Fredrick James-Educating the Masses to Help You Save On Taxes

Posts Tagged ‘tax return’

Tax planning for Average Joes? You bet!

Many people don’t think they make enough to worry about tax planning, but what they don’t realize is no matter what your income level, tax planning can help you make adjustments that will significantly reduce your tax liability.

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Earlier we discussed the tax implications of discharged debt and that the tax code, at face value, considers discharged bad debt (absent of any special exceptions) as taxable income. But of course, nothing is as simple as that in the world of Federal tax laws, so let’s delve into a few of the different ways this debt is viewed by our government.

There are two general categories for discharged debts: consumer loans (credit cards, automobile loans, mortgages) or business related loans (bonds, commercial mortgages, equipment loans). Each type is treated slightly differently when it comes to income tax recognition and/or exclusion. Today we’re going to cover the personal or consumer related loans.

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The bleak economic environment over the past couple of years has resulted in a wave of credit defaults & foreclosures striking many individuals and small companies. In addition to dealing with stress and damaged credit scores, there is something even more sinister lurking in the shadows waiting to attack unsuspecting debtors…good ol’ Uncle Sam.

At first, it may not make sense that the IRS would be concerned with a debtor’s written off debt. But the tax code is quite clear in stating that (under many circumstances) discharged debt is considered taxable income. This fact may leave you scratching your head and saying to yourself, “What?!? If I don’t have the money to pay off my debts, then how can I pay income taxes on my discharged debt? It makes no sense to me!”

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Today people have more choices than ever before when it comes to making a living. Even those who keep their regular full time positions as employees are taking on side work as independent contractors and some are choosing to make the leap to full time self employment or starting their own small business.

Make sure you have your “parachute” packed when making the leap from employee to sole proprietor!

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I hate to be the bearer of bad news, but the time for putting off your business tax return is over. But, of course, you’ve already turned in your paperwork to your Accounting professional and you’re all set to go because you know corporate and partnership tax returns are due September 15, 2009 (assuming an extension was filed), right? So there’s no need to also mention that individual tax returns are due October 15, 2009 (again assuming an extension was filed)? Uhhh, riiiggghht…

Doh! I forgot to file my taxes!

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With unemployment rates Nationwide reaching 9.7% in June 2009, and here in Tampa bay area topping the charts this month at 10.4%, in combination with a dismal housing market many homeowners are facing the grim reality of being stuck between the proverbial rock and a hard place; sell at a loss or default on your loan. Unfortunately, even in these situations there are tax issues that can haunt you down the road…just when you think you’ve gotten through the toughest part of your ordeal.

Obviously this isn’t going to be the sunniest blog I’ve posted, but my hope is that readers can use the knowledge I’m sharing to empower themselves; an important step toward starting the financial and emotional recovery process.

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So today is Tax Day and as the final return is filed, the last client steps out the door and we all sit back to congratulate ourselves on a job well done, it is also the day we launch our new Blog!

Because we are a progressive accounting firm that believes in utilizing the latest tools and technology to help us educate our clients and improve their lives, it was a natural fit to settle in here.

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