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How To Find Out If You Owe State Taxes – Your tax return can be almost fun when you know you’ll get a refund at tax time. But if you suspect you owe the IRS money you don’t have, starting the process can be difficult.
According to a NerdWallet survey, of those who didn’t file by the extended July 15, 2020 deadline last year, 24 percent knew they owed but couldn’t pay, and 18 percent didn’t know if they owed but could. Fear that they are in debt. They get a bill they can’t pay.
How To Find Out If You Owe State Taxes
Like most problems, it won’t go away by shoving your tax bill in a drawer and forgetting about it.
Why You Should File Taxes Even If You Don’t Owe Any
If getting started with taxes is difficult, you can get help. The federal government has several programs to provide free tax assistance to eligible individuals, such as Free Income Tax Assistance and Tax Counseling for Seniors. Many tax providers also offer a free version of their software for those with simple tax needs, and the IRS itself offers free filing software for those who qualify.
But if you’re holding off on filing because you’re worried about tax liability, you should understand your options for tax relief. Here are five ways to get a tax debt write-off.
Regardless of what you owe, you should still try to file on time (or file an extension if you miss the deadline). Filing an extension gives you more time to file your taxes, not more time to pay your bill, but ignoring an extension can result in stiffer penalties.
If you don’t pay your taxes, the IRS will charge you interest on what you owe. You may not pay your entire tax bill, but paying a portion of that bill will lower the interest you have to pay on the rest of the taxes you owe.
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An IRS payment plan, also called a repayment agreement, allows you to pay the taxes you owe over a long period of time.
According to Jordi V. Once you set up a monthly payment plan, you can’t renegotiate those payments, says Neth, CPA and owner of RainCity CPA in Seattle. The IRS allows you to pay it over (up to) 72 months. If you make this option, you can always pay more, but you can never pay less, says Neth.
Neth recommends spreading your payments out over the longest possible time frame so that they balance out at the lowest possible amount. “That way, when push comes to shove and you’re in a tight spot, you can actually make the minimum payment each month,” says Neth.
Remember that a payment plan will carry interest and late fees. You may also have to pay a debit or credit card processing fee and a setup fee, depending on the length of the payment plan and whether you apply online.
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An Offer in Compromise allows you to settle your tax debt. According to Tina Pittman, CPA and owner of Your Accountant in Chambersburg, PA, one of the main advantages of an offer in compromise is that you end up paying less than you actually owe. Pittman says an offer in compromise has other benefits, such as avoiding collections and letters from the IRS.
Applying for an Offer in Compromise is a lengthy process that involves a lot of documentation to prove your inability to pay your tax bill, a $205 application fee, and an advance payment on your bill. While your application is being processed, your payments and fees will apply to your balance, which you still have to pay – even if the IRS agrees to lower it.
Keep in mind that the IRS will reject most requests for offers in compromise. In this case, your payout will likely be applied to your balance. Your application fee may be refunded under certain circumstances.
If you qualify for low-income certification, you may not have to pay an application fee or down payment. Also, you don’t have to pay every month while your offer is being evaluated.
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Those who cannot pay their tax bill can apply to be placed in “non-collectible” status by the IRS. This means the IRS will temporarily suspend collection until your financial situation improves. Remember, this is only a temporary label that the IRS places on your account. The situation is not permanent and you will eventually have to pay your tax debt. (If you’re in this situation, the IRS can still file a lien against you.)
To get a billing status now, you must fill out a form and provide information about your assets, income and monthly expenses.
“People don’t realize that there are many different options with the IRS. “They automatically assume that all they have is a settlement agreement that you have to pay penalties and interest on.”
If you can’t afford to work with a tax professional, there are resources for free tax help that can clarify what options are right for you.
Your State May Owe You Money. Mine Did. Here’s How To Check For Unclaimed Property
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When it comes to saving on state taxes, there are some simple tips that will help you cut your bill in half. By following these tips, you can save a significant amount of money each year.
1. Know the rules. The first step to saving on state taxes is knowing the rules. Each state has different tax laws, so it’s important to familiarize yourself with your state’s laws. This will help you maximize your deductions and minimize your tax liability.
2. Itemize your deduction. If you want to save on your state taxes, you need to itemize your deductions. This means that any deductions will be itemized on your tax return. By itemizing your deductions, you can take advantage of deductions that you wouldn’t be able to if you didn’t itemize.
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3. Use tax credits. Another way to save on state taxes is to use tax credits. Tax credits can help reduce your tax liability and may even provide a refund. Be sure to research the tax credits available in your state so you can take advantage of them.
4. Electronic file. Filing your state taxes electronically is a great way to save money. If you file electronically, you can often get a discount on your application fees. Additionally, electronic filing is usually faster and easier than paper filing.
5. Use tax software. Tax software can help you save on your state taxes by providing guidance on how to maximize your deductions and credits. Additionally, tax software can often help you file your returns electronically, which can even save you money.
6. Check for errors. Finally, be sure to check your tax return for errors before you file. If you find an error, be sure to correct it as soon as possible. By following these simple steps, you can save a significant amount on your state taxes each year.
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How to save on your state tax – Simple tips to cut your state tax in half
If you’re like most taxpayers, you want to minimize your tax bill. And while there are a number of ways to do this, one of the easiest is to take advantage of government tax incentives.
Most states have a number of deductions and credits that can help lower your tax bill. And while some of these are well known, others are often overlooked.
If you are retired, you may be eligible for a number of government tax credits. For example, many states offer a deduction for retirement income, and some even exempt retirees from paying taxes on Social Security benefits.
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Charitable donations are another great way to reduce your government tax bill. In most states, you can deduct donations to qualified charities from your taxable income.
Owning a home comes with a variety of tax benefits, including deductions for mortgage interest and property taxes. If you’re a homeowner, be sure to take advantage of any deductions and credits you’re entitled to.
Each state has its own unique set of tax laws, so it’s important to know what’s available in your state. This will help you maximize the deductions and credits you’re entitled to and minimize your tax bill.
If you’re looking for ways to lower your state tax bill, these four tips should help. By using available deductions and credits, you can significantly lower your tax liability.
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How to get a refund if you owe tax – simple tips to reduce
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