Posts Tagged ‘Internal Revenue Service’

5 Steps to Take if you Default on Your Student Loan

May 9, 2011

Students have been defaulting on their loans more frequently than in previous years beginning at the start of the school year in 2010.  If you default on your student loan, here is what you can expect: the IRS can intercept any income tax refund you may be entitled to until your student loans are paid in full; the government can take up to 15% of a student loan debtor’s wages who is in default; up to 15% of your federal benefits such as Social Security retirement benefits and Social Security disability benefits can be taken away; and you can get sued, a move the federal government has done with increasing frequency.

If you find that you have defaulted on your student loans, be proactive and take these five steps.When you receive a notice that you have defaulted on your student loan, begin with these steps:

  1. Contact the agency that is billing you.
  2. Explain your situation fully and honestly.
  3. Ask them what options are available to resolve your problem.
  4. Let them know that you are willing to repay your loan and ask them to work with you.
  5. Always stay in touch with your lender or collection agency.

There are a few repayment plans you can choose from with your lender: Standard Repayment, Graduated Repayment, Extended Repayment, and Income Contingent and Income-Sensitive Repayment.  Keep in mind that you do not need to seek professional help, unless you believe the loan default is a mistake.  You should never ignore default notices from your loan servicer.

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Taylor P.

What to Do if the IRS Audits You

April 19, 2011

The best thing to do if you receive a notice saying you will be audited is to not panic.   You should speak to the auditor and refer him or her to your tax professional so that you have a better understanding of the situation.  Getting the situation organized is a great thing to do.  Make sure you ask the Internal Revenue Service, or IRS, why you have been selected to be audited.  Some reasons could be that you were randomly selected by computer; your business was part of a program to test compliance in the industry; or an employee, co-worker, or competing business told on you.

Even though you filed your taxes on time, the information you provide, correctly or otherwise (but especially the latter), may raise red flags and trigger an IRS audit. If you are audited, do the following.When handling an audit, be sure to do the following:

  • Be organized
  • Give them only the documents needed to support the deduction being questioned
  • Never give the IRS agent more or less information than is requested
  • Answer questions honestly, but briefly
  • Never give the IRS the original, and often, only copy of a document.  Make copies of the requested document(s).
  • Don’t chatter or exchange casual conversation.  Each comment only gives them more information.
  • Stay calm.  Don’t be argumentative or belligerent.
  • Wait until your representative has time to review any documents before you sign one

If you are aware of what you should be doing and have all the correct information, the audit should go smoothly.  Having a representative with you could help you stay out of trouble, legally.  Always be prepared when you are speaking with anyone from the IRS.  You do not want any mistakes to happen when dealing with them.

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Taylor P.

 

Tax Season

March 3, 2011

The Internal Revenue Service, better known as the IRS, opened the 2011 tax filing season by announcing that taxpayers have until April 18, 2011 to file their tax returns.  This year, Emancipation Day, a District of Columbia holiday, falls on Friday, April 15th.  By law, District of Columbia holidays impact tax deadlines the same way federal holidays do, giving taxpayers an extra three days to file.  The IRS suggests that taxpayers use e-file, which is the best way to ensure accurate tax returns and get faster refunds due to recent tax law changes.  For those not using an e-file, here are a few things to bring to your tax preparer, whether you are a business owner of any size, a homeowner, or a student.

January through the first half of April marks Tax Season, a period when Americans file their taxes with the state and federal government. In order to make filing your taxes as smooth as possible, here is a list of the paperwork you should prepare in advance.For every tax payer:

  • Last year’s Federal and State tax returns (for new clients)
  • Income/Wage statements:
    • W-2’s
    • 1099’s
    • Alimony received or paid
    • Commissions received statement
    • Brokerage account year-end statements
    • ESPP statements
    • Stock options sale papers
    • Rental property income and expenses
    • Partnership, S Corp, trusts, or estate yearly statements
    • Pension or retirement income statements
    • Social security income yearly statement
    • Unemployment income yearly statement
    • State income tax refund statement
    • Gambling and lottery winnings (and losses, if you have winnings)
  • Car, motor home, and boat registration paperwork
  • Donation receipts
  • IRA contributions
  • Child care expenses and provider information
  • Medical expenses
  • State taxes paid
  • Unreimbursed employment-related expenses
  • Job-related educational expenses
  • Casualty or theft losses
  • Foreign taxes paid

For Homeowners:

  • Mortgage interest year-end statement
  • Home equity year-end statement
  • Property tax information
  • If you sold your home, purchase and home improvement information

Businesses:

  • Income and expense reports
  • Mileage logs for autos
  • Receipts for business assets purchased

Students:

  • Tuition and education fees
  • Student loan information
  • Grants and scholarship information

By bringing all the necessary paperwork listed above, you will help make your tax preparation as quickly and easily as possible.  You receive most of these documents in the mail from January to February.  Organizing paperwork is a great, time-saving idea.  You can create binders for each year and in them, you should save receipts, pay check receipts, old Federal and State tax returns, and other important documents.  This is a great idea for two reasons.  The first reason is that you will be organized and, should you need a certain document, you will know where to find it.  The second reason is, if disaster or an emergency strikes, you can have all your important files in a secure location, since some of the documents cannot be replaced.  Organizing your important documents now will save you and your tax preparer from headache in the future!

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Taylor P.