Tomorrow is April 15. While we sincerely hope that no one spends the day in a panic and the evening in line at the post office or wrestling with tax prep software in a desperate attempt to make that midnight deadline, we know it will happen. We wonder, though, if it might be wiser to file for an extension than to speed through the tax forms.
Imagine that you have been in dire financial straits. Your credit cards are maxed out, you are having trouble finding a job -- the time has come to talk about a Chapter 7 bankruptcy. In a Chapter 7 bankruptcy, your assets go to a trustee who then uses the money to pay your creditors as much as possible. You can start fresh.
April 15th – or there about – is a date that many people dread. It is safe to say that most people do not get excited about filing their tax return. It is a confusing process involving complicated calculations and many different forms depending on your financial situation and the circumstances of your life.
Under federal law, homeowners who have a portion of their debt forgiven in a loan modification, foreclosure or short sale are required to pay income taxes on the amount forgiven. In some cases, struggling homeowners can end up owing tens of thousands of dollars, reducing the financial relief available to them.
We are finishing up our discussion of the Treasury Inspector General for Tax Administration's report to the IRS about the Fresh Start Initiatives. The Fresh Start Initiatives were introduced in 2011 in response to the financial crisis. Taxpayers were having more trouble than usual paying their taxes, and the IRS wanted to make it easier.
Treasury Inspector General for Tax Administration recently reviewed and commented on the IRS Fresh Start Initiatives. The program, introduced in 2011, streamlined and made small changes to processes involving offers in compromise, direct debit installment agreements and Notices of Federal Tax Liens. Taxpayers did get some relief, TIGTA reported.
When the economy tanked, the IRS proved that the government had a heart. Realizing that taxpayers were having a tough time paying off their tax debt, the agency announced that it would establish new processes and tweaking existing ones to make it a little easier. The program was dubbed the Fresh Start Initiatives.
We want to review just a few more tax extenders that Congress approved for the 2014 tax year. The tax season has officially started, so it's important to keep these and the rest of the extenders in mind as you prepare to file your return.
Tax filing season starts on Tuesday, Jan. 20. As you prepare your return, or work with a tax professional to prepare it, don't forget that Congress renewed some important tax deductions and credits before adjourning. We discussed the mortgage debt exception in our last two posts. While that may be one of the most high-profile extenders -- it was a terrific help to underwater homeowners during the financial crisis -- there are others that deserve a little attention.
We are circling back to our discussion of the tax extenders law passed by Congress just before the holidays. In our Jan. 5 post, we left off with a promise to talk about how a homeowner can handle an underwater mortgage. As a reminder, a mortgage is underwater when the borrower owes more than the home is worth. And, these tax extenders expired almost as soon as they were adopted; they apply to the 2014 tax year alone.