employment Tax
If you have to file taxes on your own, you will need a Schedule C, Schedule SE, and Form 1040. This will allow you to calculate your profit/loss, self-employment tax, and overall tax payment at the first of the year. You could have an accountant do this for you if you are not confident about your filing abilities. That part is up to you in the end.
Paying Self-Employment Tax
If you find yourself dealing with self-employment tax debt, you will have to come up with a way to pay the government the money you owe. That’s where the advisors at BC Tax can help you out. One of our associates can look at your situation to determine how to make your tax payments as low as possible. Then all you have to do is commit to the payments you agree to. You’ll be out from under your self-employment tax in no time.
How Should I Deal With A Tax Audit Notice
Receiving a tax audit notice seems like one of the worst nightmares in the tax world. It’s understandable to panic and to express fear caused by the matter. The good thing is that your chance of getting audited is relatively small. However, it happens and no one can guarantee you that you wouldn’t be hit. However honest and careful you might be, there would be situations wherein a mistake or two would slip past your scrutinizing eyes. It’s inevitable. But once the mistake is done, you should not despair because this is not the end of the line for you. By handling the situation properly and carefully, you can survive through the tax audit scenario.
It is your responsibility to take good care of and double check your tax returns. The IRS gives exemption and deductions every now and then but if you keep on submitting erroneous records, you might lose this privilege. Make sure you maintain accurate records to avoid being audited and to save yourself from trouble. If all else fails and you have already received a notice, stay calm. There are steps that we can take to handle it properly.
Read the Notice Carefully
Receiving a notice from the IRS does not automatically mean you are subject for auditing. There are cases that they just want to clarify a specific or couple of details in your return. You can answer their questions and be done with it. Don’t panic since it will only cost you time and stress, and possible another mistake in answering which can then result to auditing. If it is really about a tax audit, then understand what part of your tax return will be audited. That helps you in your preparation and should be taken seriously.
Be Prepared
There are 3 types of audit that can be done. One is mail audit wherein they ask you to mail certain information to prove the accuracy of your claim. Another one is office audit in which you would be asked to go to an IRS office for more in-depth questioning. This applies when there are questions left unanswered with the mail audit. The last one is field audit where IRS folks will come knocking at your door and do a thorough questioning and ask about everything stated on your return. Once you receive a letter, make sure to double check your records and have someone knowledgeable to take another look at it before sending. This reduces the chance of being asked to go to the IRS office and/or getting a visitor from their team. One way to prove your claim is to ask a third party to support you. This can be dependents or charity wherein you have donated.
Respond Quickly and Be Polite
Receiving and audit notice can be fearful, aside from being surprising. It’s easy to be enraged by the fact and some people often respond with rudeness or do not respond at all. If you would be subject for audit, the best way to deal with it is to respond quickly and to show good manners. They are not auditing you just because they want to. It is because they found something erroneous or misleading in your return and wants to double check it with you.
Dealing with such notices can be daunting, but you should not let it get into your nerves. Ask for help from a tax resolution professional to make sure you can extinguish the fire right away. They will help you in providing accurate information to be sent back to the IRS and to follow a tested and proven guideline to deal with this matter smoothly. You don’t have to burden yourselves and use up all your time. The help of a tax expert can be the biggest investment you can make regarding your financial matters.
BC Tax Employee Expansion on the Horizon
BC Tax is established on the strong foundation of ensuring that their clients receive top shelf tax services from professionals in the tax resolution field. As part of continuing this solid foundation, BC Tax plans to expand by hiring an additional 20 professionally qualified employees over the next 90 days. These new employees are intended to fortify the already proficient Marketing and Resolutions Departments.
This bold move stands independently as a reassurance to BC Tax clientele that they are growing at an impressive rate as they forge their path into the future. BC Tax fully intends to hold fast and strong to the company philosophy of providing world class tax solutions and putting their clients first. BC Tax aligns itself with qualified and experienced professionals in the tax industry to ensure that clients receive solutions tailored to their specific needs. The additional 20 members who will be joining the BC Tax team will be no exception to this rule, as they will only solidify the foundation on which BC Tax has been built and continue to provide the same exceptional service their clientele has grown accustomed to.
BC Tax is not only excited but also very proud of the extraordinary strides the business has taken since its establishment in 1998. BC Tax looks forward to introducing the new members of their team and building even stronger client relationships. They endeavor to continue remaining at the forefront of any and all new developments and bring continued world class solutions and service, keeping individuals and businesses alike financially healthy.
About BC Tax: BC Tax was organized in 1998 as the coming together of top professionals in the tax resolution field, with the singular goal of providing clients with the absolute best tax services available. The founders at BC Tax built their company on the philosophy that if you provide the absolute best service and put the client first, more clients will come. The results speak for themselves. BC Tax has helped thousands of individuals and businesses with their tax problems as the firm continues to grow dramatically.
For additional information, please visit bctax.com.
BC Tax Tax Resolution Success Story
Want to see what real tax resolution professionals can do for you? Check out our latest success story:
Failure to File Taxes: What Should You Expect?
There are certain things that are better to be unplanned. This can be true in terms of travel, dates, or parties, but not when it comes to filing your taxes. Your excuse that you work better under pressure will not be on your side this time around. Filing taxes can be a lot of work and requires sufficient amount of time to double or triple check. And once April 15th has passed and you haven’t filed your tax or asked for an extension, we’re not trying to scare you but there are things that might happen which you wouldn’t like.
Failure to file your taxes can lead to different penalties and troubles. It’s best to avoid it at all cost and file your taxes as early as possible. Then pay what you can if you cannot pay in full just yet. If you’re having problems documenting everything and does not know what to include in your statement, then ask for a professional help. Just make sure you don’t let time pass you by, or be prepared for the consequences listed below.
Late Penalties
The longer you wait to file your taxes, the higher the penalties you’ll face. IRS charges 5% of the total tax owed for each month it is left unpaid. But there’s a limit of 25% so if you are late by 6 months, you would still be charged 25% penalty. Don’t put yourself on that situation and expose yourself to more tax problems. It is also important to know that failure to pay is another penalty and you should expect interest from it. So it is better to file your taxes even if you don’t have the sufficient money to pay. Just pay what you can to lessen the penalties and interest.
Delay Your Refunds
If you fail to file taxes on time, then the IRS would also be late in giving you back your refunds. Even if the government owes you money, they can hold onto it as long as you don’t file your taxes and you can lose that refund after three years and will be forfeited.
Say Good Bye to Social Security
Yes, the IRS can attack your social security benefits under the Federal Payment Levy Program. This happens after appropriate notification process. They will seize this and can possibly cause you hardship.
Substitute for Return
If you fail to file your taxes, IRS can do it for you by filing a substitute for return. They will do this after several attempts to remind you of your obligation. However, this is something you shouldn’t be happy about. The return will not be in your favor, they will not include your tax credits and deductions thus making you get higher tax bill.
Imprisonment
While it is unlikely, it is possible to be imprisoned due to tax evasion charges. This happens when IRS sees that you’ve willfully failed to file or you file incorrect and fraudulent returns. This is not very likely if you are not doing anything against the law. And if you are, well, you shouldn’t.
Extension to File Your Return
Finally, we have one good thing on the list. If you wouldn’t be able to file taxes on time, you can ask for a 6-month extension from the IRS by filing the Form 4868 from the IRS. However, extension to file does not grant you extension to pay.
Filing your taxes can be a hassle if you don’t put enough time and effort in doing so. It is important to always be ahead of time to double check any mistakes and to avoid audits. On the other hand, failing to do so can cause you more harm and problems in the long run. Take your tax obligations seriously, because IRS certainly will.
How to File Back Taxes?
To finally be free from stress caused by your tax problems, you would need to first file all your back taxes. This is true even if you already missed returns for couple of years. Some people tend to put it off after missing one return, then eventually failing to file couple of years more. This only gets them into more trouble instead of what they expect from running away. Because whatever you do, IRS will come to you and collect the money. And penalties and interest will just pile up making it harder to achieve resolution. It’s time to get back on track and to reorganize your finances. You can start with filing your back taxes even if you cannot pay the possible tax amount in full. But how do you start filing your back taxes? Just the thought of it might be intimidating, but with time, effort, and help from a tax consultant, you can achieve the peace of mind you certainly deserve. Follow these steps to get you back on your feet.
Gather All Your Tax Documents
You need to get your tax records ready. Your copy of your last tax return, W-2s and other tax documents needed for the years that you have not filed, receipts or other supporting records for your deductions, and 1099s. If you don’t have necessary forms, you can call the IRS by dialing 1-800-829-1040.
Prepare your Tax Return
Using all the documents that you have gathered, you now have to prepare your returns for each year that you have missed. This can be a tedious process. Ideally, you can hire a tax expert to sort this out for you. Tax professional knows their way around and might be able to secure more deductions or write-offs. Also, since tax law changes every now and then, you might need to follow the rules for each and every year that you will file. Professionals are aware of this and can prevent you from getting into a deeper hole.
Be Wary Of Your Refunds
Even if you have filed your returns late, it is still possible to get refunds if you do not owe taxes. However, you only have three years to claim that and then it’s gone. Be wary of the dates, possible refunds that you can get, and plan ahead for the next tax season. This way, you can prevent the IRS from forfeiting your refunds.
Pay Your Debts
The main reason why you’re doing all this is to comply with the tax law. Now after you prepare and file your returns, pay all the tax debt that you owe. Be prepared for penalties, interests and other consequences of your failure to file it on time. If you cannot pay the tax in full, don’t despair. You still did a good job with filing your taxes and you have now opened doors of opportunities to fix your problems. With your return being filed, you can now talk to the IRS to get into and installment agreement plan, offer in compromise or other abatement options available for you.
Plan Ahead
Now that you’re back on track, make sure you will never get into the same trouble again. Take a look at your finances, look for ways on how to reduce your tax, look for options to pay for your taxes if you still expect to owe, and to budget your money accordingly.
Filing back taxes can disguise itself as a nightmare. But in reality, it is not that hard to overcome this problem. With the help and guidance of an experienced tax professional, you can get back on your feet quickly. This is not only to solve your current problems, but to avoid the same roadblocks that you might encounter in the future.
What Is My Tax Bracket?
For you to be able to file your income tax and any other tax properly, it is important to know what your income tax bracket is, your filing status, and which income tax rates apply to you. When people talk about tax brackets, they are referring to the Marginal Tax Rate – the rate at which their last dollar of taxable income is taxed.
Gross and Taxable Income
Now, it’s also important to know what the difference between Gross and Taxable Income is. This is to know what income you owe taxes on to discover your marginal tax rate.
Gross Income is the total amount of income you get whether in form of money, services, property, and goods that is not exempt from being taxed. Gross is the amount before taking taxes and deductions into account.
Taxable Income is usually significantly lower than the gross income for most people. Taxable income is a segment of your gross income and it will never be higher than your gross income. It’s possible to get the same amount but taxable income will never be higher. It is your gross income minus deductions and exemptions such as charitable donations and retirement account deductions.
To make it simple, gross income is the total amount of income you acquire, not limited to cash, for a single year. Taxable income on the other hand is your gross income less all the deductions and exemptions. That’s the amount of your income on which you will be taxed.
Filing Status
One factor to consider in knowing your tax bracket is your filing status. There are five statuses in which you can qualify: Single, Married, Married filing separately, Head of household, and Qualified Widow(er). Let’s take a look at the definition of each status.
Single – if you are unmarried, divorced, or legally separated until the last day of the tax year, you can qualify to file under the “single” status.
Married – If you are married and would want to file your taxes jointly, you can file your status under Married. When this happens, your income is combined to know what your tax bracket is.
Married Filing Separately – Even if you are already married, you still have an option to file your taxes separately. There would be times that filing a tax jointly is not advantageous or practical for you. If that’s the case, then you can choose this status.
Qualified Widow(er) – if your spouse died in the past tax year and you filed jointly the year before, you can file under Qualified Widow(er) as long as you have at least one dependent.
Now, what is my Tax Bracket?
Once you are done identifying your Gross and Taxable income, and you know what status you filed under, you can then determine what your tax bracket is. An article from Forbes.com shows several charts to help you determine your tax bracket and how much you should expect to pay for 2015. Also, it’s important to be aware of possible deductions and exemptions that you can get. This way, you can reduce the amount of your taxable income.
It’s not that easy to understand all the numbers that comes with the tax world. Average taxpayers would normally leave it as it is and pay whatever is being asked from them. Some don’t even have an idea of what is happening to their money. While it’s a bit complicated and tedious, you certainly can sort this out with the help of a tax expert. In that way, you can take advantage of all the possible deductions or other ways to lower your tax. Or better yet, tax resolution professionals can help you maintain your finances in a way that you can easily understand and manage.
Tax Refunds: How Much and Why?
According to IRS data 8 out of 10 Americans receive tax refunds on an annual basis. The average tax refund is between $2,800 and $3000 and varies according to income group. Individuals earning an annual income less than $50,000 would typically receive tax refunds 84% of the time and normally in the region of $3000 each time. Those earning more than $200,000 would only get refunds 34% of the time but the average refund would be about $12,000, six times more than those in lower income groups.If you live in Connecticut, Nevada or Texas you would tend to get a higher refund compared to people living in rural Montana, Maine, Vermont or North Dakota.
Why do refunds even exist?
Contrary to popular belief, tax refunds are not “gifts” from the government but rather they are simply returning your money back to you. Think of a tax refund as an interest free loan to the government. Through tax deductions on your pay check, which at times tend to be a little bit more than necessary, on an annual basis the IRS is simply returning the difference in money owed to them versus what you have paid over in the first place.
What to do with your refund?
According to annual surveys, people generally use their refunds for two things. Firstly to pay bills such as mortgages and other household related expenses. Secondly, to purchase (or payment towards) big-ticket items such as cars, vacations and large appliances etc.
What rarely features on most peoples list is the need to pay down their debt such as loans and credit cards. What is of even greater concern is the general lack of people putting their refunds towards their 401k and savings.
A great way to use your tax refund would be to do one of the following:
1. Pay of you credit card debt and take advantage of its 30 day interest free usage option.
2. Invest in yourself. You could attend a short course or seminar to increase your skills and further your chances of better job prospects and earning potential.
3. Invest in your home. By using you tax refund towards increasing the energy efficiency of your home, you could literally save thousands in future utility bills.
If you fall into the category of those eligible for a tax refund between $2,800 and $3,000, that equals roughly an extra $107 in a bi-weekly pay check. With that in mind you might start to think that it would be a better idea having that money during the year instead of getting it back from the IRS only later on.
What can you do to hold onto your money?
As previously stated, you become eligible for a tax refund only when you have paid over too much to the IRS in the first place.
There is a way to control how much withholding tax is deducted from your pay check. By filling out a W-4 form when starting a new job you can indicate how much withholding tax should be taken out of your pay check, you can use this form in conjunction with the IRS withholding tax calculator. The amount withheld will be influenced by some the exemptions that you can claim such as; number of dependents, how many jobs you have, if you have a non-working spouse or perhaps childcare payments that you make.
Remember that by keeping a close eye on your tax payments and personal finances in general now, you will save hundreds if not thousands of dollars in the long run.