Is IRS Debt Relief Going to Be Your Hero?

If you owe the IRS money, you may feel as if you’re in a hopeless position. The interest and fees the IRS adds to back taxes often amounts to a huge sum of money that may seem impossible to pay.

Don’t give up. If you owe the IRS money, you may qualify for debt relief. While this option is not for everyone and the application process is complex, debt relief provides a reprieve that can help you salvage your confidence, improve your finances, and get your life back. Discover four ways IRS debt relief can help you.

Avoid Wage Garnishments

Image via Flickr by Tax Credits

If you disregard your tax obligations, the IRS can garnish your wages. However, if you’re participating in a debt relief program, the agency won’t take this step. Going the debt relief route can save you the embarrassment and financial distress that accompanies wage garnishment.    

Reduce Your Tax Burden

Possibly the greatest benefit of debt relief is that it may reduce the amount of money you owe the IRS. Get professional help to try to make your tax debt more manageable. If you qualify for debt relief, you may be able to pay a reduced lump sum, called an Offer in Compromise. This option gives you the chance to pay a smaller amount of money as your full and final amount. 

You may also qualify for a long-term payment plan. This type of plan can allow you to pay off your tax debt at a reduced dollar amount over several months or years depending on the amount you owe.

Provide Stress Relief

Owing the IRS money is a huge stressor that can affect almost every aspect of your life, but qualifying for debt relief can help. If you’re able to reduce what you owe the IRS, the amount of stress you’re under can decrease. The plan the IRS will give you to follow can help with anxiety as well.

The payment plan you will use to pay off your tax debt can help you make short- and long-term financial goals. This flexibility can give you a sense of control that can help with stress and anxiety.

Improve Physical Health  

Mental health and physical health are intertwined and improving one can improve the other. Since you could likely enjoy decreased levels of stress after qualifying for a debt relief program, you may find that your physical health improves.

Stress can cause heart problems, digestive issues, sleep disorders, fatigue, and a host of other health problems. When they reduce stressors, people often find that many of their physical ailments diminish as well.  

Qualifying for debt relief from the IRS won’t solve your money problems, but it can lift some of the burdens that go along with them. While you still must pay the IRS what you owe, you may find you’re able to pay a reduced amount, enabling you to reduce your debt more quickly. Qualifying for debt relief can also allow you to avoid wage garnishment and the distress that accompanies it. These combined benefits can reduce your stress levels, possibly leading to improved mental and physical health.

6 Tips for Completing Your CIS Tax Return

As a contractor or self-employed business owner, you are obliged to complete an annual Contractor Industry Scheme (CIS) tax form for any and all subcontractors under your employment. This mandatory form is an important document that must be submitted to secure future tax payments of all sub-contractors, as well as their National Insurance.

If you’re stuck on this form, we’ve compiled 6 easy steps to help you through it. This guide is full of useful information that will help the process along a lot quicker.

1. Note the Exceptions

First off, let’s recognise some of the instances you WON’T have to submit a CIS tax return. If you only specialise in the following respective industries you are exempted from this process:

  • Carpet laying
  • Construction material factories
  • Delivery service
  • Surveying and architecture
  • Any non-construction-related service in or around the construction area (even if it’s a service to the workers)
  • Hiring out of scaffolding

If any of these industries apply to you, call the HMRC and confirm that you do not qualify for a CIS tax return.

2. Set Aside Time

Remember that filing a CIS tax return is a time-consuming process. If you don’t have the time to follow this process thoroughly—or if you simply don’t know how to complete CIS tax return, contact one of many trusted CIS tax return services to follow through on the process on your behalf.

But perhaps you want to do it yourself. If so, remember that you have a deadline for filing. So, be sure to plan your filing process at least a month ahead of the deadline, to prevent any penalties.

3. Register with HMRC

Before you can begin the process of filing your CIS tax return, you will have to register with HM Revenue and Customs (HMRC). This helpful online registration will identify you to the service helpdesk, and also generate a Unique Tax Reference number which you will need for filing.

4. Get Your Unique Tax Reference

If you don’t receive a UTR number, contact the service desk and ask for it. This number is completely unique to your company. Without it, your CIS tax form will be rejected, which will incur a penalty from the HMRC.

Keep this unique tax reference number handy during the entire CIS filing process. It’s the single most distinguishing detail of who you are and what your business’ tax obligations are.

5. Include Interest in Your Income/Losses Calculation

You’ll be doing a calculation of your income and your losses. You will also add your business expenses and payment deductions from any contractors working for you during that period. But another important detail to add is the interest earned on your bank accounts or business investment accounts. Failure to include this important detail may result in an inaccurate calculation of your CIS tax obligations.

6. File on Time

Most importantly, don’t file past the deadline. Remember that HMRC will fine you for any late submissions, so avoid this by filing your CIS tax return on time.

How Would an Import Tax Affect Consumers?

sale, shopping, tourism and happy people concept – two beautiful women looking inside shopping bags in the ctiy

In 2017, U.S. President Donald Trump proposed a 20% import tax, also known as a “border adjustment tax.” The proposition created a lot of uncertainty, and while it has yet to come to fruition, many consumers wonder how an import tax will affect their wallets.

Any kind of import tax would likely increase prices for the average American consumer. But experts are still unsure of how much and for how long.

One thing they do know: most industries will be affected. This includes retail, food and manufacturing.

How quickly will prices rise? That depends on what is being imported. It’s possible that consumers could see an immediate rise in products like vegetables, televisions, shoes and clothing.

Most experts think that consumers would see a one-time inflation spike, but prices would adjust over time.

It’s also possible that other changes could come along with the tax that might affect how goods are imported.

The Union Customs Code changed the way goods are imported into EU countries. The changes on imports into Germany forced companies to establish a German EORI to act as a declarant. Previously, companies outside of Germany could import goods as long as they had a non-established VAT number and EORI.

Along with these changes, experts say that a tariff may also have unintended consequences. For example, a spike in inflation could prompt the Federal Reserve to raise interest rates at a quicker pace.

A report from Consumer Reports also pointed to the tariff on Chinese tires in 2009. Not only did the tariff raise prices on American consumers, but it cost companies nearly $1 million for each job saved, and three retail jobs were lost for every factory day. China also imposed a tariff on U.S. chicken, which cost the industry $1 billion in sales.

There are also experts who argue that people will hardly notice an import tax. Take, for example, the VAT in the United Arab Emirates (UAE). Consumers in the UAE have significant purchasing power, so a 3-5% VAT would likely not have a significant impact on consumers. A 10% or higher tax raise, on the other hand, would have a bigger impact.

Those purchasing big-ticket items will be impacted the most.

Back in the U.S., President Trump is doubling-down on his pledge to impose a reciprocal tax on imports. If implemented, consumers may not only face higher prices, but the action may also escalate tensions with important trading partners.

“What’s going to happen is either we’ll collect the same that they collect, or probably what happens is they’ll end up not charging a tax and we won’t have a tax, and that becomes free trade,” said Trump.

Although Trump is pushing for the tax, the White House says there is no such proposal for a reciprocal import tax in the works.

Still, economists point out that Trump has the authority to impose the tax without congressional action if he does so by increasing import tariffs. Much of the constitutional power over trade has been delegated to the president through various laws enacted over the years.

RRSP's

RRSP.ORG Registered Retirement Savings Plan

Registered Retirement Savings Plan – RRSP.ORG the original website that best describes everything you wanted to know about Canadian registered plans and schemes has taken a turn for the best. The information and knowledge base on RRSP.ORG is more than ready for change and a complete overhaul.

MONEY.CA the leading Canadian money and personal finance website has acquired the aging website for all the right reasons. RRSP is just one of many keyword subject sites that most of Canada wants and needs. For over 20 years this small and meaningful site providing news and information in the world of Registered plans for Canadians has now been taken over by people who know and care dearly about the subject matter and the benefits and advantages it brings to Canadian’s, the government and the country as a whole.

Look forward to the changes and updates as Canadian financial consumers will learn how to make, save and preserve more of their hard earned wealth. The advisor channel is more than welcome to contribute news, information, stories and articles that make sense and pays dividends to the average Canadian.

How to Save Money on Investment Taxes

Paying taxes on investments lowers your rate of return. Investors want to maximize their gains and save money on investment taxes. The right types of investments can help you save money on taxes, and this means more money in your pocket.

Of course, there are exceptions, but the following investments are often solid choices for reducing taxes.

1. Avoid Investing in Dividend-Paying Stocks

Stocks that pay dividends are income-generating, and while it’s great to make money off of an investment, this also means that you’ll be required to pay taxes on this income. A lot of mutual funds will use the tactic of avoiding dividend-paying stocks to minimize the tax burden on their investors.

2. Aim to Avoid Short-Term Gains

Short-term gains are great, but long-term gains in the stock market are where fortunes are made. When short-term gains are realized, taxes need to be paid on the income from the sale of the stock.

Long-term gains offer better returns.

You’ll need to pay very close attention to the calendar here because long-term investments are generally considered investments that have been held for a period of more than one year.

3. Capital Gains Offsetting

When it comes to capital gains, hire an accountant that can help you with your capital gains. One tactic that is used often is offsetting these gains with losses to lower the tax burden. This legal method allows the investor to claim lower gains when they have losses in other areas.

4. Invest in Your Kids With a ROTH IRA

Kids can be left money now, and this can be done with a ROTH IRA. The tax-free compounding can turn a 7% increase annually, leading to a significant amount of money for your child over the long-term.

Money in your estate that will be left to your child will then be out of your estate, allowing you to lower the risk of state inheritance taxes.

You can also invest in a Section 529, which is designed only to be used for schooling.

5. Bond Funds

Bond funds don’t offer as high of a return as stocks in most cases, but there are municipal bond funds that are normally free from federal taxes. Tax-exempt bonds give a lower rate of return than taxable bonds because they offer significant savings.

Most municipal bonds are also free from state taxes – an added bonus.

Investors that are in high income brackets will often choose these types of bonds that offer a tax-free return even if the return is lower than other bond options available.

6. Defer Taxes with Treasury Bills

You can confidently defer your taxes slightly by strategically utilizing treasury bills. This means that you’ll only have to pay taxes on the treasury bill the year that it matures. Three- and six-month bills are the best option because you don’t have to pay taxes on the interest.

Interest taxes are also exempt on the state and local level.

So, when you want to be able to lower your tax bill the last minute, you can defer taxes through the purchase of treasury bills.

Creating Wills for Tax Planning Purposes

The most important thing you can do to reduce the amount of inheritance tax that must be paid on your estate is to make a will. In the absence of a will, estates are distributed according to the rules of intestacy. This can result in higher amounts of inheritance tax being owed to HM Revenue & Customs. The wills and probate solicitors in London at SCL Wills and Probate can assist you with will writing services to help minimise inheritance tax.

Inheritance tax is an extremely emotional subject that has been increasingly politicised in recent years. If you are concerned about reducing the taxes paid by your beneficiaries, you may want to seek advice from experienced tax planning solicitors and probate solicitors. Visit http://www.sclwillsandprobate.co.uk/ to learn more about the services provided by SCL Wills and Probate.

Factors to Consider When Planning Your Estate

Transferring property is one way people use to help minimise the amount of tax that must be paid on an estate. For this to be successful, specific rules must be followed. Property can be transferred to a spouse or civil partner without inheritance tax. However, when a person is giving assets to children or another person, the donor must survive for another seven years and must not maintain any interest in the property or the property will continue to be considered part of the estate for tax purposes.

Trusts are sometimes used to reduce taxes owed on an estate. You may choose to create a discretionary trust or fixed trust for tax purposes. There are limits to the amount of money, property, or assets that can be gifted through a trust. Get the advice of your solicitor regarding these limits and any possible charges or periodic charges that may need to be paid before setting up the trust to make sure your goals are well served.

Do you plan to leave money to charity? Donations to charity that amount to at least ten percent of the value of the estate may reduce inheritance tax by up to 36 percent. Tax planning solicitors can help you make decisions about charitable donations to reduce inheritance taxes.

Making gifts during your lifetime to your beneficiaries can help avoid inheritance tax. This can be done in small gift allowances, larger annual gift allowances, and one-time tax free wedding gifts to children and grandchildren, and regular contributions from excess income. There are annual limits to each type of git, which may be exceeded, provided that you survive for at least seven years beyond when the gifts are made.

Investments made in unquoted companies, companies listed on the Alternative Investment Market, and investments for companies that are enterprise investment schemes may qualify for Business Property Relief. In order for the investments to be exempt from inheritance tax, you must hold the shares for a minimum of two years. If the investments are held for more than two years and still held at the time of death, your beneficiaries may enjoy 100 percent inheritance tax relief.

Planning ahead is the best way to minimise the inheritance tax that must be paid on your estate. Take into consideration all the possible options to make the best decision for your estate and heirs. Because each situation is unique and annual limits and other rules change periodically, it is best to consult with a solicitor for advice that is specific to your estate.

Ed Rempel Org

What is The Cash Flow Dam?

What Is The Cash Dam and How Does It Work?

 The Cash Dam (sometimes referred to as a “cash flow dam”) is a simple but powerful concept, and it’s an especially attractive option for those who are familiar with the Smith Manoeuvre or other tax minimization strategies. Cash Dam can help you with tax optimization if you have a mortgage and own either a small business or a rental property.

What is cash damming?

 The Cash Dam allows the owner of a small business or rental property to more quickly pay down their non-deductible mortgage on their home. It’s a variation on the Smith Manoeuvre, but without additional investing. The Cash Dam is essentially an expedient way to change bad debt into good debt.

For someone who’s using the Cash Dam, what it involves is using a line of credit to pay for business expenses. Then, while using the increased business cash flow, you pay down a non-deductible mortgage or loan. This, in turn, produces an increasing tax-deductible business loan, while paying down a non-deductible mortgage or loan. Be advised that the Cash Dam as described above will only work for those who own a non-incorporated personal or partnership-based small business or a rental property.

Example:

 If you own a small non-incorporated business that has $2,000 in expenses each month and you also have a readvanceable mortgage, then the $2,000 per month expense would be paid by the home equity line of credit (HELOC). You then use the additional $2,000 you have in your business expense account to make a payment on your non-deductible mortgage. Interest paid on money that’s borrowed for business expenses is tax-deductible; by using the Cash Dam, you’ll be left with a tax-deductible business loan and a non-deductible mortgage that’s been quickly paid down.

One of the keys to the Cash Dam, however, is capitalizing the interest on the business line of credit. That way, you avoid using any of your own cash flow and you keep the business line of credit tax-deductible.

How does the Cash Dam differ from the Smith Manoeuvre?

The Cash Dam relies on using a tax-deductible business loan to allow you to pay down a non-deductible debt, while the Smith Manoeuvre allows you to buy investments. Investing from your credit line is why the Smith Manoeuvre has much higher risk and return than the Cash Dam.

Potential applications

 Say that you’re a rental investor, instead of using your own cash flow to pay for rental-related expenses, you can use the Cash Dam and a line of credit. In this instance, using the Cash Dam would help you pay for your personal mortgage and help you satisfy your tax obligations as well.

And if you are a small business owner, the Cash Dam can be extremely advantageous. The strategy gives you a way to quickly pay down your non-deductible mortgage and convert that debt into a tax-deductible business loan.

Canada’s Taxation on Pain and Suffering, Litigation Damages

The Canadian Revenue Agency makes it clear that there is no income tax on pain and suffering awards. Awards can be granted by a judge, jury or they can be settled out-of-court without paying taxes.

Settlements are not taxed if they’re non-pecuniary damages.

Non-pecuniary damages are those damages that are difficult to measure. For example, it’s difficult to put an exact value on an impairment of life, emotional distress or impairment of physical or mental abilities.

“Trying to figure out the right medical treatments, whether surgery is necessary and you’re going to be able to pay these bills can be overwhelming for any victim,” states Reyna Injury Lawyers.

Awards are seen as compensation not income. They money awarded in a settlement is a reimbursement.

Litigation Damages

Personal injury awards are tax-free. Litigation damages, however, are not tax-free. Damages are taxed in the same manner as income, and in some areas, such as Alberta, the taxation rate may be as high as 39%.

Litigation damages are different than pain and suffering.

Business contracts or the destruction of property are within the scope of litigation damages. In these circumstances, it’s often plausible to put a monetary value on the damages. A contract, for example, may have resulted in a loss of $1 million in business.

This figure can be determined by how much money was lost as a result of the contract obligations not being fulfilled.

Personal injury claims cannot have an exact amount given with 100% certainty. A person may have been awarded lost wages in a settlement, but this figure will also not be taxed. The main difference is pecuniary versus non-pecuniary damages.

Profits from Awards

Settlement money is yours to do as you wish, but if you choose to invest this money, the income earned will be taxable. That is, if you were to invest your money at a 5% rate per year and earned $1,000 in income, this would be taxable income.

Settlements are only tax-free initially.

You can also opt to receive a structured settlement. These settlements are interest- and tax-free, and they’re periodic payments.

Annuity payments must meet the following criteria:

  • Awarded only in death or personal injury cases
  • Agreement on payment terms
  • An annuity contract must be purchased
  • Insurers must remain in accordance to the settlement

Canada’s non-pecuniary damages had a maximum compensation value of $100,000 following a 1978 Supreme Court decision. The value is adjusted for inflation and remains around $350,000 at the time of writing this article.

Employment damages are tricky because the characterization may result in the defendant needing to meet withholding requirements or not. Exceptions must be clear if the income is not to be taxed. Otherwise, the income from employment damages would be subject to the Income Tax Act.

Employers that are paying a settlement to an employee are almost always going to result in the settlement being seen as employment income. Necessary withholdings will be required. If the employment income is related to another matter, it may fall within an exception.

Ed Rempel CFS

Ed Rempel Top Key Note Speaker at The Canadian Financial Summit

Ed Rempel is a well known Canadian “Financial” Keynote Speaker and shares his enthusiasm and many years of experience to primed financial audiences that want, need and deserve more and better insight and information. Join Ed Rempel a senior financial industry expert with a host of other top speakers at the Canadian Financial Summit. www.canadianfinancialsummit.com September 13-16 Online Event.

 

 

How Self-Employed Workers Can Deduct Phone Costs on Their Tax Returns

Most entrepreneurs today will tell you how important it is to have a smartphone for your business. What they may not tell you is that you may be able to write off phone expenses every year on your taxes. Here’s how to deduct your cell phone bills when filing taxes.

Calculating Your Deduction

cell phone bill

Image via Flickr by TheBetterDay

You can deduct your cell phone bills from your taxes if you file as self-emloyed or if your total business expenses combined with other specified deductions exceed 2 percent of your total gross income. If you want to take this deduction, it’s essential to know exactly how much time was actually used for your business from your phone. It’s likely that less than 100 percent of your cell phone time was used for business purposes, so the IRS will not allow you to deduct your entire phone bill.

Because of this, you can only deduct the percentage of your bill that represents how much your phone was used for your business. For example, if 60 percent of your phone time was spent talking to clients, then the IRS will allow you to deduct 60 percent of your annual phone bill from your taxes. Many times the numbers won’t be so cut and dry, so when in doubt, underestimate the percentage. Unusually high amounts can result in an audit.

Keep Phone Records

In case of an audit, it’s important to retain copies of your itemized phone bills. The IRS will need to be able to see who you called and for what purpose as well. Keeping detailed records on a calendar or in a spreadsheet will go a long way in making sure you get the deduction you’re due.

When the tax year is over, don’t be quick to throw out your records. The IRS can audit anyone up to seven years after any tax year, so if you’re subject to an audit five years down the line, being ready with those old records will help.

Deducting With a Family Plan

While it may seem like a hassle to deduct your bill if it’s part of a family plan, the process is actually simple. Determine how much of the bill per month is yours, which is especially easy with a carrier like T-Mobile, which simply divides the total cost of the monthly bill by how many lines are in use. Check your carrier for plan details so that you can accurately report and deduct your phone bill on your taxes.

Having a Separate Phone for Personal Use

While not practical for everyone, having two separate phones, one for your personal use and one for business is beneficial to some. The IRS will even allow you to deduct the entire cost of the phone – the initial purchase and the monthly bills – if the phone was exclusively used for your business. The LG V20 is a high-end smartphone with the latest technology and a large screen that makes it great for self-employed entrepreneurs who need to keep in contact with clients through emails and phone calls.

Where to Claim Deductions
When tax season comes, it’s important to know exactly which forms to fill out. It can be easier if using a service like TurboTax or H&R Block, as they’ll walk you through the steps and show you at every step how to get the biggest refund. If you’ve decided to do your taxes yourself, however, make sure you fill out Form 1040 and Schedule A if you’re filing as an individual or fill out Form 1040 and Schedule C or Schedule C-EZ if you’re filing as self-employed.

If using Schedule A, you’ll also need to fill out Form 2106 or Form 2106 EZ, which will document your itemizations. Be warned that if filing this way, the government will only allow you to deduct the amount of your bill that exceeds 2 percent of your total yearly income. It may be safer in this case to take a standard deduction or to file as self-employed.

If filing as self-employed, simply fill out line 48 on Schedule C or C-EZ and write in the total amount on line 27. No further paperwork is required.

Deducting your cell phone charges has never been easier for today’s self-employed. Simply follow these guidelines and you’ll be on your way to a bigger deduction.