Tips for Avoiding Tax Debt
Someone who is looking up tips for avoiding tax debt is obviously trying to head off problems before they are unable to pay taxes, and end up with an expensive bill. However, if you are brand new to using credit cards, then this can be a problem just in lack of information. Ideally, if you owe taxes to the government, then you want to pay them as quickly as possible. Just by doing this before or by the deadline, you can avoid some crazy expensive penalties that increase more as time goes by. This can be a problem because if you were in a financial hole in the first place, this is going to dig you in even further. Of course, the problems that we deal with usually come up at the worst possible time and you might not be able to avoid asking for extra time.
Filing an Extension Request
If you have been granted an extension, then you want to find as many ways as possible to get this money to the IRS. They will be charging you higher interest rates than your credit card companies do, so this is an option to look at. How much credit do you have on your cards? Will the available balance take care of this tax bill? If so, you might be able to get benefits from the credit card company just for transferring over this balance to them. Also, you will be saving on monthly interest rates which will help you keep up on that monthly bill. This is a problem but it can be dealt with effectively if you have a good relationship with your credit card providers.
Another way to get rid of this kind of bill is to sell whatever additional or extra items you have around your house or office. This is just a way to make some extra money that would allow you to make a nice-sized payment towards the bill, if not pay off the whole thing. When you follow this procedure, you are not incurring more debt in the process and you are making more room to live and work in. This is a double benefit that should be considered before making another transaction on your credit card. Anytime you can just be done with a bill once and for all is going to give you more peace of mind in general.
Adjusting Claimed Tax Deductions
Remember too that you can adjust the tax deductions you claim each year as well as what you claim for each paycheck. Pay attention to expenditures if you are self-employed because this documentation is important to back up any claims you make. If you are chosen for an audit, then it will probably save you hundreds and possibly thousands in penalties for anything you can't clearly prove. Keep a file there with you so you can keep copies of all the receipts and other transactions you make, clearly identifying what is a potential deduction and what is not.
For the dependents that you claim on your paycheck, this is going to be a number that you can change halfway through the year. Sometimes, claiming half the year with the maximum number of dependents the first half and then claiming the minimum number during the second half will help you avoid a tax bill altogether. It also gives you a time of the year when you can keep as much money in your pocket as possible so spend on items like family vacations and furniture, and anything else you would normally have to save up for to buy.
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