Tax Relief

When it comes to tax relief, not everyone knows what that means or how it can impact them. When it comes to tax deductions and tax credits, there is much money to be saved, provided that you either.

1. a) are well versed in handling tax issues or,
2. b) seek the advice and support of a qualified tax relief firm.

The choice is yours, but one of those is going to solve your issues faster, cleaner, and with minimal stress. (It isn’t a).

While it is true that every tax situation will differ from one person to the next, you will need to submit a tax return at the end of every fiscal year. This goes for self-employed, employed, a contractor, or any other form of work.

Let’s look at some of the details about tax relief.

What Is Tax Relief?

Put very simply:

Tax relief is any incentive or program which will reduce the amount of tax that an individual or business owes. There is a range of allowable deductions like pension contributions, and some that are temporary, like tax credits for installing better equipment.

In general, tax relief is designed to reduce how much a business or individual is liable for. Most often, tax relief will be for a specified period or event. Things like tax relief for people who have been victims of a hurricane and the area has been declared a disaster area. There is also a range of tax relief options for support of environmental causes. You’ll see this with the tax credits available for the purchase of things like energy-efficient windows or energy-efficient appliances.

Most often, a business or individual will get tax relief from deductions, credits, the forgiveness of a tax lien or exclusions.

Reductions, credits, forgiveness, and exclusions are an area where many people don’t understand the full extent of what applies to them, or they make some mistakes in their reporting. That is why it is always recommended that you work with a company that can take care of these things for you.

Let’s take a further look at the items that come under tax relief.

Tax Credit

When it comes to tax credits, they are basically a tax relief that provides more savings for a tax entity than a tax deduction. It directly reduces the taxpayer’s bill on a dollar to dollar amount, instead of reducing the amount of income that is subjected to tax.

This means a tax credit will be applied that is owed by the taxpayer after all of the other deductions are made from their taxable income.

A quick example for you is:

Someone owes $4000 in taxes, but they get a $900 credit. When that tax relief is applied, they will only need to pay $3100.

Tax Deductions

A tax deduction is where the taxable income of the taxpayer is reduced. This is what a tax deduction looks like:

$21,000 taxable income earned, but they have a $3000 tax deduction. Therefore their taxable income is then $18,000.

That $18,000 is then going to pay fewer taxes overall, because of the reduction.

There is an extensive range of deductions, and the trick is to know which ones apply to you and which don’t. A person who does their own taxes will often miss out on some that could make a big difference to what they would usually be paying.

Some popular deductions are:

• Business Car Usage
• Charitable Contributions
• Medical and Dental
• Health Saving Account
• Child Care
• Home Office Expenses

Tax Debt Forgiveness

Way back in 2011, the IRD implemented the Fresh Start initiative. This expanded the options that a taxpayer has to settle their tax debts for a smaller percentage of the original liability. It is important to note that it will depend on a person’s financial situation. In some cases, the IRS will provide an arrangement that gives tax relief and helps the taxpayer reduce taxes and avoid tax liens.

Tax Exclusions

There are some incomes that are classified as tax-free or as tax relief. This will reduce the amount that the tax filer reports as the final gross income number. Any income that is excluded because of tax purposes will not be required to be shown on the tax payer’s tax return.

There are occasions where the income will be shown in a part of the tax return but then removed in another.

There are a number of reasons that there may be a tax exclusion. In some cases, it is because the taxes are too challenging to measure, and in others, it will be to encourage taxpayers to partake in particular activities.

A notable example is the FEIF (Foreign Earned Income Exclusion). There is tax relief for ex-pats who earn income in foreign countries.

Common Mistakes

It is often the case that people try to rush through their tax returns, instead of taking them to a professional. Which means there are some prevalent mistakes that can cause some issues. Here are some of the most common mistakes:

• You are misspelling your name. The tax return should match your name as it is on your social security card.

• Number mistakes happen most often. It is easy to get numbers wrong when you are rushing, or you aren’t that confident in filling in the forms (a tax professional is not going to make this mistake).

• Credits and deductions. There are so many deductions and credits sometimes they are claimed on paper but aren’t applicable, or not claimed when they are.

• Unsigned forms are a widespread reason that a tax return is not accepted and will be returned as invalid.

• Bank Details Incorrect. When it comes to refunds, they can be back with you in weeks, and if you had the bank account number wrong, you’d need to fix that asap.

• Social Security Numbers. They are usually missing or completely wrong. Double-check and check again.

What Happens If You Don’t File?

If you decide not to file, there are some financial consequences that you will have to deal with. There are some options when it comes to getting help with back taxes, working with an expert tax relief service is one of the best.

It is important to note that there is a difference between failure to file your taxes and a failure to pay your taxes. Failure to file will land you in more financial problems than a failure to pay would – but you should avoid both of these situations. Filing on time is the most important thing that you can do.

If you fail to file on time, you are going to be given a late filing fee from the IRS. The fee varies, but you can expect to pay a minimum of 5% on the taxes you owe for each month you fail to file. And while the penalty maxes out at 25%, it is not worth letting it slide.

There are some extenuating circumstances where the IRS will waive filing penalties, but don’t expect that to happen.

Failure to pay will still land you with a penalty, although it will be less than the cost of filing late. The interest here will begin to accrue on the unpaid taxes daily from the day after the bill was due. And this interest compounded daily until it got paid.

Ideally, rather than hide from your taxes because you aren’t comfortable with filing them, you should hire a professional to take care of it for you.

If you have been sure to pay at least 90% of your balance by the time tax day rolls around, and you will avoid being penalized for failing to pay.

Finally, Tax Relief

Taxes can be complicated, and they can go really wrong if you are sure about what you are doing. When it comes to talking to the IRS, it is something that many people don’t want to do. This means that instead of getting the right answers, you will be winging it. And that is one thing you don’t want to do when it comes to ensuring you get the right tax relief on your taxes.

When it comes to the world of tax relief, there is a lot to learn, and much space to make some pretty hefty savings. However, in almost all cases, when it comes to really working out those tax relief options, you’ll need a seasoned professional to help.

It is often that case that you can benefit from a free consultation which will mean you understand the situation better, and are aware of how a tax relief specialist can help in your circumstances.

It is worth remembering that when working with a tax relief company, they will be able to negotiate a better deal for you because they know the right questions to ask regarding all of your tax options.

As mentioned very early on, taxes are a one-size-fits-all thing, which means getting personalized advice and a plan of action will make sure that you are really making the most of all of your tax relief benefits.