A committee appointed by President Bush has come up with an alarming recommendation. They want to limit the tax deduction for mortgage interest!
Reform
Following his re-election, President Bush set up an aggressive agenda in which he hoped to reform social security and the tax code amongst other things. As with many things in the political world, this sounded easier done than it really was. With social security, political forces have forced the President to pull back from private accounts. With tax reform, a similar political and practical mistake is being made.
Limited Deduction
The bipartisan tax reform committee appointed by President Bush is making a mess of things. They are proposing the elimination of the Alternative Minimum Tax, which is clearly a good thing. Unfortunately, they are also proposing a limit on the tax deduction you can take for mortgage interests.
Although the final recommendations are not yet published, leaks have led to the belief the tax reform committee is going to propose the mortgage interest tax deduction be limited to the percentage of any loan that the Federal Housing Administration would write. Put another way, you would only be able to write-off interest on the first $315,000 of a mortgage! On top of this disaster, the committee is proposing to eliminate the deduction for property taxes.
Economic Disaster?
The implementation of the above recommendations would be an economic disaster for the United States. The real estate industry would suffer incredibly and the real estate boom would become a bust. In many parts of the country, a single family home averages well over $315,000. In San Diego, the average cost of a home is in the $600,000 range. To get into such homes, many families apply for interest only loans to make ends meet. If they lose half of the interest deduction, default will not be far behind.
Once again, we are faced with a situation where politicians just don’t get it. Our housing market is incredibly strong and they want to throw a wrench in the process. Developers and homeowner associations have vowed to fight this “tax reform”. You should as well if losing half of your deduction troubles you.
The Internal Revenue Service wants you to pay taxes on time. That being said, it understands this is not always possible and has created a program for such situations.
The IRS Solution If You Cannot Pay Your Taxes
The Internal Revenue Service is very upfront about its goal in dealing with taxpayers. While it obviously wants to collect all taxes due, it is also focused on keeping you in the system. This attitude is a relatively recent change undertaken in the 1990s. The IRS essentially determined it made better financial sense to have you in the system versus spending hundreds of man hours hunting you down. In practical terms, this means you need not have a panic attack if you do not have sufficient funds to meet your tax obligation. If you panicked this past tax deadline, there was no need.
The IRS will put you on a payment plan if you cannot pay your taxes on time. The plan calls for monthly payments like a car loan, to wit, they are an equal amount each month so you know what you are obligated to pay.
You are only eligible for a payment plan if you file a tax return. Once you file, you want to use form 9465 to request the payment plan. It costs $43 to file the application. The IRS will then get back to you on what it is willing to do. The payment plan process is not an audit. Millions of people apply each year and the IRS considers it standard operating procedure. No red flags are raised when you file the application. To the contrary, the IRS tends to view you as an honest tax payer since you are acknowledging the full amount due and trying to find a way to pay.
Importantly, the payment plan should be viewed as a means to buy time. Making the monthly payments will eventually pay off the debt, but it will take years. Interest on the amount you owe will also continue to accrue. The best strategy for using the plan is to make the monthly payments while saving up money to make a lump sum payment to satisfy the debt.
If your business has employees, you must pay employment taxes. The payment system can be a bit confusing, so this article discusses how to go about depositing employment taxes with the IRS.
Depositing Employment Taxes
To pay employment taxes, you must deposit the money with the IRS. As is typical with tax situations, the payments are not actually made to the IRS. Instead, you must deposit the employment taxes with a federal depository. Moving the burden to the private sector, the IRS requires most banks to act as depositories. If your business has just started hiring employees, ask you bank if they act as a depository. If they do not, you may want to change banks.
To deposit the taxes, you forward money per the bank specifications. You will also need to file a Federal Tax Deposit Coupon, Form 8109, with the deposit. The IRS typically sends these forms to you at the beginning of each calendar year. If you don’t receive any, you can download the form from the IRS site or ask your tax professional.
When To Deposit
You must deposit employment taxes either once or twice a month. The IRS will send you a schedule at the end of each year for the subsequent year. As a general rule, you want to file within a few days of each pay period.
Failure To Deposit
Collecting employment taxes is a high priority of the IRS. Since the taxes include money deducted from an employee’s paycheck, the IRS views an employer’s non-payment as a form of theft. If you fail to pay, you can expect the IRS to come down hard on your business and, potentially, shut it down. In short, make absolutely sure you deposit the employment taxes.
In Closing
There is no other way to put it - paying employment taxes is a pain. Just make sure you pay them to avoid the wrath of the IRS.
(AXcess News) Washington - The Internal Revenue Service today announced relief for taxpayers affected by Hurricane Rita. The President issued major disaster declarations covering Texas and Louisiana effective Sept. 23, 2005.
Taxpayers affected by the hurricane may be eligible for relief. Deadlines for affected taxpayers to file returns, pay taxes and perform other time-sensitive acts have been postponed to Feb. 28, 2006, the same extended date that Congress granted to taxpayers affected by Hurricane Katrina.
In the hardest-hit areas those counties designated by the Federal Emergency Management Agency (FEMA) as “individual assistance areas” the tax relief will be automatic, and taxpayers won’t need to do anything to get the extensions and other relief available.
In Texas, nine counties are in this category for individual assistance: Chambers, Galveston, Hardin, Jasper, Jefferson, Liberty, Newton, Orange and Tyler. In Louisiana, five parishes are in this category: Beauregard, Cameron, Calcasieu, Jefferson Davis and Vermilion.
In areas of Texas and Louisiana where FEMA has determined damage is more isolated designated as “public assistance areas” or for other taxpayers outside the hardest-hit areas whose books, records or tax professionals are located in the affected areas, people will need to identify themselves to the IRS as hurricane victims.
Taxpayers who need to identify themselves as hurricane victims should write “Hurricane Rita” in red ink at the top of their tax forms or any other documents filed with the IRS. Taxpayers who need to alert the IRS or have other Rita-related questions can also call the special IRS disaster hotline at 1-866-562-5227.
The IRS has postponed deadlines and will abate interest and any late filing, late payment or failure to deposit penalties that would otherwise apply for any tax return, tax payment or tax deposit with an original or extended due date falling on or after Sept. 23, 2005. This relief includes the Oct. 17 deadline for individuals who received a second extension for filing their individual income tax returns; the Oct. 31 deadline for filing quarterly federal employment and excise tax returns; and employment and excise deposits due on or before Feb. 28, 2006. In addition, any affected taxpayer who receives a penalty notice from the IRS should call the number on the notice to receive penalty abatement.
The IRS will provide relief from compliance activities until Feb. 28, 2006, in the hardest-hit areas, specifically those designated by FEMA for “individual assistance.” Compliance activities for taxpayers outside the hardest-hit areas will be suspended if those taxpayers identify themselves as affected by the disaster. Taxpayers with questions in these areas can contact the IRS.
Covered Disaster Area
All counties and parishes in Texas and Louisiana have been designated as eligible for individual assistance and/or public assistance and constitute a covered disaster area for purposes of Treas. Reg. 301.7508A-1(d)(2). The relief detailed below applies to all the counties and parishes in Texas and Louisiana and to any counties in other states that FEMA later designates as being eligible for individual assistance and/or public assistance as a result of the devastation caused by Hurricane Rita.
Affected Taxpayers
Taxpayers considered to be affected taxpayers eligible for the postponement of time to file returns, pay taxes, and perform other time-sensitive acts are those taxpayers listed in Treas. Reg. 301.7508A-1(d)(1), and include individuals who live, and businesses whose principal place of business is located, in the covered disaster area. Taxpayers not in the covered disaster area, but whose books, records, or tax professionals are in the covered disaster area, are also entitled to relief. In addition, all workers assisting in the relief activities in the covered disaster area are eligible for relief whether or not they are affiliated with a recognized government or philanthropic organization. Finally, any individuals visiting the covered disast! er area that were killed or injured as a result of the hurricane are also entitled to relief.
Grant of Relief
Under sections 6081, 6161, and 7508A, the IRS gives affected taxpayers until Feb. 28, 2006, to file most tax returns (including individual income tax returns, corporation and S-corporation income tax returns, partnership tax returns, estate and trust income tax returns, estate and gift tax returns, exempt organization returns, employment tax returns, and certain excise tax returns), or to make tax payments, including estimated tax payments, that have either an original or extended due date falling on or after Sept. 23, 2005 and on or before Feb. 28, 2006. The IRS will abate interest and any late filing or late payment penalties that would apply during this period to returns or payments subject to these extensions.
The IRS also gives affected taxpayers until Feb. 28, 2006, to perform other time-sensitive actions described in Treas. Reg. 301.7508A-1(c)(1) and Rev. Proc. 2005-27, 2005-20 I.R.B. 1050, that are due to be performed on or after Sept. 23, 2005, and on or before Feb. 28, 2006.
This extension to file and pay does not apply to information returns in the W-2, 1098, 1099 or 5498 series, to Forms 1042-S or 8027, or to employment and excise tax deposits due on or before Feb. 28, 2006. Penalties for failure to timely file information returns can be waived under existing procedures for reasonable cause. The IRS will abate penalties for affected taxpayers for failure to make timely deposits, provided they make these deposits by Feb. 28, 2006.
The IRS assures individuals, businesses and tax practitioners that it will continue monitoring the aftermath of Hurricane Rita and resolve other potential tax administration issues as they arise.
Is your financial health is crippled by debt? Are you unable to recover from it, in spite of your utmost effort? Don’t worry, you are not the only person in UK who is suffering from debt problem. There are plenty of UK residents who have build up huge debts and are unable to come out of it singularly.
The loan market in UK offers various loans to those people who are trying to make themselves free from the burden of debt. Secured Debt Consolidation Loan is one of the most popular loan among these. This loan has better chance of getting approved and proves to be very effective for debt consolidation.
In order to take a secured debt consolidation loan you have to offer collateral which may be your house, real estate or automobile. This may put you in risk because if you fail to pay off the loan your property may be repossessed by the lender. But the benefits you will get are worth the risk you undertake.
Being secured against your property this loan lessens the risk of the lender and he charges a low rate of interest. Monthly repayment for this loan is generally small and the loan period is stretched over a long time. Though the amount you want to borrow will be stipulated by the security you offer yet you can take out a reasonably big amount.
The usefulness of secured debt consolidation loan is that you can pay off all your outstanding debts with it. You can also consolidate your various loans into a single loan. This will not only lower your monthly interest but also set you free from dealing with different lenders and making multiple payments.
After paying off your debts and consolidating your loans the burden of interest will become less and you will start to regain your financial health. Gradually you can come out of the debt problem fully and enjoy life without any tension.
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