Tax Refunds & Advice

Keep this in mind: the IRS will never contact you via email. This not only holds true for you, but also for every other taxpayer in the United States. Simply put, they do not communicate via this method. That being said, you may come across an email from the “IRS” in your inbox. If you do, one word should come to mind: scam. Anytime you receive an email and the sender claims to be from the IRS, you can be rest assured that they are trying to scam you.

What do scammers wish to accomplish by sending out these emails? The first thing that you should know is that they prey on your vulnerability. These scammers will tell you that you have a refund that needs claimed, or that you owe money to the IRS. Additionally, they will ask for personal information such as that related to your bank account or credit card. In the end, if you give up this information the scammer received what they need to access your personal information and accounts.

Reading a scam email is one thing. But if you open an attachment or click on a link, you are definitely putting yourself at risk. Some scammers do not want your personal information, but would rather infect your computer with malicious code that can be used to hijack your computer. As you can imagine, this is just as bad as offering your bank account information.

All in all, the IRS does not communicate via email. They never have and they probably never will. So anytime you receive an email from somebody claiming to be with the IRS, you can be rest assured that it is a scam. 

In many cases, lenders forgive or cancel a taxpayer’s debt. And while this may seem like a benefit on the surface, it can lead to other issues such as brining on additional tax liability. If you, the debtor, are not aware of this, you may end up finding yourself owing the IRS additional money when you file your final return.

Current tax laws state that cancelled debt must be claimed as income by the debtor. As you can imagine, this greatly effects how much tax is paid, due to an increased income, and can also change the way that you deal with deductions.

If you find yourself in this position, you should be aware of the options for excluding this “extra income” from your tax return. There are three exclusions: one for bankruptcy, one for a case of insolvency, and one for mortgage debt. The mortgage exclusion is most commonly used, and for this reason should be understood by anybody in this position.

The Mortgage Forgiveness Debt Relief Act helps to provide tax relief to homeowners who lose their home to foreclosure, for example. This law allows individuals in this situation to exclude up to $2 million of certain debt. Of course, there are many criteria that must be met in order for a taxpayer to take advantage of this exclusion.

If canceled debt is staring you in the face and you do not know how to deal with it come tax time, hire a professional. As noted above, you may be able to take advantage of an exclusion that will help your tax situation. This is much better than being responsible for paying tax on additional income.  

There are many websites that offer free tax calculators that you can use no matter who you are and what tax situation you are facing. With that in mind, you only want to use and rely on these if you know that they are accurate. After all, relying on inaccurate information is not going to get you very far when it comes to filing your taxes.

One of the most commonly used tax calculators is one for determining withholding. With this calculator, you can ensure that you do not withhold too much or not enough from your paycheck. As you can imagine, this is an important calculator in order to ensure that you do not owe the IRS money after your final return or that you do not lend them too much during the year.

You will also come across tax calculators that are meant to calculate the refund that you will receive or the amount that you will owe the IRS. In most cases, this calculator will work to your advantage after the year has ended. At this point, you may want to see where you stand before you begin to work on filing your final return.

There is nothing wrong with using a tax calculator. Just remember, you want it to be free, accurate, and simple to understand. If you find a tax calculator that offers all three of these benefits, feel free to use it to your advantage throughout the year. No, you do not want to rely solely on these calculators, but there are times when they will come in handy and allow you to take some stress off of your financial life.