The first step to getting a tax debt paid off, reduced, or forgiven is to simply get on the same page as the IRS regarding how much you owe. Unfortunately, you may have fewer options at your fingertips if you wait until the IRS alerts you to the fact that you owe money. Let’s talk about how to get a hard look at what you owe. This could be the first step to debt relief or forgiveness.

How Much Do I Owe the IRS?

You may be unclear on how much you actually owe in back taxes. Taxpayers have a number of ways to clear up any confusion regarding what they owe. Let’s run through how to handle the problem.

One option is to use the IRS’s online portal for taxpayers. You should be able to see the balance for each tax year that has an outstanding balance when you use the IRS’s online portal. However, the process isn’t exactly breezy. You’ll need to be prepared to provide documentation that allows the IRS to verify your identity. The list of required documentation includes the following:

• Date of birth.
  
• Your filing status.
  
• Social Security Number or Individual Tax Identification Number.
  
• Mailing address used for your last return.
  
• Email address.
  
• Phone number.
  
• Details for financial accounts.

It can be difficult to gather all of these details. What’s more, the online portal is only available during office hours without any sort of after-hours option for logging in online to obtain your records. The other thing to know about this option is that pulling up your record via the IRS portal will generate a “soft inquiry” on your credit record.

You can also call the IRS during office hours. Just make sure you have a big window of free time and access to any paperwork you may need to reference. Unfortunately, wait times on the IRS’s taxpayer phone line are notoriously long.

Lastly, it’s possible to submit a mail-in request to see your tax records. Any taxpayer who filed a Form 1040, Form 1040A, or Form 1040EZ can ask for what is called an IRS Account Transcript. However, be warned that this record is only going to go back one year. In addition, you may not see any of the penalties or interest that make up your full and complete tax bill.

Time is always of the essence when you’re attempting to get an idea of IRS taxes owed. That’s because penalties and interest may continue to pile on as you wait to hear back from the IRS, gather your information, or deal with technical issues within the IRS’s channels. This is one of the reasons why so many curious taxpayers simply get the help of a tax professional to handle the task. The urgency for handling the issue promptly and properly really grows once you consider that things like liens, levies, and wage garnishments could get closer to creating big complications in your life every day that your bill remains unpaid.

How Do I Know If I Owe Taxes?

You should receive a tax bill for the amount you owe if you haven’t paid your tax obligation in full. A bill from the IRS typically provides information regarding the balance due, penalty amounts, and interest. Keep in mind that a bill from the IRS is technically the first step in the collections process. Additionally, your unpaid taxes may be subject to both daily compound interest and monthly penalties.

Why Do I Owe Taxes?

There are several reasons why a taxpayer might owe taxes. It’s not necessarily true that only people who purposely skip tax payments could owe money to the IRS. Underpayment is a common cause of tax debt. Here’s a rundown of common reasons for IRS taxes owed:

• Not enough was withheld from your paychecks.
  
• Your tax bill rose unexpectedly without proper tax-planning adjustments being made.
  
• You made insufficient quarterly tax payments.
  
• You didn’t adjust your withholding to account for changes in your tax return or tax code.

It may be time to consider getting assistance with tax planning if you owe money due to underpayment. Specifically, a tax expert can help you to come up with a plan to withhold the right amount of money if you’re filing as an individual. There are also options for planning to put money aside to cover self-employment tax when the time comes. Of course, having your taxes professionally prepared may drastically reduce your chances of being caught up in late tax payments with the IRS.

How to Find Out How Much You Owe the IRS

Don’t stay in the dark for another day if you’re unsure about how much you owe the IRS. Tax Group Center works every day to help people get to the bottom of discovering exactly how much they owe. We offer a shortcut to how to find out how much I owe the IRS that will enable you to move forward with repayment or debt relief options right away. That may help you avoid very messy penalties and interest charges. If necessary, we can even dig deeper by making a Freedom of Information Request (FOIA) to see exactly what your case looks like from the perspective of the IRS. Tax Group Center has a team of licensed tax professionals, CPAs, and lawyers ready to handle all of your tax needs if you’re an individual taxpayer, self-employed taxpayer, or business owner. Give our office a call today if you have any questions at all about a tax bill.

Can the IRS chase you forever? The answer is complicated, but no, you may not have to fear the IRS for the rest of your life if you’ve been carrying around tax debt for a while. Let’s discuss something called the Expiration of Statutes.

The IRS’s term for when the clock runs out on your debt is the Collection Statute Expiration Date, or CSED. Many taxpayers are surprised to discover that tax debt can expire. This is important information to know if you believe that the collection statute expiration date is approaching on debt that you owe. Here is why the start date of your tax debt may help to determine what your next step should be.

What Is the IRS’s Definition of the Expiration of Statutes?

The IRS defines the Expiration of Statutes as the automatic expiration of your debt after a certain period of time. Your tax debt is expunged by default if you pass this date without paying in full. That means that the IRS can no longer pursue your debt or punish you with penalties.

Important Things to Understand About CSED

CSED can be complicated. You shouldn’t try to outrun the IRS just because most tax debt can and does expire, but it’s important to know when your debt will potentially expire. 

The big thing to know is that the CSED can be extended by certain actions. In fact, applying for relief of any kind may extend the expiration date of your debt. Litigation and suits to reduce judgment can also freeze the clock on debt expiration. Here are some circumstances that may extend the lifespan of a tax debt beyond the default expiration date:

• When you move out of the United States for at least six months
  
• When you file for bankruptcy
  
• When you file for innocent spouse relief
  
• When you request a Collection Due Process (CDP) hearing
  
• When you apply for an Offer in Compromise (OIC)

You’re going to want to take a look at the records if you’ve taken any kind of action to contest your debt or seek relief as a taxpayer. There may be a good chance that your debt’s lifespan was extended if you’ve applied for any type of relief program in the past. Of course, that doesn’t mean that your debt won’t expire. We’re simply looking at a longer window.

The good news is that your debt cannot be reestablished once it has expired. The IRS loses its ability to collect a remaining balance once the date hits. Of course, that doesn’t mean that the IRS won’t try to collect anything it’s owed before your CSED arrives. There is a lot that the IRS can do before your debt expires to try to collect as much as possible. This can include liens, levy enforcement, and property seizures. 

Ask yourself just how much you are willing to risk in order to “wait out” the IRS. Don’t forget that measures taken by the IRS can have long-term effects on your finances. Your credit profile could suffer for years if the IRS moves forward with collection efforts due to back taxes. This could impact everything from employment opportunities to your ability to purchase property. The bottom line is that the repercussions of having long-standing debt with the IRS could outlast your actual debt by many years.

Another important thing to know about the IRS Expiration of Statues is that the IRS is not going to notify you when your debt expires. You will likely notice that collections calls come to a halt once you reach the statute of limitations on your debt. However, it will be up to you to request documentation from the IRS that shows that your debt has expired. It is important to have this written proof, because you may be asked about your tax debt when you go to obtain loans or financing from financial institutions and lenders in the future. In addition, you will need documentation that clears you as a debtor if you need to have a federal tax lien removed.

How Long Can the IRS Collect From You?

The IRS typically has 10 years to collect a debt starting from the date of assessment. The IRS’s right to pursue that debt ends after 10 years – but bear in mind the factors that can extend an expiration date, as discussed above.

Why You Need Professional Tax Help Regarding IRS Expiration of Statutes

Should you attempt to wait out your impending CSED? This is not a simple strategy. It is essential that you only consider this option when utilizing the careful guidance and advice of a team of licensed, experienced tax professionals. You may discover that relief options are available that can get you on the right side of the IRS before your debt deadline is up. These moves could provide debt relief, freedom from harsh penalties, and the ability to spare your credit records.

It’s important to know what an impending CSED can mean for your debt. The first step is to get an accurate assessment of exactly when your debt will truly expire. This information can help you to build a plan of action for walking away with the best possible outcome for your financial future. The team at the Tax Group Center can offer guidance and support regarding the IRS Expiration of Statutes. Let us help you figure out exactly where you stand with the IRS!

How Student Debt Affects Your Taxes

Americans owe over $1.3 trillion in student debt, a number that continues to increase as the cost of education rises. Nearly 40% of adults under 30 have student loan debt with two-thirds of college seniors taking out a loan to pay for their education, according to the Pew Research Center. While the median amount of debt among all borrowers is $17,000, one-quarter of student loan borrowers owe at least $43,000. 

The cost of student debt often makes headlines, but the impact of student debt on taxes is often overlooked. Student loan debt can impact taxes in many ways, both positive and negative. 

Student Debt and Tax Deductions

Student loans are expensive and can be difficult to manage but there may be tax benefits that help offset the cost. Student loan borrowers can deduct the student loan interest paid every year through the student loan interest deduction. This reduces the borrower’s taxable income by up to $2,500 for borrowers whose modified adjusted gross income is less than $65,000 or by a lesser amount for higher income levels. There is an IRS tool borrowers can use to check if they are eligible to claim the deduction. 

This deduction can result in $625 back for borrowers in the 25% tax bracket. It’s important to remember that only the borrower who took out the loan can get the deduction, whether it’s the student or the parent, but neither qualifies for the deduction if the student is listed as a dependent on the parent’s return. 

This is the only tax deduction applicable to student loans but there are tax credits available for students in college such as the American Opportunity Credit which is worth up to $2,500 per year for students attending at least half-time. The Lifetime Learning Credit is another credit worth up to $2,000 per year for books, supplies, fees, and tuition. These credits are only available to students still in school. 

Student Loan Tax Refund Offset

When a federal student loan falls into default, the Department of Education can refer the account for collection to the Department of Treasury. This is done through a tax refund offset of the borrower’s federal and sometimes even state return. The Treasury can withhold the entire refund amount and apply it toward the outstanding student debt. 

Under the law, the IRS must provide a proposed offset and the chance to review loan records. This notice is sent by mail. It is possible to prevent or overturn a student offset, however. Possible solutions may include: 

• Consolidating the loan. Borrowers who are eligible for consolidation can bundle all student loans into a single loan, usually with a new federal lender. Once consolidation is complete, the student loan is no longer in default and there is no longer a risk of an offset. Borrowers may also be able to qualify for payment plans during consolidation such as the Income-Based Repayment Plan (IBR).
• Rehabilitating the loan. It may be possible to reach an agreement with the lender to make the payment plan affordable and bring the loan current. Loan rehabilitation usually takes 9 months with on-time payments.
• Repay the defaulted loan in full.

For most people, a tax refund offset can be a significant financial burden. Even after a refund has been offset, it may be possible to get it back with a student loan tax offset hardship refund request. There are many circumstances under which students can qualify for a hardship refund of an offset such as: 

• Proof of eviction or foreclosure
• Utility disconnection notice
• Proof of exhausted unemployment benefits
• Filed for bankruptcy
• Totally and permanently disabled

 

Student Loan Forgiveness and Tax Consequences 
Federal student loans come with a benefit not available with private loans: the option for student loan forgiveness. Under some circumstances, federal student loan borrowers may have their outstanding balance forgiven. This option is only available under certain circumstances, however. There are multiple student loan forgiveness programs available such as: 

• Teacher loan forgiveness. This program is available for borrowers who meet specific teaching requirements.
• Public service loan forgiveness. This program is available for borrowers who get a job at a nonprofit or government organization, repay the loan based on their income, and maintain their employment for 10 years.
• Student loan forgiveness for nurses through state and federal programs such as the NURSE Corps program.
• Income-Based Repayment (IBR) forgiveness. The IBR plan caps payments at 10-15% of the borrower’s discretionary income but the balance is forgiven after 20-25 years of consistent payments.

While loan forgiveness may make sense, there may be tax consequences. The amount of student debt that is forgiven can be transformed into tax debt, a substantial hidden cost to a seemingly clear-cut decision. 

This tax debt usually comes into play with the Income-Driven Repayment plan, which comes with forgiveness of the remaining balance after 20 to 25 years of repayment. Under current IRS rules, any loans forgiven under this program is considered taxable income. If $40,000 is forgiven, for example, the borrower may be left with a $10,000 or more tax bill along with state income taxes. This can force the borrower into a new payment plan with the IRS to pay down the tax debt. 

What Can Borrowers Do About Student Debt? 
According to the Federal Reserve, the average student loan payment is $393 although some borrowers pay much more. Student loan debt can be a substantial burden and make it difficult to qualify for a mortgage or even pay for daily living expenses. Borrowers have many options for combating the financial burden of student debt. 

A financial advisor specializing in student loan debt is one solution to help borrowers better understand their situation and assess their options, including student loan forgiveness, loan consolidation, and repayment plans. Along with repayment plans like an Income-Based Repayment plan, there are strategies that can help pay off student loans faster such as making extra loan payments or paying more than the minimum payment. Refinancing can also be a good strategy to reduce the loan’s interest rate. A refinance pays off the existing loan and replaces it with a new loan at a lower interest rate. It’s even possible to refinance a federal loan into a private loan, although it’s still a good idea to consult with a financial advisor as there may be consequences to this decision such as the loss of repayment plan and forbearance options.

Making smart choices about your living situation will have a big impact over the long term on your finances. A lot of consumers aren’t sure whether it’s best for them to rent or buy a home in their particular situations. It’s hard to provide a simple rule for which is preferable.

While you build equity in your home when you pay off a mortgage, you also have to handle a lot of additional expenses yourself like property taxes and home repairs. At the same time, you do get to take advantage of some tax write-offs when you’re paying off a mortgage.

For a lot of consumers, whether or not they should buy a home depends on their age and financial situation. Generally speaking, younger consumers are better off renting while older consumers probably want to take advantage of the financial incentives to own a home.

Renting when you’re young
Those who are able to be approved for a mortgage loan need to have relatively good credit and also have built up some savings in order to be able to put a down payment on a home. These things are sometimes not financially feasible for younger consumers. Younger consumers tend to have lower incomes and haven’t been working long enough to acquire as much in savings as older consumers.

Another reason why home ownership is sometimes not possible or the best idea for younger consumers is because younger consumers are more likely to move around. Younger consumers are in many cases still establishing their careers. They are more likely to have to relocate. Relocating can be a big problem once you’ve bought a home because it generally requires you to sell your home.

At the same time, there are quite a few disadvantages to renting that younger consumers who are unable to buy a home just have to deal with. Rent money is lost every month and doesn’t help to build up equity in a property. While there are financial disadvantages to renting, renters also have less responsibility over their properties. They can simply call up the landlord to handle repair needs when necessary and don’t have to foot the bill. For the moment, renting is a less expensive living situation that doesn’t involve as much responsibility.

Enjoying the benefits of homeownership
Once you’re in stable condition financially and you have some savings built up, it’s time to start thinking about home ownership. Before you can even think about it, however, you’re going to have to make sure that your credit score is high enough that you can be approved for a mortgage loan.

Before you buy a home, you need to be actually certain that your income level is not going to face any sudden shocks that will decrease it. You need to be able to count on income coming in well into the future so that you know that you’ll be able to make your mortgage payments. Defaulting on a home loan is a big problems and can devastate your credit for years to come.

When you buy a home, you’ll be able to take advantage that each payment you make will increase your equity in your home. Once you stop making payments, you own a house and you’ll be able to sell it in order to get all the money you put into your house back.

At the same time, you’ll also be able to take advantage of numerous tax benefits as a homeowner. When you’re making payments on a mortgage loan, you get to claim a tax credit for all of the interest you pay on your mortgage loan. There are a few other tax benefits and tax deductions that go along with home ownership. You get to write off the points you pay on your mortgage loan as well as the cost of all the property taxes you have to pay in order to own your home. The other big tax deduction you can claim when you are a homeowner is a deduction for any costs you have had to incur in order to pay for the insurance on your mortgage.

The tax benefits of owning a home are also particularly appealing and applicable to older consumers because older consumers tend to have higher incomes and therefore higher tax liabilities. Younger consumers might not benefit as much from home ownership tax credits because they might not itemize deductions or they may be in lower tax brackets and therefore have to pay a smaller percentage of their income as taxes.

Deciding for yourself
In the end, you must make your own decision on whether you want to rent or buy. If you can afford to buy, it’s generally good to do so if you know you’re not going to be relocating and you know your income is secure.

However, you need to carefully evaluate your options and make sure that you can get a decent mortgage loan with a manageable interest rate before you commit to home ownership.