Money, Debt and Taxes

Everytime I hear these ads I just want to scream! DON’T DO IT! I know it sounds tempting. I know you have lots of debt and you don’t know how you are ever going to get out from under it, but trust me, this is one secret you don’t need to know. So this is how it goes. According to Debt Elimination Companies there are secrets the credit card companies don’t want you to know. If you have $5,000 or $10,000 or even $20,000 in credit card debt, just call this respectable sounding debt reduction company(DRC). They will use their secret powers with the credit card companies and eliminate 40-60% of your credit card debt.

Don’t believe it for a minute! Your scam alerts should be going off big time!

How this works is you sign up with debt reduction company and pay them a nice big fee. It can be as high as $3,000. You might even put it on your credit card. It’s OK, they are going to save you thousands of dollars, and even their fee that you just put on your card will be reduced by 40-60%. Then they work with you to come up with just one monthly payment that is less than the mulitple payments you are currently making to your credit card companies. So far so good. But then, instead of sending your payments to your credit card company, you send the payment to the DRC. All is well for a month or two. And then the phone calls will start. Nasty phone calls from people demanding that you pay your bill. They might even call you at work! You see, the DRC has not been making your credit card payments. They have been holding onto the cash. If you call them and ask them why, they will tell you it is all part of the secret. Be patient, don’t let the phone calls get to you, and keep sending your payments to the debt reduction company.

So here is the secret the credit card companies don’t want you to know. If you don’t pay any of your credit card bills for over 90 days, your credit report will become full of the dreaded “90 day lates.” This totally trashes your credit score. Some say it is worse than going bankrupt. The credit card companies decide you are a no good bum. They are pretty sure they are never going to see their money again. Then, if you offer to settle your debt with them, even for way less than you owe, they might just take you up on the deal.
After all, some money is better than no money.

This is where the DRC is supposed to step up and take all those payments you have been sending them (minus fees of course) and negotiate for you to settle your credit card debts “for pennies on the dollar”. But many people find out at this time that the DRC has taken their money and left town. So now you have even less money to pay the credit card companies and your credit rating will take years to recover.

So now you know the secret. If you are becoming overwhelmed with credit card debt there are better ways to handle it. Contact the Association of Independent Consumer Credit Counseling Agencies. They will set you up with a legitimate credit counseling service in your area where you will learn money management skills and work out a payment plan that won’t leave your creditors hating you. You might even get a lower interest rate, and sometimes some forgiveness on your credit card debt.

Tax time is here! It is bad enough just needing to file one tax return, but what if you have unfiled back tax returns and unpaid taxes? Having unfiled tax returns can be very stressful. The IRS can make your life miserable. They can garnish your wages, put a lein on your house, and even lock up your bank account so you can’t get at your money! Also, know that when you have unfiled tax returns, that tax year stays “open” and available for audit for up to 3 years after you do file your tax return. And every year you don’t file and pay your taxes, penalties and interest are adding up.
So what do you do if you have back taxes and unfiled tax returns?

Filing back taxes is not something you want to do on our own. There are ways to reduce your IRS tax debt, but you have to know the best way to approach the IRS. At the very least you should do some research about all the options available to you.

I have just found a site that can be a great resource. Back Tax Help has an extensive amount of content that you can use to research your particular tax problems. What I really like is they have a number of guides that will walk you through filing back tax returns and paying unpaid taxes. If you don’t have time to do the research, or you don’t want to go it alone, they also offer professional services to help you with your tax problems. So don’t wait any longer. Make this the year you file your back tax returns and get rid of that stress forever.

Free File is back for 2008. Once again, if your income is under $56,000, you can prepare and e-file your federal income tax return for free. But be careful before you choose a company. Most will charge you to prepare a state return, and one company, TaxSlayer.com is advertising free income tax preparation, but if you want to print or e-file your taxes, there will be a fee.

The IRS’s Free File Page has a good list of companies, and their restrictions. Make sure to read the fine print, because companies may have different restrictions based on income, age, or what state you live in. In fact, if you live in a state without a state income tax, you may have difficulty finding a free file site.

Here are my top picks for free Tax Filing.

If you don’t need to prepare a state income tax return, start with the big names.

H&R Block’s TaxCut Free File: Free federal online tax preparation and e-file if your adjusted gross income is $56,000 or less and you are age 50 or younger. Includes Form 982 (Mortgage Forgiveness Debt Relief).If you have to do a state return, it will cost you $29.95 at H&R Block. You can find a better deal elsewhere.

If your income qualifies, (under $30,000 or active military and under $56,000)  look at Turbo Tax.  In addition to free federal tax filing, they offer free state tax filing for residents of AL, AR, AZ, GA, ID, IA, KY, MA, MI, MN, MO, MS, NY, ND, NC, OK, OR, RI, SC, VT, WV. Or just $9.95 if you live in a state that does not have a free file program.

TurboTax® Freedom Edition: Free federal tax preparation and e-file if your Adjusted Gross Income is $30,000 or less or you are active military or you qualify for Earned Income Tax Credit. Includes Form 982 (Mortgage Forgiveness Debt Relief).

You may not have heard of  TaxAct. But they have been a supplier of professional tax preparation software for some time.  They charage $13.95 for a state return, and a federal return is just $7.95 if you don’t qualify for the free program.

Free TaxACT: Free federal online tax preparation and e-file if your adjusted gross income is $56,000 or less and you are age 19 through 55 years old. Includes Form 982 (Mortgage Forgiveness Debt Relief).

Liberty tax service may be a good choice.  State returns are just $9.95  and if you don’t qualify for the free federal,  your federal return is just another 9.95. They also online tax preparation in spanish.

eSmartTax From Liberty Tax Service: Free Federal online tax preparation and e-File if your adjusted gross income is $56,000 or less, and you are age 50 or younger. Includes Form 982 (Mortgage Forgiveness Debt Relief). En Español.

Free tax services are only good to use if you have a fairly simple return. If your return is not simple, you should consider hiring a professional. Many times you will save more money in taxes, than you spend on tax preparation, just by having someone who spends the whole year studying taxes.