Tax Refunds & Advice

Have you found that you owe the IRS money? This can be a lot or a little. It doesn’t matter. The only thing you should be thinking about is that you need to pay this debt as soon as you can. When you owe the IRS money it means that they will be watching closely to ensure that you pay as soon as possible. Of course, owing money and paying money is not the same thing. The worst situation to be in is to owe a lot and not be able to give the IRS what they want.

Instead of sitting around feeling sorry for yourself you need to open the lines of communication with the IRS. Tell them that you are aware of your tax liability, but that you are not going to be able to pay them in one lump sum. This is not something that they are going to fight. In fact, they will be glad that you are aware of your situation and willing to pay them in another way. They will more than likely suggest an installment agreement that allows you to pay your entire debt, but over the course of several months.

Those who are in a terrible financial place and have no prospects for a comeback in the near future may be able to settle their tax debt. This means paying less than what is owed. The IRS allows you to make an offer in compromise. Just remember, they do not have to agree to settle your debt.

It is a big deal to owe the IRS money. But you can make things much worse on yourself if you decide that you are not going to pay. 

Before we get started, keep this in mind: you never want to make any mistakes when it comes to your taxes. If you do, you need to fix it at once. A small mistake left alone can lead to future problems that are more difficult to deal with. That being said, it is hard to go through life without ever making a tax related mistake. Fortunately, you can learn from every situation so that you don’t screw up twice.

Here are several tax mistakes that you don’t want to make more than once:

1. Not tracking your deductions. This is a big tax mistake, and if you make it once you will realize how stupid you were. When you don’t track your deductions you end up paying the IRS more than you should in taxes. Who wants to do that?

2. Filing your own return when you don’t know what you are doing. This may be the biggest tax mistake. Unfortunately, many people make it time after time. If you are lost and have no idea what you are doing, it is time to call a tax professional. Quit making the same mistake and pay a pro. This will put your mind at ease.

3. Lying. This is a mistake that you never want to make. You should never, ever lie on your tax return. If you do you are asking for a lot of trouble with the IRS. It is important to be 100 percent honest, 100 percent of the time.

If possible, avoid these tax mistakes altogether. If you have already committed one or all of them, do what you can in the future to make sure they do not occur again.  

If you are self-employed you are probably familiar with schedule C. Even though you may know a lot about your tax situation and what the IRS expects from you, filling out and filing schedule C is not always the easiest thing to do. Here are a few schedule C problems to avoid:

1. Don’t forget to track your income and expenses. Many self-employed professionals get so excited and caught up in their business that they forget about this detail. It is important to have a flawless system for tracking income and expenses. Any mistakes or omissions will throw your schedule C out of whack.

2. Know which deductions are for business and which ones are not. Take for instance a freelance writer who purchases a new computer. Even though you may use the computer for business, if you also use it on a “personal basis” you cannot deduct 100 percent of the purchase price, maintenance, etc.

3. You need to keep great records in case you are audited. A tax audit is not something you ever want to go through, but every year millions of Americans face this scenario. The IRS is aware that self-employed professionals are in a unique situation, so they will be watching you. Be sure to keep accurate records in an easy to understand format. When you have documentation to backup your claims you never have to worry about a tax audit ending badly.

If you need to file a schedule C it is important to avoid the problems detailed above. These potential issues wreak havoc on many taxpayers every year.