One very important subject which no one pays too much attention to until it is too late is tax returns. That’s right, filing tax returns can be quite worrisome for people who have never done so before and it is a responsibility that can not be ignored by any responsible adult. Also, it is the only way in which a person can hope to get tax relief. For example, if a person has any tax that is withheld from their earned income, they are supposed to file tax returns in order to get that amount refunded. But apart from this, there is one more reason to file tax returns as well. Any person who did not file tax returns earlier should definitely start filing returns now, simply because of the economic stimulus payments offered to people that file tax returns… and there is a chance of going to jail if an individuals taxes are not paid.
There are various other situations which necessitate people to file tax returns. For example, the sale of a home would necessitate a person to file their returns. Another situation that will require an individual to file taxes is if they are self-employed and have a net income of more than $400. Tax returns will also need to be filed if contributions or withdrawals are made from an IRA fund beyond prescribed limits.
The preferred method for returning any excess payments made on tax returns to the IRS is through direct deposit. People that choose this option will save themselves a trip to their bank to deposit their check. However, they need to ensure that they fill out their account details properly to avoid any delays in their refunds. Any errors in this information and it may even effect the tax relief that a person may qualify for.
Now, if a person has a large refund due to them they can choose to decrease the amount of tax withheld from them by simply filing out a W-4 Form. This is a great way to avoid excess tax withholding and can also be considered another form of tax relief. But remember that any refund can also be offset against pending dues to the IRS or even the federal government. A refund may even be adjusted against state taxes, spouse support dues, child support dues or student loans. These offsets will not be done without a prior intimation by the IRS though. One last thing, if returns are filed jointly by a couple, the state may even offset state or federal taxes owed by either spouse. This may be avoided on some occasions with the help of the 8379 Form.
Business owners, too, are obligated to deduct taxes from the salary of each employee. This is the amount that can be claimed as a refund in tax returns. This tax is basically called a Trust Fund tax and is to be paid to the IRS (Internal Revenue Service). When owners can not do this, Trust Fund tax liabilities are created and this is will not be overlooked by the IRS. It does not matter how long this tax is outstanding, in fact, even if the company declares bankruptcy, this tax is not cancelled. There really is little or no hope for tax payers as far as any relief is concerned here. The chances of a business owner getting a tax relief as far as this is concerned is almost zero, especially when taking in to consideration that there is more than $50 billion in payroll taxes that are currently outstanding.
Anyone who is having trouble understanding their taxes or how everything works should consider hiring a tax consultant to help them with their filing. But people should be very careful and ensure they hire a genuine professional. There are many tax consultants who try and convince tax payers to claim illegal deductions or credits. While many people do manage to get away with this, there are many others that are prosecuted. Even though there are some, very few people willfully take this risk. Adopting such methods is never a good choice. There are many legitimate avenues for being awarded tax relief.
A popular example that will help clarifying how this works is that of the telephone tax refund. While people were only allowed to claim a refund of 3% on any long distance or bundled telephone services many were claiming their entire telephone bills. While this worked for a long time, the IRS eventually caught on and many tax payers had to pay a very high price for this while the tax consultant firms got away free and clear of any wrong doing. On top of that, they took a cut from each of the refunds and charged exorbitant fees for this as well. At the end of the day, it was the tax payer who had to suffer the most. The allure of huge and unrealistic refunds may seem very welcoming but the fact of the matter is that crime never pays. So instead of trying and becoming a millionaire through tax refunds it will be much better if people took the honest route and build up their bank balance without using any unscrupulous means.