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Tax Returns and Tax Relief

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.

Different Bankruptcy Chapters

Bankruptcy is not something which should even be consider unless all other options have been exhausted, it should never be considered as anything but a last resort.

There are six different types of bankruptcy in the U.S. and each of them have been outlined in the Bankruptcy Code (Title 11). There are two types which are very common throughout the country, i.e., Chapter 7 and Chapter 13. But there are 4 other types of bankruptcy which people do not even know about. It is quite interesting and can be really helpful for people to know about all of these types of bankruptcy called “Chapters.” Given below is a little information about each of them:

Chapter 7 Bankruptcy
This is the most common type of bankruptcy and is used for total liquidation by individuals or companies. What happens here is a person or company gives everything they own to a trustee, who then sells everything and uses the proceeds to pay off their debt. The person or company will no longer be responsible for the debt but he or she will not own any property either. In the case of individuals, they do not have to give up any household items or clothes, although they will be expected to continue making child support payments and even pay their taxes. This type of bankruptcy can only be applied for once every 8 years. It may be voluntary but it can also be compulsory. There are some types of debt that do not qualify for this, two of them being student loans and home mortgages.

Chapter 9 Bankruptcy
This type of bankruptcy is only available to municipalities. In past times, when municipalities were not able to pay their debt, certain strict measures were taken in order to recover the money, increases in tax rates was one. This type of bankruptcy was created at the time of the Great Depression. During that time raising the tax rates was not really helping municipalities get any more money. There are some places where state approval is compulsory prior to filing for bankruptcy under Chapter 9. Two of the most famous bankruptcy cases of this type include the Orange County, California case and the Jefferson County, Alabama case.

Chapter 11
Chapter 11 is a type of bankruptcy that is not only available to businesses, but also to individuals as well. However, it is usually used by corporations more than anyone else. It is similar to Chapter 7 in many ways but one major difference is that here the debtor will retain control of all his assets. Instead of involving a trustee, the debtor will be in charge of this along with the supervision from the appointed court. This type of bankruptcy helps a company reorganize themselves more than anything else. One important factor to keep in mind when considering to file a Chapter 11 bankruptcy, is that sometimes, ownership of certain parts of an organization as well as the rights to revenue can go to some of the creditors in order to pay off the debt.

Chapter 12
Chapter 12 bankruptcy is just like Chapter 13, which is discussed in detail below, but only applies to fishermen and farmers. Previously there were not any specific provisions for agricultural professionals and that is what led to the creation of Chapter 12 bankruptcy. Before Chapter 12 bankruptcy there were general provisions which were modified on multiple different occasions with new expiry and renewal dates. However, in 2005 a permanent chapter was finally created for these professionals. There are a couple of restrictions on this type of bankruptcy though. At least 50% of a farmer’s debt has to be linked to farming operations while 80% of a fisherman’s debt needs to be linked to commercial fishing operations. But it does manage to get the major creditors off of an individuals back as long as the debtor does not create any new debts.

Chapter 13
Chapter 13 is the other type of common bankruptcy that many people already know about. The main difference between Chapter 13 and Chapter 7 bankruptcy is that while Chapter 7 liquidates a person’s assets and immediately releases his debt, Chapter 13 is more of a rehabilitation program. Restructuring and reorganization is involved here as well. Debtors need to create a plan that will pay off all their creditors within a minimum period of 3 years or a maximum of 5 years. The only problem with this type of bankruptcy is that the debtor will require a high level of disposable income in order to fund this rehabilitation plan.

Chapter 15
Chapter 15 bankruptcy is the most difficult and  the most complicated. The main differentiating factor here is that the assets of the debtor will be in multiple countries. The provisions that are outlaid in this Chapter basically help mitigate any issues that trustees may face while involved in cross-border litigation. What happens here is that the U.S. courts have the discretion to either provide additional assistance in foreign law proceedings or not.

In short, this was a brief run down of what each chapter of  bankruptcy entails.

Unsecured Credit Options

In today’s world, paying back unsecured credit is getting harder and harder. In fact, credit card debt is the biggest type of unsecured loan which people have nowadays and trying to settle or clear these debts is quite difficult. With the compounding interest every month, most customers pay far more than they are supposed to and still receive huge bills at the end of the month. It is only when these situations arise that people start looking for alternatives to this problem. What else can they do to get rid of their credit card debt? How do they resolve their credit issues? That’s where debt consolidation loans come into the picture.