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Weekly Tax Tips from Alliance Financial & Income Tax

Offer in Compromise

An Offer in Compromise is an alternative way for you to settle for less than what you owe. This is based on your net disposable income; after all reasonable and necessary living expenses have been paid, your net equity in assets, and any unique circumstances you may be faced with. Depending on what’s going on, this may or may not be the best approach to resolving your tax problem, so give me a call to discuss this further. 816-220-2001

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Tax Preparation vs. Tax Planning

Many people assume tax planning is the same as tax preparation but the two are actually quite different. Let's take a closer look:

What is Tax Preparation?

Tax preparation is the process of preparing and filing a tax return. Generally, it is a one-time event that culminates in signing your return and finding out whether you owe the IRS money or will be receiving a refund.

For most people, tax preparation involves one or two trips to your accountant (EA), generally around tax time (i.e., between January and April), to hand over any financial documents necessary to prepare your return and then to sign your return. They will also make sure any tax reporting on your return complies with federal and state tax law.

Alternately, Individual taxpayers might use an enrolled agent, attorney, or a tax preparer who doesn't necessarily have a professional credential. For simple returns, some individuals prepare and file their own tax forms with the IRS. No matter who prepares your tax return, however, you expect them to be trustworthy (you will be entrusting them with your personal financial details), skilled in tax preparation and to accurately file your income tax return in a timely manner.

What is Tax Planning?

Tax planning is a year-round process (as opposed to a seasonal event) and is a separate service from tax preparation. Both individuals and business owners can take advantage of tax planning services, which are typically performed by a CPA and accounting firm or an Enrolled Agent (EA) with in-depth experience and knowledge of tax law, rather than a tax preparer.

Examples of tax planning include bunching expenses (e.g., medical) to maximize deductions, how to use tax-loss harvesting to offset investment gains, increasing retirement plan contributions to defer income, and the best timing for capital expenditures to reap the tax benefits. Good recordkeeping is also an important part of tax planning and makes it easier to pay quarterly estimated taxes, for example, or prepare tax returns the following year.

Tax planning is something that most taxpayers do not take advantage of - but should - because it can help minimize their tax liability on next year's tax return by planning ahead. While it may mean spending more time with an accountant, say quarterly or even monthly, the tax benefit is usually worth it. By reviewing past returns an accountant will have a more clear picture of what can be done this year to save money on next year's tax return.

If you're ready to learn more about what strategies you can use to reduce your tax bill next year, help is just a phone call away.  816-220-2001

What do They Expect You to do With Federal Tax Liens on Your Credit Report?

How Can You Possibly Get a Loan To Pay Them Off, When Your Banker Won't Even Talk To You?

Federal Tax Liens prevent you from being able to borrow any money for a car or a home.

Taxpayers with IRS Problems often have to shop at Buy Here, Pay Here car lots because these car dealers don't care if you have a Federal Tax Lien, because they charge so much for the cars and usually have very high-interest rates.

Cars are expensive enough without having to pay 18% to 21% interest on a used car loan, but with a Federal Tax Lien, you don't have many choices.

The banks have gotten so tough on opening new bank accounts that anyone with a Federal Tax Lien is usually prevented from even having a simple checking or savings account.

This makes it hard for taxpayers to cash their paychecks or to pay their monthly bills. Often they have to pay more money and use money orders or certified checks, just to pay their rent or utility bills.

Have a Tax Problem? Mike Mead can help. Call us today at 816-220-2001