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Hand Clicking Tax Refund Button On A Screen InterfaceYou know that feeling you get when you find some money that you didn’t know you had? Or maybe you’ve overpaid on a bill, like an escrow account for example, and an unexpected check shows up in the mail. That’s a great feeling. Sometimes people are even fortunate enough to stumble across money lying on the ground whose owner apparently is nowhere to be found. Even finding a $20 bill in your coat pocket when you weren’t expecting it could be cause for celebration. The bottom line is it’s always nice to be on the receiving end of money that you either didn’t know you had or that you weren’t expecting to get.

With the IRS Nothing’s For Free

In much the same way, receiving a tax refund is usually a great feeling. After all who doesn’t like to get a few extra hundred or even a few thousand dollars in one fell swoop? In all of these scenarios this money is typically yours to keep without any repercussions. However, what would you do if you ended up getting a much larger tax refund than you were expecting? The tax season ended just a few weeks ago, but while many people have already received, deposited and even spent their refunds, those who waited till the deadline to file could also still be waiting for their refund to come. So what should you do if the IRS refunds you too much money? Can you simply keep it and chalk it up to the belief that it’s their error so it’s their problem? Do you sit on the check for a while and wait it out to see if the IRS figures out its mistake? Or, do you fess up and let the tax agency know they screwed up?

Avoid a Spending Spree

Of course it would be very tempting to keep the extra money and it might feel good to give the IRS a little “payback” so to speak. However, if the IRS overpays you don’t start making plans to take an extra vacation, buy a new car or give your savings account an extra boost. Instead be prepared to give it back. Sometimes, the IRS does find mistakes in your calculations or entries and it will send you a bigger refund than you were expecting. If that is the case it will most likely send you a notice in the mail explaining the reason. However, if you don’t receive an explanation and you know you were over-refunded then don’t spend the money because chances are the IRS will discover its mistake sooner or later.

Act Fast and Fight to Give it Back

The best thing you can do in this situation is contact the IRS immediately and let them know what happened. In fact, if you hold onto the money and the IRS discovers the error six months, or even a year later, they will actually not only expect you to return the full amount, but they will also ask for interest and in some cases penalties. That sounds completely unfair, but it happens more often than you might think. One couple ended up in a heated battle after the IRS refunded them too much money. Even though they attempted to return the money right away and were initially turned away by the IRS, eventually the agency came calling and tried to force them to pay interest. They fought the IRS for two years before the issue was finally resolved. The lesson here is to do whatever it takes to pay the money back ASAP if you know the IRS has made a mistake, even if they tell you everything is fine.

Make Sure It’s Not Your Error

Tax policy states that penalties and interest depend on who committed the error. According to the IRS, “taxpayers are not liable for penalties and interest on erroneous refunds until the IRS asks the taxpayer for repayment. But this is contingent upon the presence of both of the following: The IRS must be clearly at fault in generating the erroneous refund; and the amount of the refund cannot be greater than $50,000.” However, be prepared to fight because the IRS doesn’t give up easily and the agency will always look to find fault in the taxpayer, rather than itself.

If It Seems to Good to Be True it Probably Is

So to recap, if the IRS overpays you don’t spend it and do everything in your power to return the money as swiftly as possible. It’s great to receive an unexpected check in the mail but if it comes from the IRS then always assume a mistake has been made until the agency can assure you otherwise. In the meantime, if you still feel unsure about what to do next, please reach out to a tax pro like Clean Slate Tax and get advice from a tax attorney.

 

Get a free case review by one of our tax professionals and get started on fixing your tax problems.

 

There is no denying that real estate can be a very lucrative market and investment opportunity to consider, but owning a rental property can take up a lot of time, effort and energy. There is a lot to think about when it comes to rental properties. It isn’t just about getting the property ready to be occupied in some way, but it is also about thinking of the consistent maintenance that may go with it. However, the rental property market can be very lucrative. Investing in tax lien certificates is an alternative way to include real estate in your portfolio without having to cap a landlords income. Tax lien investing can be a little more complicated that owning mutual funds, shares and stocks, however, it can be a well suited option for many investors.

What are Tax Lien Certificates?

In truth, when a homeowner falls behind on things like their property taxes, country or municipality where the property is located, you can place a tax lien against the property. This is when a tax lien certificate is issued, usually by the tax assessors office, and they will verify that there is a lien in place. There is calculated to be billions of taxes going unpaid each year, which creates a broad market for investors.

Tax Lien Certificates as an Investment Vehicle

The one thing to remember is that if a property has a tax lien certificate against it, it can’t be sold or refinanced until the past due taxes have been paid. The tax lien certificate itself, however, can be purchased by an investor. Such as yourself. This would normally happen at public auctions that are organized by councils or municipal tax collectors offices. Auctions can be held online or in-person with certificates going out to the highest bidders.

If you become the winning bidder, then you would pay the tax office the amount of taxes owed on the certificate. You then assume the right to collect the money back from the homeowner, and can add some interest to see a return on the investment. The maximum interest rate that can be applied can vary, depending on where the property is situated. But it can be extremely lucrative in terms of profit potential.

It is worth noting, that the homeowner does have a certain amount of time to redeem the debt and pay what’s owed. This can depend on the redemption period that has been applied. If the owner doesn’t pay the taxes and the interest due, or even ignores such communication, you then have the right to foreclose on the property and enable you to sell to redeem the costs in that way.

Are there any benefits of Investing in Tax Lien Certificates?

In truth, there are a few different factors that make tax lien certificates an attractive and lucrative investment option. First of all, these investments often have a low threshold for buying into them. You may be able to purchase tax lien certificates at auction for only a small price, but the outlay and potential return could be in the thousands if not more. Depending on the amount of taxes owed.

If you are looking to only make a small investment at this time, it is possible to spread capital across multiple tax lien certificates. This can put you in the position of being able to diversify your property assets by where purchased tax lien certificates are located in different housing markets. Finding auctions to bid in isn’t that difficult either. You can simply contact the tax assessor for the specific county and find out when the next auctions are likely to take place.

Perhaps, more importantly, from an investment perspective, there is the opportunity to earn a consistent rate of return and this is what makes it a good investment to consider. With stocks and mutual funds, returns are determined by movements in the market. With tax lien certificates, returns are shaped by the interest rate that’s paid to you and the redemption period put in place. If you hold a tax lien certificate in a state with a higher maximum interest rate, your investment could yield a substantial payoff.

However, Tax Lien Certificates Aren’t Risk-Free

Like many different investment options, tax lien certificates also have some risks attached to them. One obvious one to mention is that you need to ensure you don’t buy a tax lien certificate for a property whose market value is less than the amount of taxes that are due. In that circumstance, the homeowner has no motivation to pay the debts of taxes owed.

There’s also the inherent risk that the homeowner won’t redeem the property, regardless of its value. A foreclosure could allow you to take ownership of the property but the legal fees can be expensive, and therefore make it less worthwhile. You may also face additional costs to repair or rehab the home once you take ownership. Foreclosing can also be problematic if there are other tax lien certificates attached to it or claims in place that need to be cleared before you can assume the title.

Tax liens typically have an expiration date that falls after the end of the redemption period. If your tax lien certificate expires, you wouldn’t be able to collect any unpaid taxes because your rights as a lien holder expire along with it. Which effectively means your investment is lost. You’d have to purchase any subsequent tax lien certificates to maintain your rights; otherwise, another investor could make a claim against the property. That increases your overall investment and also any potential return.

It is important to have due diligence

If you’re considering investing in tax lien certificates, you can’t afford to skimp on research and this is an important aspect before parting with any money. You need to understand what the state laws are regarding tax lien certificates, including the length of the redemption period, what your responsibilities are for notifying the homeowner that you’ve purchased the lien certificate and the maximum interest rate allowed for that specific area.

You should also research the specific market you’re interested in to understand how much tax lien certificates typically sell for at auction and how much competition you may face from other investors. This will help you to calculate whether your investment will be worth it long term. Finally, consider your larger investment strategy to determine what gap or need tax lien certificates could help to fill. Knowing what you’re investing in is only one element, you may need to understand a little more as to why there is a potential investment to make. It can help to understand the story behind to also calculate the risk.

Let’s face it, we can all get into financial difficulties at times. It might be because of a larger than expected tax bill. It could be due to a house or car repair that eats into our finances. We might even get into financial difficulties because of a lapse in memory, perhaps when we forget to file our taxes on time, or when we forget about the deadlines on a household bill. We then face the financial consequences of our forgetfulness.

When financial difficulties arise we can find ourselves with unpaid debts. It is at this point that our creditors might place a lien on our property. This gives the creditor a way of satisfying the debt that is owed, as they have the legal right to seize the property and obtain the money owed through the sale.

Of course, a lien can be lifted if payments are made and debts are resolved. Until then, however, the property serves as collateral on the property until the debt is repaid. During this time, the homeowner will need to repay the creditor or seek assistance from a specialist firm. In the case of a tax lien, Clean Slate Tax can help you resolve the problem with the aid of our experienced team of professionals.

Let’s delve a little further.

What Causes Liens On Houses?

As we suggested, liens stem from unmet financial obligations and unpaid debts. When the homeowner fails to pay the bill or balance, a lien might be placed by the creditor on their property.

Common reasons why there might be a lien on a property include:

Unpaid taxes: If you failed to pay your income or property taxes, the IRS could issue a Federal tax lien against your house.

Unpaid credit cards: Credit card bills can add up, but if you were to withhold payments, for whatever reason, the credit card company could issue a lien on your property.

Unpaid child support: If you didn’t pay the right amount of child support that had been agreed upon, the court might impose a property lien. These are called court or judgment liens. Judgment liens can also be issued when somebody wins a lawsuit against you for any other legal matter.

Unpaid maintenance bills: If you failed to pay your contractors or other home service professionals for work done, you might find yourself with a mechanics lien against your property.

As you can see, there are all kinds of reasons as to why you might get a lien on your property. The types mentioned are all linked to unpaid debts, and so until those debts are paid, you will be forced to deal with the effects of the lien.

However, while some liens are imposed on your property because of unpaid debts, there are others that have nothing to do with your repayment history. You will already have a lien if you have a mortgage, for example, and this is because the lender uses your property as collateral. This lien won’t be harmful to you if you keep up with your mortgage payments. Once you have paid off your home, the lien will be removed, and you will be free from that burden.

Unfortunately, the other types of liens mentioned are harmful to you. For one, you will be forced to share ownership of your property with your creditor. During this time, you might have a hard time trying to sell your home if you intended to move. If you failed to pay your creditors what they were owed, your property might be seized and sold. This often happens in cases where there are unpaid property taxes. Thankfully, most creditors will wait for the debt to be settled, but you do need to evidence your willingness to pay back the money that is owed.

How Can You Prevent A Lien?

So long as you keep up with your payments, you won’t have to face the prospect of a lien on your property. If you face difficulties making payments, your best course of action is to always speak to your creditor, as they may be able to offer a repayment solution that satisfies both them and yourself.

So, when it comes to the IRS, for example, you can sometimes avoid a tax lien by getting in touch with them. You might also contact us, as we can give you advice on reducing your tax liabilities.

How Can You Remove A Lien?

There are a number of options open to you.

Pay it off: The sooner you pay off your debts, the sooner your lien will be released. It might be that a repayment plan with your creditor will help you pay back the debt sooner, or you might be able to raise finance to sort the issue.

Negotiate with your creditor: Not all creditors are unreasonable. If you can’t afford to pay back all the money that is owed, but can at least afford to pay some of it back, you might be able to come to a reasonable agreement with your creditor.

Dispute the lien: If you don’t agree with the lien that is placed against your property, you do have the right to dispute it. It is important to seek legal advice, however, as you want to make sure you have a valid case before pursuing legal action. Otherwise, you would incur more costs and push yourself further into debt.

Finding Help

If you are struggling with unpaid debts, seek assistance from a debt-relief charity near you. The sooner you receive help, the sooner you will be able to take the necessary steps to alleviate your debt situation. This should then reduce the risk of a lien being placed on your property.

If you already have a lien on your property and you’re hoping to sell it, enlist the services of a real estate agent with lien experience to help you sell.

Ask for financial help too. It might be that somebody you know can help you pay off your debt, or your creditor might have a solution that works for you.

And seek professional help with the lien. In the event of a tax lien, we can advise you further. You can find out more information here, so give us a call if you require assistance.

The sooner you get help, the sooner the burden of a property lien will be lifted from you.

 

It’s not always easy to manage your taxes. You can find them difficult to handle, especially if you manage to get behind on paying them. When you’re having problems with your taxes, claiming available tax relief can help you to relieve the pressure so that you can breathe again. Tax relief is any program or scheme that allows you to reduce the amount of tax that you owe, which could include property taxes, income tax, and other types of tax that you are required to pay. This article is designed to give you tax relief help so that you can deal with any problems you are having with your taxes.

Tax Relief When You Owe the IRS

There are a few ways you could seek tax relief when you owe the IRS. What you decide to do might depend on whether you need more time to pay your bill or you’re unable to pay it at all. When you’re looking for more time to pay your bill, a payment plan could be the solution that works for you.

The IRS offers short-term payment plans of 120 days or less, or long-term payment plans, which last more than 120 days. With a short-term payment plan, you can owe a maximum of $100,000 and it is free to apply, with the option of paying through automatic withdrawals from your checking account, by check, money order, or by credit or debit card. Long-term payment plans can be for up to $50,000, with fees of up to $225 to apply, depending on how you choose to pay and which method you use to apply. The cheapest method is to apply on the IRS website.

If you choose tax relief via a payment plan, interest and penalties for late payment will still accrue until you have paid off what you owe.

Another option when you owe taxes to the IRS is an offer in compromise. Using this option, you can pay less than you owe if you can’t pay your taxes or if paying your bill will mean you experience financial hardship. This option is not as easily accessible, with only around half of requests accepted, but getting professional help with tax relief can help you. You will need to fill out IRS Form 656-B and pay a non-refundable $205 fee and initial payment.

Finally, you can ask to have your account marked as Currently Not Collectible. This indicates that you can’t pay your taxes or your living expenses. It is a temporary solution, and you will have your finances reviewed each year to see if your income has improved. It also only puts your tax on hold. It doesn’t make it go away, and the IRS might file a tax lien.

Tax Relief on State Taxes

If you are struggling with state taxes, there may also be tax relief help available for you. Many states handle tax relief in a similar way to the IRS, but each state has different rules and tax relief processes. When you use tax relief experts to help you, you can navigate the options available in your state. If you want to find out more information, you can check your state’s website.

Tax Relief on Property Taxes

Some people may be able to get tax relief help with their property taxes. For example, in New York, property tax relief is automatically applied for those who meet the criteria. Most states offer property tax relief based on homestead exemptions, providing relief for homeowners who claim their primary residence in that state. Some states might have property tax relief programs based on other factors, such as the age or the income of the homeowner. If you want to claim tax relief on your property tax, you should look at your state’s website to find out what is available.

Tax Relief for Expatriates

Another type of tax relief that is available is tax relief for expatriates. American citizens living and earning money outside of the US still have an obligation to pay tax in the country. However, they have a tax relief of $105,900, which they can apply for through the Foreign Earned Income Exclusion. This means that they only need to pay for any money that they earn above the exempt amount.

There are various forms of tax relief that you can benefit from, both before you find yourself struggling to pay your bills and when you start experiencing problems. With help from tax relief experts, you can address your issues.

Both individuals and businesses have experienced the impact of the COVID-19 outbreak. The Coronavirus Aid, Relief and Economic Security (CARES) Act was signed into law to provide financial support during the public health crisis. The Act builds on two pieces of legislation previously passed to offer more support to businesses and individuals. The changes include alterations to tax policy. But who can benefit from the CARES Act? There are several parts to the bill, which are designed to help individuals earning at different levels and businesses too.

The Recovery Rebate

About half of the tax cuts are accounted for by the recovery rebate for individual taxpayers. This provides $1,200 refundable tax credit for individuals or $2,400 for joint taxpayers, as well as $500 for each child. It is credited against tax liability and refundable for those with no liability to offset, so the rebates won’t be counted as taxable income. The rebates are calculated using 2019 tax returns or 2018 tax returns if they haven’t been filed. After filing a 2020 tax return, those who are eligible for a larger rebate can claim the difference.

The rebate phases out at 5 percent per dollar of qualified income, or $50 per $1,000 earned for:

  • $75,000 for singles
  • $112,500 for heads of households
  • $150,000 for joint taxpayers

It phases out entirely for single taxpayers with no children at $99,000 and $198,000 for joint taxpayers. Dependent children under age 17 are taken into account for this purpose. Those with no income or very little income are still eligible for the rebate, as long as they are not a dependent of someone else and have a work-eligible SSN.

Seniors whose income comes solely from Social Security, veterans whose income is from disability payments and people in similar situations are eligible if they are not a dependent of anyone else. The rebate can be based on Form SSA-1099, Social Security Benefit Statement or Form RRB-1099 to help seniors. However, seniors should still file their 2019 tax return as soon as they can to receive their rebate as quickly as possible.

So how do you get your rebate? Most people will not have to do anything to benefit from this tax relief. As it will be based on your tax return for 2019, or for 2018 if you have yet to file your 2019 return, there is no need to apply for anything. Even if you do not owe any tax due to low income, you will be eligible. If you have not filed your 2019 tax return yet, you should do it as soon as possible.

Business Benefits from the CARES Act

Most of the remaining tax cuts from the CARES Act go to businesses. Employers can claim a 50% refundable payroll tax credit on wages paid up to $10,000. Businesses that have been affected by shutdowns during the health crisis and those who have experienced a decrease in gross income compared to last year are eligible for the credit. It is to be used for employees who are still employed by the company but are not currently working due to the crisis if a business has more than 100 employees. If there are 100 or fewer employees, it can be used to pay all employee wages.

Businesses also benefit from an employer payroll tax deferral. Another benefit to businesses is that restrictions from the Tax Cuts and Jobs Act (TCJA) have been loosened. Active losses to pass-through businesses can be offset against other forms of income, with no limit in place. This will primarily benefit high-earning households, with incomes over $1 million. Other benefits to business include looser limits on net operating loss carrybacks and interest deductions. Employers and self-employed people can also delay the payment of their Social Security taxes, which will then be due to be paid over two years. This measure is available to all businesses, regardless of whether the crisis has affected them.

While businesses see many benefits from the tax relief measures in the CARES Act, individuals also gain some help. Almost half of the money spent as a result of the Act will go to helping low and middle-income individuals and families keep their finances boosted during this difficult period. If you are eligible for a rebate, you will automatically receive it, so you don’t need to take any action. Filing your 2019 tax return, if you haven’t already done so, is a sensible thing to do.