How do Taxes Work?

What is Income Tax?

Income tax, is a taxed placed directly on the income of a citizen. It is typically based on the annual income, and is given to the government.

Why Are Taxes Legal?

Tax Day

In the beginning of every year, there is “Tax Day” in April which you may know about if you have a job. Tax Day is the deadline for workers to report their income and expenses to the IRS, and employers also report how much they paid each worker. The IRS compares these numbers to make sure they’re accurate.

If you don’t have enough money that was withheld from your income to cover the amount, you have to “pay in” the remaining amount. Often, individuals wind up with too much withheld from their income, so they receive that money back as a refund from the government.

History of Taxes in America

Taxation first began when the English first came to America. The British were taxing Americans on imports like tobacco, tea, spices, and even glass windows at one point. The colonials protested against the British taxation policy in the 1760s, which ultimately led to the American Revolution. You may be familiar with the Boston Tea Party.

The colonials were facing a problem with the British taxation because they proposed that parliament had no right to tax Americans if they were not represented in parliament. Once America gained its independence, they created a new form of taxation and government.

Tariffs

Tariffs were the first form of taxation that Americans used to deal with. It played major roles in the trade policy and economic history of America. Tariffs were the largest source of federal revenue from the 1790s to the eve of World War I. After that, it was surpassed by what we know as the income tax.

Tariffs offered many things for the American government. Proposed by Alexander Hamilton who was the US Secretary of the Treasury at the time, he issued the Report on Manufacturers which talked about applying tariffs in moderation. He sought out the tariffs with three things in mind:

1. To protect the American infantry for a short term until it could compete
2. Raise revenue to pay the government’s expenses
3. Raise revenue to directly support manufacturing through bounties/subsidies

Excise Tax

Federal excise taxes are only applied to specific things on the market. The funds are only used to activities or other objects related to the following items:

• Motor fuels
• Tires
• Telephone use
• Tobacco
• Alcohol

Income Tax

The origination of the income tax that we now know today started as a way to fun the war efforts. After some federal struggles with the legal jurisdiction of the income tax and the use of it in both World Wars. While the government had been mostly funded by tariffs until World War I upon imported goods, it became a minor portion of the federal revenue. On top of the general income tax, the government also collects taxes for social security and Medicare.

Why Do Americans Dislike Paying Taxes?

In short, Americans complain about them because they truly don’t understand what they are for, or how they are used. According to a poll, 57% of Americans said they pay too much in taxes, while another poll demonstrated that only 45% of Americans pay the federal income tax. So, why do we hate them?

It can be frustrating to see a large chunk of money removed from a hard-earned paycheck. We think about all the things the money could’ve been used for: bills, rent, a much-needed vacation, a repair. We hate them because there are many arguments about the unfair rates of taxes people pay based on income.

In the end, Americans need to be educated on taxes. The chances are the average American only touches on taxes in high school during an economics class. There are no classes in college that students voluntarily take, and there is no mention of it prior to elementary school. The best thing to do is to truly educate students or educate your children. Without tax knowledge, not only are Americans unaware of the taxes they pay, but they are also unaware of the promises politicians are making when they run for office. Knowing could eliminate half the battle.

State and Federal Taxes

Many, if not most, American citizens are required to file for both state and federal taxes each year before mid-April. Unless the day falls on a weekend or public holiday, both state and federal taxes are typically due by April 15^th. But do you know the difference between state taxes and federal taxes are, or why you pay them? And do you know how title loans can help you pay these payments with an emergency cash title loan?

What Are State Taxes?

State taxes, also known as a State Income Tax, is a portion of income that goes towards the funding of the individual state the taxpayer lives in. Different states around the U.S. have varying charges when it comes to the taxes residents of that state are required to pay.

Since State Income Tax is dependent on what the individual’s income is, American citizens who make a larger sum of money per-year typically have to pay more taxes than those American citizens who do not make as much money per-year. Because of this, State Income Taxes are broken up into what is known as “brackets.” People who make a larger amount of money have a higher percentage in their bracket, and those who make less have a lower percentage in their bracket.

If you don’t know what the state tax rate is for your area, you can check out this page which has a list of some recent state individual income tax rates and brackets.

What Are Federal Taxes?

Federal taxes, also know as Federal Income Tax, is also a portion of income, but this portion contributes to the overall funding of the country. This tax payment does not vary from state to state, but it does depend on how much money each taxpaying American citizen makes per-year.

Like State Income Taxes, Federal Income Taxes are also broken up into brackets. Those who make usually more pay more according to their bracket, and those who make less have a lower percentage of income due to the federal government in their bracket.

What Are the Tax Brackets?

Most people believe that tax brackets are determined by how much money one makes. However, that is not true. A tax bracket is the tax rate paid on the largest amount of taxable income. Therefore, money earned is directly affected by the tax rate and the taxes had on any additional income.

So, What Tax Bracket Am I in?

Here are some examples:

For instance, if the taxable income is $9,200, that is less than $9,325; therefore, the tax rate is 10%. Meaning about $920 in income tax.

It gets tricky when one starts making more money.

For instance, if taxable income is $26,500. That is less than $37,950, which means that the tax rate is 15%. Now, this does not mean that all the income is taxed at 15%.

One must pay the designated 10% on the first $9,325 and then will pay 15% on what is leftover.

$9,325 x .10= $932.50

$26,500 -$9,325= $17,175

$17,175 x .15= $2,576.25

Total income tax on is $2,576.25. If the government were to tax income of $26,500 at 15%, one would be paying $3,975 in income taxes. So, the method the government now uses to calculate the tax brackets and income taxes, may actually save money in the long run.

What if someone has over $100,000 in taxable income?

If the taxable income is $147,000, for example, then one would have a 28% tax rate because the taxable income is less than $191,650.

One will pay the designated 10% on the $9,325. They will pay 15% on the amount between $9,325 and $37,950, 25% on the amount between $37,951 and $91,900, and lastly, they will pay 28% on the amount over $91,901.

$9,325 x .10= $932.50

($37,950- $9,325) x .15= $4,293.75

($91,900- $37,950) x .25= $13,487.50

($115,000- $91,900) x .28= $6,468

$932.50+ $4,293.75+ $13,487.50+ $6,468= $25,181.75= total income tax.

If someone were taxed 28% on a taxable income of 28%, they would be paying $41,160 in income taxes.

Follow this same method to determine income tax, based on taxable income. The rate is based on your fining status and income. There are several sites that you can use to automatically do the math, quickly and easily.

What Are Other Common Types of Taxes?

State and Federal Income Taxes are probably not the only form of tax payments you make.

Some other common forms of taxes that American citizens usually pay are:

• Sales tax
• FICA (Federal Insurance Contributions Act)

Sales tax is a tax on almost everything purchased. However, some states do not have a sales tax—which means that there is no extra charge when residents of these states purchase groceries, movie tickets, or mostly anything else in the state.

FICA is a portion of a paycheck that is taken out to cover Social Security and Medicare taxes. FICA taxes can also be called, payroll taxes, because the money is taken out of an individual’s paycheck.

How are Tax Returns Calculated?

When you are paid by your employer, you may notice that there is a significant portion of your paycheck missing. This is because the federal government has implemented a way to make sure that they are getting money: withholding. Withholding, is the amount that is “withheld” by an employer and given to the federal government as a portion of income tax. The money from your paycheck is deposited from your employer, to the Federal Reserve Bank.

Now, the amount you get back on your tax return is determined by a number of factors. The number of dependents you claim, your taxable income, your filing status, and the credits and deductions you are eligible for, all determine what your tax return will be.

It is possible to get 100% of your taxes back if you make less than a certain amount each year, according to filing status:

• Single, and making less than $9,370
• Head of household, making less than $12,000
• 65+, making less than $13,450
• Married, filing together, under 65, making less than $18,700

Your tax return is a refund of excess amounts you’ve paid to state or federal governments within the last year. The percentages withheld range from 10%-35%, based on income. If you claim any deductions, those amounts come out of your income and may therefore reduce your tax return.

The idea of taxes can be overwhelming, especially if you don’t know what any of the terms mean. If you plan to live in the United States, it is important that you learn the basics. Money will be taken out of each paycheck you receive. You can opt to have more withheld per check, so that your tax return is larger, or not. If you do not trust yourself to make all the necessary calculations, concerning taxes, take them to a licensed tax preparer and pay to have them do everything correctly so that you get exactly what you are owed.

How Do You Calculate Taxes as a Contract Worker?

If you’ve worked for a business your whole life, but you’re considering striking out on your own and becoming an independent contractor, you may be wondering how your life will change. One major difference will be the way you calculate taxes. Contract workers not only have different tax responsibilities, they also have different deductions available to them. Before you calculate your taxes, you need to determine if you qualify as a contract worker.

Note that the best way to determine the exact amount you owe is to contact a tax professional who specializes in something like independent contractors or small businesses.

How Do I Know if I Qualify as a Contract Worker?

You qualify as self-employed and must pay the self-employment tax if you are:

• A Sole Proprietor of a business or trade
• An Independent Contractor
• Part of a Partnership that carries on a business or trade

Additionally, you’ll need to meet a few other criteria:

• Behavioral Control: You need to direct and control your own work.
• Financial Control: You need to have direct control over business and financial aspects of your job, setting your own rates for example.
• Type of Relationship: The company that pays you mustn’t give you employee benefits or deduct taxes from what they pay you. Nor can your service be an essential, regular part of their business.

If you meet these requirements, you may qualify as an independent contractor. Your income from self-employment will also need to be at least $400, after deductions, for you to be required to pay the self-employment tax. Once you’ve determined that you need to pay taxes as a contract worker, you’ll need to figure out your tax obligations.

How Do I Calculate My Taxes as an Independent Contractor?

You’ll need to pay all the taxes you paid as a regular employee. In addition, you’ll need to pay the employer portion of the Social Security tax and the Medicare tax. As the name may suggest, the employer normally pays this tax. However, because you don’t technically have an employer, as an independent contractor, you are responsible for that portion of the tax.

Your total obligations for Social Security is 12.4% of your income. This includes both your employer and your employee portion. Your Medicare obligation is 2.9%. As mentioned, normally your employer is responsible for half of the 15.3%, total, of these two taxes. Note that the “employer” portion of these taxes can be deducted as an expense. And you’ll need to calculate your income before you determine the actual dollar amount that you owe.

How Do I Calculate My Income for Tax Purposes as an Independent Contractor?

In a sentence, you calculate your income by taking all the money you made and subtracting all the expenses you had. What’s left over is your taxable income. Naturally, it isn’t as simple as that. Some business expenses are deductible and some are not. Some expenses may be only partly deductible. For example, if you take a trip for work but spend part of the time on vacation, you’ll need to determine what percentage of each expense, travel, hotel, etc. was work-related vs. vacation-related. Once you’ve done that, you’ll need to figure out if any of those expenses were tax deductible. Another complicated business expense is a home office. If you have a home office, you can potentially deduct a portion of things like:

• Mortgage and property taxes
• Utility bills
• Homeowner’s insurance
• Maintaining and updating the home office space
• 2^ndphone line devoted to business calls.

Once you’ve sorted the percentages of each business expense that is deductible and deducted it from your gross income, you’re left with your net income. You’ll use this to calculate how much you actually owe taxes on.

Unfortunately, it’s more complicated than that. Deductions can fall into a number of different categories. Two of the major categories are above-the-line deductions and below-the-line deductions. Above-the-line deductions reduce your Adjusted Gross Income (AGI). Below-the-line deductions reduce your taxable income.

Reducing your taxable income is less efficient than reducing you AGI. For example, when you reduce your taxable income by $,1000, it will only reduce it by $1,000. In contrast, reducing your AGI by $1,000 can potentially reduce your taxable income by more than $1,000. Reducing your AGI with above-the-line deductions can increase other tax benefits that get phased out at higher taxable incomes.

And it gets even more complicated. Independent contractors normally pay taxes quarterly. This means that you’ll have to figure your taxes four times a year, rather than once. This is called paying Estimated Taxes. These payments cover your income tax and your self-employment tax. If you fail to pay a sufficient amount through withholdings (if you also have non-self-employment income) and estimated tax payments, the IRS may charge you a fee for failing to cover your entire tax liability.

This, coupled with complicated tax laws, is one of the reasons many contract workers opt to have their taxes handled by a tax professional. They will be more familiar with the specific laws governing how taxes need to be paid. It removes the burden of determining the tax obligations from the independent contractor and allows them to focus on income-generating activities.

Hopefully now you know a little more about paying taxes as an independent contractor. There’s a lot of great resources online that can help you determine exactly what the different types of deductibles are. Then you can always take advantage of a tax professional’s in-depth knowledge to help make sure you are not only paying the correct amount of taxes, but also maximizing your deductions.

Different Ways to File Your Taxes

Filing your taxes doesn’t have to be hard. There are 3 ways for you to successfully file your taxes. If you start one process, and realize that it is simply not working for you, switch to another one.

Your ability to do your taxes yourself, is not based on how much you make. Your income does not make your taxes difficult to maneuver through. Your taxes can be complicated depending on how you’ve made your money in throughout the past year, and other things going on in life. If you own a home, own a business, are enrolled in school, investments, are an in-home employee, etc. you may have some additional issues with trying to file your taxes yourself.

How Can I File My Taxes?

1. By hand
2. Through a certified tax software
3. Hire a tax professional

How Do I Know What Tax Form I Need to File My Taxes?

Use form 1040 if you:

• Have taxable income greater than $100,000
• Have a certain type of income (shareholder in an S corporation, self-employment income, unreported tips, dividends from insurance policies, or beneficiary of an estate/trust)
• Owe household employment taxes
• Itemize deductions or can claim certain tax credits/adjustments to income

Use form 1040A if you:

• Have taxable income less than $100,000
• Have income from wages, salaries, tips, interest, capital gain distributions, taxable scholarships/grants, IRAs, taxable social security, etc.
• Do not itemize deductions
• Do not have an alternative minimum tax adjustment on stocks
• Can only claim IRA deductions, student loan interest deductions, tuition/fees deductions, and educator expenses deductions as adjustments to income

Use form 1040EZ if you:

• Have taxable income less than $100,000
• File as single, or married filing jointly
• Claim no dependents
• Claim no adjustments to income
• Only claim Earned Income Credit (EIC)
• Have income from wages, salaries, tips, unemployment, taxable scholarships/grants, and taxable interest less than $1,500
• Are not in a Chapter 11 bankruptcy case filed after 10/16/2005
• Don’t owe any household employment taxes

How Long Does it Take to File?

There is not a set amount of hours that you have to file your taxes. Depending on your adjustments and claims, you can spend more than a few hours on the entire process. You will need to write everything in, or plug everything in, which is a tedious process. Online tax software will help to decrease the time it’ll take you to file manually, and will make most of the calculations for you. But you should at least set aside 3 hours to file via tax software, and more than that if you’re filing manually. If you decide to have a professional file your taxes for you, time will still need to be allotted. They will probably not take as long, because this is what they do for a living.

How Much Does it Cost to File My Taxes?

To file by hand the cost is free. You can get the paperwork from your local library or post office. They are also posted on the IRS website. There will be an instruction sheet on how to properly fill out the forms in the package. You will, however, need to pay for postage costs to send your documents.

To file your taxes via an online tax service, there are generally fees associated with the service. These services generally offer 2 packages: simple and advanced. There is a price difference between the two options. The simple version will typically cost up to $50. The advanced version is usually more than $50.  Most of these services will tell you what you will get back on your state and federal returns after you click submit on their forms.

To file your taxes through a hired professional tax preparer, it will typically cost you $100, or more anywhere you go.

When are Taxes Due?

You generally have to file your taxes by April 15^th each year. If that day happens to fall on a Sunday or a National holiday, that day is moved to the next appropriate day.

When Will I Get My Tax Refund Back?

If there is an issue with your filing, your refund can take longer to be issued to you. For instance, if your paperwork is incomplete, your math is wrong, your social security number doesn’t match, you filed too early or too late, you made an amendment, your direct deposit information is wrong, or you filed via a paper application, there is a chance that your tax refund can be delayed. Generally the IRS processes and issues tax refunds within 21 days.

The process to filing your taxes should be just a little easier for you now. If it is not, do some more research, and take in all of the advice you possibly can.

What Do I Need to File My Taxes?

Personal Information

• Your full name
• Your spouse’s full name (if applicable)
• Address
• Social security number or tax ID number
• Your spouse’s social security number or tax ID number

Dependent(s) Information

• Birthdates
• Social security number(s) or tax ID number(s)

Sources of Income

• W-2 forms from all employers you worked for in the past year
• W-2 forms from all employers your spouse worked in the past year (if filing a joint return)
• Unemployment income (1099-G form)
• Retirement income (1099-R form for pension/IRA/annuity income)
• Income from local and state tax refunds from the prior year
• Investment income information (i.e. interest income, dividend income, income from stocks and bonds, and income from foreign investments)
• Rental property income
• Social security benefits/RRB income (forms 1099-SA, RRB-1099)
• Miscellaneous income (i.e. jury duty, lottery, gambling winnings (form 1099-MISC) for prizes and awards, form 1099-MSA for medical savings accounts distributions)
• Record of alimony paid/received with ex-spouse’s name and social security number

Deductions

• Educational expenses
  • Form 1098-E for student loan interest paid
  • Form 1098-T from educational institutions
  • Records of scholarships received
  • Itemized receipt of qualified education expenses
• Childcare expenses
  • Receipts of wages paid to a babysitter
  • Receipts of fees paid to a licensed care center for an infant or toddler
• Adoption costs
• Health insurance
  • Form 1095-A for insurance plans through the Marketplace
  • Form 1095-B/C for insurance through any other source
• Charitable donations
  • Receipts of non-cash charitable donations
  • Sum of miles drives for charitable/medical purposes
  • Cash amounts donated to places of worship, schools, or other charitable organizations
• Medical expenses
• Home ownership (all 1098 forms)
• Work expenses
  • Receipts for classroom expenses (grades K-12)
  • Job-hunting expenses
  • Employment related vehicle expenses (tolls, mileage, gas, parking, etc.)
  • Employment related expenses (dues, uniform costs, travel, etc.)
  • Receipts of moving expenses not reimbursed by employer
• Tax preparation fees
  • Receipt of amount paid for preparation of last year’s tax return
• IRA/HAS contributions
• Federally declared disaster
  • Check FEMA site

Direct Deposit Information

• Your bank’s name
• Your banks’ routing number
• Your personal account number

Now you are ready to file your taxes on your own, or hand them off to a licensed tax preparer. Some online tax filing services and agents will offer you other tips and other ways to maximize your return. Take all of the advice you can.

How to Claim Dependents on Taxes

Claiming dependents could reduce the amount of your taxable income. A large part of filing taxes is figuring out how to claim dependents and who qualifies as a dependent.

A dependent is a person other than yourself that you can claim is “dependent” on you. Though it may seem rather straightforward, there are plenty of rules and qualifications for who you can and cannot claim as dependent. There are two types of dependents: a qualifying child, and a qualifying relative.

Step 1: Figuring Out Who Counts as a Dependent on Taxes

The first thing to do is to figure out who counts as a dependent on your taxes. Dependents are typically children or a relative that is receiving more than half of their financial support from the person claiming them on their taxes. These dependents must be U.S. citizens, permanent residents (aliens), or U.S. nationals. They must have a Taxpayer Identification Number (TIN) and can only be claimed as a dependent by one person.

Even if a potential dependent meets all of the requirements listed above, there are rules set in place to determine whether they can be claimed. Here are the following requirements for qualifying as a dependent—and the rules surrounding the claims on a tax return:

Requirements for Claiming Children

• Age: The child must be 18 or younger, or under 24 if they are a full-time student attending school at least five months out of the year. The child must be younger than the parents unless the child has a disability.
• Relation: The child must be related to the tax filer—by blood or by relation (i.e., step children, adopted children, foster children, or even grandchildren).
• Duration of Stay: The child must live with the parent for more than half of the year.
• Divorce/Separation: Only one parent can claim the child on their taxes.
• If a Child Files a Joint Return: If a child lives with you, is married, and is filing a joint tax return—that child cannot be claimed on your taxes.

Requirements for Claiming Other Relatives

• Duration of Stay: The person must live with you all year long.
• Potential Dependent’s Income: The gross income of a potential dependent cannot be over $4,050.
• Financial Support: You must have provided more than half of the financial support for this relative.

If you still have any questions check out Publication 501 for more information and details about the rules and regulations surrounding claiming dependents.

Step 2: Figure out What Forms to File When Claiming Dependents on Your Tax Form

Once you have figured out who your dependents are, you can begin to file the proper tax forms. To file income taxes, most people will have to use some variation of the 1040 form—1040, 1040A, or a 1040EZ form (1040EZ doesn’t allow filers to claim dependents). So for the purposes of claiming dependents, it may be best to stick to a 1040 or a 1040A form.

Step 3: Correctly Fill in the Right Information When Claiming Dependents

Here is the right way to fill out tax forms when claiming a person or multiple people as dependents:

Putting In Dependent Information

On the tax form—the first and second page—you will be given a few columns where the dependents you are claiming will need to be accounted for. In these columns, you will have to list the name and the Social Security Number (SSN) or TIN for each dependent. You will also have to state how the dependent(s) is/are related to you.

Claiming Exemptions

The next part is adding up the amount of dependents and claiming exemptions (these reduce the amount of taxable income—like deductions). If a person is married, they get one exception for themselves, one for their spouse, and one exception for each dependent. Once the number of exemptions is figured out, that number needs to be filled out on the second page.

The Child Tax Credit

The last part of claiming dependents on taxes is to check whether your dependents qualify for a child tax credit. This tax credit will reduce the amount of taxes paid straight from your tax return. In order for a dependent to qualify, they have to be a dependent child who meets the requirements for children dependents (found in step 1).

When filing taxes, it is important to know who you can claim as a dependent and how to include them on your taxes. Filing this information correctly on a tax form can make a huge difference in how much money you get back on your tax return. If a person is supporting other family members, they deserve to keep some extra money for those expenses, especially if they have children.

To make sure the tax system is fair to every American, it is important that everyone knows what dependents, exemptions, and child tax credits are—as well as how they work. There are many ways to file dependent tax forms, and although filling out one yourself is fairly easy—it doesn’t hurt to check out a professional business or use a professional tax filing software to get the most accurate tax forms.

Rules, Risks, and Warnings

Claiming dependents doesn’t come without its risks though, so maintain caution when doing so. First off, you cannot claim a spouse as a dependent, not even under the qualifying relatives section, so make sure to avoid accidentally doing so. Secondly, only one person can claim the same individual as a dependent. If two people try and claim the same person as a dependent, it may result in an audit.

In an audit, the IRS’s automated system will go over your tax forms and identify potential duplicate social security numbers. If any one social security number is claimed as a dependent on two separate forms, they generally send an automated message to both parties informing them of the error. If you receive one of these messages, make sure to double check your form and make sure you have the social security numbers right on your claimed dependents. If all is in order, then you’ll need to move to the next step.

After confirming your own sheet is in order, check with family members and others who could have potentially claimed your dependent as their own. If you cannot find anyone, the dependent’s social security number may have been compromised, and you’ll need to take the proper steps to resolve that situation. If you find out who has, discuss with them who should rightfully get the claim, and if neither can decide, the IRS will get involved.

The IRS has tie-breaker rules regarding who truly gets to claim the person in question as a dependent. These rules are strict; usually only one person qualifies and is allowed the claim. Those who fail the claim are disqualified from the exemptions, and also suffer payment penalties for allowing the dispute to continue. This process also helps with stolen social security numbers, but there are other dangers with that process that must be dealt with separately.

Overall, claiming dependents on your taxes is a great way to save yourself money on your income taxes. More tax-free income is always a welcome bonus, and dependents give you just that. Make sure you review your qualifications carefully, give accurate information on your claims and be prepared to handle the hurdles if problems arise. If you’ve followed these preparations, you’ll be all set to receive those sweet, sweet exemptions.

The Difference Between Claiming 1 and 0 on Your Taxes

Filing taxes every year is an important obligation. If it’s done incorrectly, you could have too much taxes withheld or too little, which determines whether you’ll get a refund or not. So, what’s the difference between claiming 1 and 0 on taxes, and which one is the better option for you?

Before jumping into tax terms, make sure you at least understand the difference between allowances and exemptions:

• Allowances – Allowances are marked on your W-4 when you start new employment, and the amount you mark will depend on your situation like number of jobs you have, marital status, number of children, etc. You can adjust them at any time to make sure you have the correct amount of taxes taken out.
• Exemptions – Exemptions reduce the amount of income being taxed and is claimed on the IRS Form 1040. You can claim yourself, your spouse, and each qualifying dependent. If someone claims you as their dependent, you cannot claim yourself.

What’s the Difference Between Claiming 1 and 0?

The difference between claiming 1 and 0 on your taxes will determine when you will be getting the most money: with every paycheck or in one lump sum during tax season. Each allowance you claim lowers the income subject to withholding. For example, if you have 1 job, you can either claim 0 or 1.

Claiming 1 on Your Taxes

If you prefer to receive your money with every paycheck rather than waiting until a certain time every year, claiming 1 on your taxes could be your best option. Claiming 1 reduces the amount of taxes that are withheld, which means you will get more money each paycheck instead of waiting until your tax refund. You could also still get a small refund while having a larger paycheck if you claim 1. It just depends on your situation.

If are single, have one job, and no dependents, claiming 1 may be a good option. If you are single, have no dependents, and have 2 jobs, you could even claim both jobs on one W-4, and 0 on the other.

Claiming 0 on Your Taxes

When you claim 0 on your taxes, you are having the largest amount withheld from your paycheck for federal taxes. If your goal is to receive a larger tax refund, then it will be your best option to claim 0. Typically, those who opt for 0 want a lump sum to use as they wish like:

• Pay bills
• Go on vacation
• Put towards a loan

If you claim 0, you should expect a larger refund check. By increasing the amount of money withheld from each paycheck, you’ll be paying more than you’ll probably owe in taxes and get an excess amount back – almost like saving money with the government every year instead of in a savings account. You might also need to claim 0 in a few different situations:

1. Your parents still claim you as a dependent – If you are employed (whether 16 or 20), and your parents still claim you as a dependent, you might have to claim 0 on your taxes because you cannot claim yourself since your parents already do.
2. Other income – Another situation could be if you have other income where tax is not withheld like a self-employed job, contract positions, selling stocks, or interest on savings. To avoid owing taxes for those situations, it might be best to claim 0.

Should You Claim 1 or 0 on Your Taxes?

How much you claim will be determined by your lifestyle and living situations. As mentioned previously, things like marital status, children, number of jobs, and more can help you determine what you should claim on your taxes. The best option for figuring it out is to talk with your accountant or contact an IRS agent.

Don’t worry about claiming the wrong allowances on your W-4, either. You can revisit your W-4 either electronically or with worksheets provided by the IRS. People make changes all the time for reasons like:

1. Getting a second job

This is the most common reason that people have to adjust their W-4. Whether you have a home business or get another full-time job, you’ll want to change your W-4 to match it.

1. Spouse gets a job/changes jobs

Any change of household income will also require a different tax bracket for allowances. Based on the income change, it may be beneficial when one spouse claims the allowances over another.

1. Unemployed for part of the year

If you get laid off or stay unemployed for the remainder of the year, you may have too much tax withheld. But, if you are re-hired within the same year, you’ll have to adjust for the downtime.

1. You get married/divorced

Tying or untying the knot will change your tax rate – especially if both spouses work. Joint filing gives a lower tax rate and other deductions, so a divorce will also reverse the benefits. Your withholdings could be inaccurate if not adjusted properly.

1. You have a baby/adopt one

Having a child is a major tax event since you now have a dependent as an allowance. Adoptions also give you another tax credit. Either of these situations can reduce your withholding amount with the tax benefits, so you’ll want to adjust it.

Click here to file your taxes with TurboTax now

Where Does Your Tax Money Go?

Taxes are an important part of society. Almost all Americans have to pay taxes, and they may be wondering about the truth of where their tax money goes. The truth about taxes is actually not to shocking or surprising- tax money goes to help Americans all across the United States, who most likely also pay taxes. Different aspects of society receive different amounts of tax funding. Here is the truth about where our tax money goes.

Tax Money Going to Healthcare

This is the largest allocation for tax money- simply because it is one of the most expense cost that American’s face. In the United States there are three major branches of public funded healthcare:

1. Medicare- This program provides healthcare for those Americans who that are sixty-five or older, or who have a severe disability. Income here is not a factor. Medicare is funded by federal taxes.
2. Medicaid- This program helps households with very low income get access to healthcare. This is funded by both state and federal taxes.

*If a person is eligible for both Medicare and Medicaid they can get both forms of help.

1. CHIP- This is short for Children’s Health Insurance Program, as the name suggests, CHIP helps children of low income families get access to healthcare.

It may be hard to believe that these three branches of healthcare cost billions- but they do. This is simply because of how expensive healthcare is in the United States. As the costs associated with healthcare rise and wages stay stagnant, more and more American’s find that they need to use these programs to get the help they need.

Tax Money Going to Social Security

This is the second largest allocation for taxes in the United States. Social Security pays for retirees, and disabled Americans. The monthly payments are made to cover any expenses that they, and any dependents may have. This is something that many Americans need once they stop working. Nowadays most Americans rarely solely rely on Social Security to fund their retirement.

Tax Money Going to Defense and Security

It is not a huge surprise that this is the third largest allocation of tax money. Defense and security are an important part of America’s values and are reflected through the size and success of its military. These expenses can be broken down into two broad categories:

1. Internal Security- This protects the people who live in the United States.
2. External Security – This protects American military personal overseas. It also funds any military expenses for different operations that may happen.

Tax Money Going to Safety Net Programs

This is the fourth largest expense for taxes. Safety net programs help those who are low income- or unexpectedly lose their income. Here are all of the programs that exist in the United States:

• Unemployment- temporary income to help those who lose their job unexpectedly.
• SSI- Additional Social Security benefits for those of low income households (who are disabled or over 65).
• SNAP Benefits- Debit funding for low income households to buy food.
• Housing Assistance- Public housing developments, and funding for those who have very low income.
• TANF- Cash to low income family in hopes of helping them to find fair jobs.
• Pell Grants- Educational grants for low income students who are pursuing college.
• Child Nutrition – School programs that help low income children get breakfast, lunch and sometimes, dinner at school- for free.
• Job Training– Several employment programs for the general public- helps Americans connect with jobs.
• Child Care- Helps those with low income get access to child care- so they can work.
• WIC- Offers nutrition for pregnant women and children up to the age of five.
• Lifeline- Low cost phone programs,
• LIHEAP- Financial help for heating and cooling expenses.

Tax Money Paying For Everything Else

Although healthcare, social security, defense, and safety programs make a large part of the budget- there are other smaller expenses that taxes are used to fund:

Transportation

Taxes pay for the construction of roads, bridges, highways etc. They also cover any maintenance that is required every year.

Education

In the United States public schools from grades K through twelve get the majority of their funding from taxes (from property taxes to be precise). Taxes help do everything from paying teachers to paying for the administration.

Veteran Benefits

Some portion of taxes go to support those who fought for the United States. This support can range from additional income to publically funded support centers for veterans and their families.

The FDA

Also known as the Food and Drug Administration- the FDA handles the safety of all of the food and drugs that Americans consume. They test things out and then rule out its effectiveness and safety, they can also recall any products.

Government’s Debt

Some amount of taxes are allocated towards paying off any debt the government has.

When a person pays taxes they may be curious about where their taxes are going. They way taxes are allocated- for the most part- are simple and make logical sense. As a tax payer it is important to know and understand where that money taken out each paycheck is going. Taxes, essentially help pay for the function of American society, and they help support all Americans- in one way or another.

4 Ways to Lower Your Taxable Income

There are very few things in life that are completely inevitable no matter what you try to do but having to pay taxes are most certainly one of them. Everyone has to start paying them at some point or another in their lives. However, with a bit of the right sort of know-how and the right actions being taken, it is possible for you to noticeably reduce the amount that you pay on taxes every year. The following actions are 4 ways for you to lower your taxable income.

Increase the Tax Deductions You Use

Tax deductions are one of your absolute best friends when you want to lower your taxable income. They are one of the most commonly used methods by people in order to not have to cough up as much money to the government every year for taxes. You would be amazed at the kinds of things you can use to deduct the amount of taxes you have to pay. With the right knowledge of these deductions, you can save a truckload of money every year. You can use all kinds of things, ranging from (but certainly not limited to):

• Expenses for health care
• Personal property taxes (stuff like car registration fees)
• State and local taxes
• Job related expenses
• Investment related expenses
• Tax preparation fees
• Mortgage interest
• Gifts to charity (either monetary or physical items)

The three best tax deductions to go with for most people would be state taxes, gifts to charity, as well as mortgage interest.

Be Sure to Make Use of Tax Credits

Another one of the best ways to reduce how much money you are shelling out for tax payment every year is to use any and all tax credits that you can. Tax credits are an amount of money that can be subtracted from the amount of taxes that someone owes to the government. There are tax credits for all sorts of things, ranging from but not limited to:

• Earned Income Tax Credit
• American Opportunity Tax Credit
• Child and Dependent Care Credit
• Savers Credit
• Advanced Premium Tax Credit
• Lifetime Learning Credit
• Child Tax Credit
• Adoption Credit
• Energy Credits
• Credit for the Elderly or Disabled

One of the best and most used tax credits for people who might not be making a whole lot of money to begin with is the Earned Income Tax Credit. It is a credit that is meant to help lower to middle class households keep more money as long as they make less than a certain amount of money per year. The amount you may be able to get from it would vary depending on how much you are making, how many dependents you are claiming, etc. This credit can be worth up to $6,242.

Reduce Your Income

Another good way of saving money from paying taxes is to reduce your income. The less money you are making, the less money you will be taxed on. But, reduce your income? What do you mean? Who would want to do something like that? That is crazy talk! Insanity!

However, before you decide to go ahead and jump ship on this tip, just listen for a moment. Reducing your income does NOT mean taking a lesser paying job or making less money in general. No one on Earth would ever want to do that. However, there is a way to still make more money but not have it taxed by the government this year.

There are all kinds of useful ways for you to make adjustments to your gross income. By doing this, you can end up making less money every year on paper in a legal manner and in turn save quite a bit of actual money in the long run. Examples of reducing your income through adjusted gross income will include but are not limited to things like:

• 401(k) plan
• Traditional IRA
• Student loan interest
• Alimony paid
• Classroom related expenses
• Half of self-employment taxes that you pay
• Losses from sale or exchange or property
• Moving expenses
• Unreimbursed business expenses
• Healthcare savings account (HSA) deductions

Increase Withholding

Another way for you to pay less money in taxes (after everything is all said and done) is to use absolutely no tax credits whatsoever. While at first this method may seem rather counterintuitive, it may in the long run get you more money than you may have anticipated. You will likely end up paying more in taxes every paycheck, and although at first this will mean that you have less money to use on the important things in life, it means that come tax refund check time, you will be getting a noticeably larger refund than those who decided to opt for using tax credits instead. It is essentially a way of playing the long game instead of trying to keep all of your money right now.

Auto-Related Tax Deductions You Might Be Missing Out On

Don’t wait until April to begin thinking about your taxes. If you drive, there are things you do every day that could get you a tax deduction. Learn about these write-offs before you miss out!

April 15^th is not the time to start thinking about your taxes. There are things you are paying for all year long that could affect your return this season. You could even be driving your most valuable tax asset. There are many auto-related tax write-offs that you probably never knew existed, especially if you often use your car for work or business. Most personal use of your car isn’t tax deductible, but professional use certainly is. Your car might be able to make you more money than you would think.

Check out these auto tax deductions you definitely don’t want to miss out on. You might even do one or more of these things every single day.

Transportation Deductions

There are a lot of terms flying around in this section so let’s take a second to define some of them. According to the IRS’s Publication 463: Travel, Entertainment, Gift, and Car Expenses, your “regular or main job” is your dominant place of business. If you have two jobs, you will have to decide which job is your “regular or main job” and which job is your “second job.” Think about how much time you spend at each job, what kind of activities you do at each job, and the overall income you bring home from each place you work. Your main job is probably the place where you spend the most time, are the busiest, and make the most money.

Another term used here is “temporary work location.” This refers to any place you are assigned to work outside of your regular job. For example, if you work in the suburbs and are assigned to attend a one-week training session in the city, this city location would be considered your temporary work location for the week.

Okay, that’s it! No more terms! Now I have some good news: You can get some major tax write-offs for driving your car around for work or business purposes! Use your new fancy knowledge and check out why commuting to work can actually put money in your wallet.

• Claim the Commute to your Second Job

While the commute from home to your regular job is non-deductible, there is still a way to get some money out of your drive to work if you have a second job. If you work your regular job and your second job in the same day, the travel distance between your main job and your second job is tax deductible. Finally, a bright side to working two jobs in one day!

• Deduct the Commute from Home to your Temporary Work Location

Hey, another loophole in your commute being non-deductible! If the location of your regular job changes for one year or less, you can claim the travel distance between your home and this temporary work location. If unexpected circumstances require you to work at this other location for longer than a year, your commute is still tax deductible if your regular work location remains the same. So, as long as your employer expects to have you back at your main working location, you can continue to claim another location as temporary for tax purposes.

Bonus, if your temporary work location requires you to stay overnight, you have a bundle of other tax write-offs you can claim. For example, if your job requires you to travel to another state for a day to meet with a client and you must stay in this other state through the night, there are certain travel expenses you may be able to claim. Ordinary and necessary expenses, like a hotel to sleep in and a meal to eat, are tax deductible. But don’t go crazy and check into the honeymoon suite and eat a ten-course meal at a five-star restaurant: ordinary and necessary are the key words here.

• Claim a Commute from your Home-Office to Another Work Location

If you are fortunate enough to work from home, you don’t have to worry about work commute expenses too often. Well, now you don’t really have to worry about them at all, because you can claim the travel distance between your home-office to another work location. Just another reason to work from home if you can.

• Deduct a Commute from your Regular Job to a Temporary Work Location

Whenever you drive your car for work purposes, you should claim it. Even if the driving is minimal. For example, if you work at a restaurant chain, and your boss has you drive to another chain to pick up some food or supplies that your location needs, that drive is tax deductible. Think about it, while you are picking up items from another location, that place becomes your temporary work place for a very brief time, right? That means you should be compensated for your commute from your regular working place to this new location.

• Claim Parking and Tolls When Commuting to Temporary Work Locations

Wouldn’t it be wonderful if tolls didn’t exist and parking were always free? Get a little bit closer to this reality with tax deductions on tolls and parking fees when you are traveling to an outside work location. Meeting a client in the city and are forced to pay three tolls and a ridiculous $20 parking fee out of the blue? Don’t worry, just claim it and try not to think about how much of a scam parking fees and tolls are in the first place.

Car Expenses

The IRS defines “actual car expenses” as including, depreciation, licenses, gas, oil, tolls, lease, payments, insurance, garage rent, parking fees, registration fees, repairs, and tires. Who knew these things were tax deductible? The only catch is that you cannot claim transportation deductions if you claim car expense deductions; and, no matter what kind of write-off, it must be from work or business use. You must do some personal research and find out which kind of claim, transportation or car expenses, will bring you more money at the end of the year. There are a few charts in the IRS’s Publication 463 that can help you figure this out.

• Check out the Section 179 Deductions

If you drive your car 50% or more for business use, you should consider claiming Section 179 Deductions. With these deductions, you claim the fixes and tune ups it takes to combat the normal wear-and-tear of your car, since more than half of them are from business use. Things like oil changes and tire rotations can be claimed if they are not reimbursed by your work or business already.

• Claim any Expense for an Employer Provided Vehicle

Claim every little thing you do in a company car that is business related. Everything from the gas it takes you to get places from the insurance it takes to protect your car is tax deductible when you are driving a business-provided car for work functions or tasks.

There are more than a handful of ways you can get tax write-offs from professional use of your car. But the secret to getting these deductions are good record keeping. If you cannot prove that any of your expenses are business related then unfortunately they are not valid for a tax write-off.  There is a whole section in Publication 463 that discusses the basics of good record keeping and how to prove certain expenses if you don’t know how.

All it takes is a little organization to get back some of the money you spend on your car for work purposes! How many of these things have you done already this week?

I Got a Letter from the IRS, Now What?

Letters from the Internal Revenue Service (IRS) are both dreaded and feared. They come without warning, and the cause is not immediately clear. But there are several reasons why the IRS may have sent that cryptic letter, and not all of them are cause for panic.

According to the IRS, notification letters are mailed in the following cases:

• A balance is due
• A tax return question needs an answer
• You are due a refund value
• Identity needs verification
• Additional information is needed
• Tax return has been changed
• Return delay notification

The first step in handling a letter from the IRS is to carefully read it and follow the recommended course of action. Ignoring the letter will simply cause issues if action is required, but not taken.

Outstanding Balance is Due

If a balance is due, the letter will state the amount owed, the reason for the payment, and the payment options. If there is cause for disagreement, the individual may dispute the charges by calling the toll-free number located on the top right corner of the letter.

The amount due will generally charge interest until the full balance is paid. If unable to make the full payment before the due date, a payment plan may be set up through the online payment agreement application.

If no payment plan is set up, the full amount is not paid, or no action is taken, then a late payment penalty fee will be added to the balance due. Failure to pay the penalty fee will result in more penalty fees until the balance due is paid in full or a payment plan is set up. If early action is taken, it may be possible in certain situations to remove the penalty fee.

Until the balance is paid, the individual will not be able to receive a tax refund. The refund money will be used to pay off the remaining balance owed instead.

Information Request

If the IRS has a question in regard to a tax return, they will ask for clarification or additional information through a letter. Then the individual may make a correction on the form or call the toll-free number printed on their notice.

If the IRS receives a suspicious tax return, they will send a letter (letter 5071C) through the mail stating the taxpayer’s identity needs to be verified. The individual will then need to access idverify.irs.gov. The website will ask a series of questions only the taxpayer will know. After completing the questions and the identity is verified, the taxpayer will be asked if they filed the tax return in question. If so, they can expect to receive their refund in approximately six weeks. If the taxpayer did not file the return, then the IRS will help the individual remedy the situation through secure steps.

Change Notice

If a change to the tax file is made, the IRS will issue a letter detailing any and all changes. The changes should be reviewed carefully. If the changes are agreeable, then no action is needed. But if a taxpayer disagrees with the correction(s) made, they should write a letter to the IRS detailing why they disagree with certain changes to their tax file.

Documents and additional information for consideration may be submitted in the letter, in addition to the tear-off portion of the notice. The items must be mailed to the address listed on the notice, and a response from the IRS may be expected in 30 days.

If Notice is Lost

If the letter from the IRS is ever lost for any reason, taxpayers may call one of the following toll free numbers for assistance.

• Individual taxpayers: 800-829-1040
• Business taxpayers: 800-829-4933

Avoiding Scams

Scam artists seem to always be trying to steal personal sensitive information from individuals. To avoid falling for a scam, know that the IRS will never contact taxpayers through social media, email, or text message.

IRS phone call impersonations are not unheard of, so beware of the signs. If a scammer claims to be the IRS, they will state an outstanding balance that is due and say it must be paid promptly through a gift card, credit card, debit card, or money wire transfer over the phone.

If an individual asks too many questions or refuses to pay, the caller may turn hostile and threaten the individual with arrest by local law enforcement if they do not comply. At this point, it is advisable to hang up the phone and contact the IRS through an email describing the scam attempt or incident to phishing@irs.gov.

IRS Letters: What Not to Do

Opening and reading a letter from the IRS may cause initial dread, but opening the letter and reading it may be far more beneficial to you than ignoring it. Oftentimes, the letter may simply be a notice that requires no action.

But in case the letter requires additional information or a payment due, then prompt action is suggested to avoid any issues or penalty fees. Make sure to read the letter in depth and follow the recommended course of action, if any is needed. If there are ever any questions or concerns, the letter will have a secure number listed to call.

Smart Ways to Spend Your Tax Return

1. Be Practical: If you are considering purchasing a 24 jet hot tub for the backyard, but you live in an apartment building that you do not own, that is not practical. Think about the things you need that can increase the quality of your life.
2. Emergency Fund: An emergency fund is important for those rainy days, where you need some liquid cash to handle an unexpected hurdle. Try to have at least $1,000 in an emergency fund. This money will come in handy if your car breaks down, if you need to suddenly go to urgent care, or even if you forget to pay a bill. Make sure that your future is secure.
3. Invest in Your Health: Buy bikes and jump ropes for the whole family. This will increase their activity, making everyone healthier, but it will also increase the amount of time you all spend together as well.
4. Pay off Your Debt: Your tax return can get you partially, or even completely out of debt depending on how much debt you have and how much your tax return is worth. If you have a payday or title loan out, pay that off first, along with your credit card debits.
5. Invest in Yourself: This will allow you to let your money work for you. Take that certification class, finish up your degree, buy self-help books, go to a career-related conference, or join a professional organization. All of these things can open some really big doors for you in the future, all while increasing your résumé experience.
6. Purchase Life Insurance: This is an easy thing to overlook the necessity of, until someone falls terminally ill, and you are left to figure out how you would pay for their funeral arrangements. A term life insurance policy will bring you great comfort knowing you are protected in the case of emergency.
7. Buy an Experience: Many will say that this is not a smart use of tax return funds, but nothing takes away the stress of the world, like a modest vacation. You can go on a hiking/camping trip with friends, or to see your favorite singer in concert. Buying and creating experiences lasts a lot longer than buying material things.
8. Donate to Charity: You don’t have to give your entire return back, but whatever you decide to give, it should be from the heart. You giving will benefit your community, and help a lot of people. You can also claim your charitable donations as tax deductions as well.
9. Invest in a Business Venture: If you already have a business and were contemplating ways to elevate it without going into debt, using your tax refund will definitely help you out. If all goes well, your investment will turn into income.
10. Start Your Own Retirement Account: Retirement is not free. The longer you wait, the less money you will have in your account when it is time for you to retire. Aside from the 401K you have from your job, you can open up your own Individual Retirement Account (IRA). You can make a one-time contribution, or make several smaller ones over time. Talk to a banker for more details on the options, and decide what route is best for you to take.
11. Start a College Fund: Children are the future, and the cost of education isn’t going down any time soon. Loved ones will be extremely grateful to know that you cared that much about their higher education expenses.
12. Make Repairs: You have probably seen some things around the house that need to be fixed, and perhaps even felt some things in your vehicle that need to be addressed as well. Now is the time, repair the leaky faucet, and get that 50,000-mile check-up your vehicle needs.

Tax returns are the government’s solution to taking too much money out of your paycheck throughout the year. So yes, while it may seem like they’re just paying you back, they are actually just giving you your money back without interest. Many people say that it is literally an interest-free loan to the government.
Using an IRS Tax Refund to Repay a Car Title Loan

A person can receive a car title loan when they use an automobile that they own and have equity in as collateral against a sum of borrowed money. A lender will possess the title to that car and provide a check that must be repaid, along with a fee for lending that money in the first place.

While this is an easy way to quickly receive a check, people need to be conscious of how these types of title loans work and the consequences for failing to repay what they owe.

If a person defaults on their loan, this means that they did not meet all the terms that were outlined in the car title loan. Things that could trigger such a default are that they failed to repay the amount that was borrowed on time; they missed a payment, or did not pay the lender’s fees for loaning the money along with the full sum of the borrowed amount. Defaulting on a car title loan could lead to their car being repossessed.

Car title loans are helpful tools for those who have trouble getting traditional loans from big banks. But there are consequences for failing to repay, which is why it’s important to have a plan for paying back a car title loan.

One easy way to repay a car title loan is by using an IRS tax refund to cover the costs. If a taxpayer borrower anticipates getting a big refund check, they should plan ahead!

Although people may want to spend their IRS tax refund money on something more fun, it is more important to do everything possible to avoid defaulting on a car title loan. If the lender chooses to repossess the car, that person will not only lose their transportation, but will also lose out on the opportunity to sell it or trade it in for a newer automobile in the future.

Using a tax refund check is a smart way for someone to make sure they can repay their car title loan in full and on time. They won’t have to deal with added fees or be responsible for paying repo fees, and they’ll have their title back too!

Emergency Cash to Pay Back Taxes

Occasionally, after you finish your tax paperwork, you will find that instead of getting a refund, you might own back taxes. While you have different options to repay your back taxes, you may be able to get emergency cash in as little as 24 hours³. But before you a take out a title loan or personal loan, make you sure double check your tax documents.

If you have taxes that you need to pay, there are a few different things you should do:

• Double-check that the math is correct – It could be a simple error that resulted in you owing money.
• File your tax return on time – If you file a tax extension, it only pushes back your filing date. It does not push back the due date for paying.
• Determine exactly how much you owe – The amount you owe will affect which repayment options are available to you
• Determine how much you can pay – You’ll be charged interest and fees on the balance that you don’t pay, so you’ll want to make that amount as small as possible.

Once you’ve figured out what portion of your back taxes you can pay, you’ll need to select the best method to pay the IRS. Consider how title loans can help get you the emergency cash you need.

What are the different ways I can pay my back taxes?

There are a number of different ways you can pay your back taxes. Note that these assume you owe less than $25,000:

• IRS2GO – This is the official IRS app. Not only can you use it to pay your taxes, you can do things like view the status of your return and get free tax preparation tips.
• IRS Direct Pay – A free, secure way to pay the IRS the money you owe. You can even schedule payment in advance from your checking or savings account. No need to register or put a check in the mail.
• Pay by Credit Card – You can use various payment processors to pay your tax bill. They may charge a processing fee. Depending on the circumstances, it may be tax deductible.
• Pay when you E-File – You can schedule a payment to occur on or before the due date for your tax filing. You can have it taken directly out of your bank account using an Electronic Funds Withdrawal.
• Pay using the Electronic Federal Tax Payment System – You can pay your taxes online, or by phone with the phone number 855-422-7412.
• Pay by Check or Money Order – The IRS recommends you use other means, but if you prefer to pay by mail, you can find the details here.

What do I do if I can’t pay all the taxes I owe?

If you can’t pay all the taxes you owe, you have a few options. Note, you’ll likely accrue interest and fees as long as you owe money, regardless of which option you select:

• Apply for an Online Payment Plan – There are two types:
  • Short-Term – You may be eligible for a short-term payment plan if you owe less than $100,00 in taxes, interest and fees, and if you can pay the balance in 120 days.
  • Long-Term – If you owe less than $50,000 in taxes, interest, and fees you can potentially set up a longer-term payment plan.
• Make an Offer of Compromise – You might be interested in this option if you owe more than you think you can ever pay. Often advertised by companies claiming they can get the IRS to settle for pennies on the dollar of your owed taxes, you’ll likely have to offer your entire net worth, i.e. everything you have, for them to accept.
• Get a loan – But not just any loan. Title loans may actually be one of the quickest ways to get fast cash in as little as a day³.

Whichever option you choose, you should pay as much as you can immediately. Penalties are assessed based on the remaining balance you owe.

How Can I Pay My Back Taxes?

There are a number of short and long-term things you can do to pay your back taxes:

• Take money out of your savings account – The interest you earn on the account is likely to be less than the IRS will charge you. However, you should avoid taking money out of retirement accounts like 401(k)s as you will probably lose a lot of the money to the early withdrawal penalty.
• Sell assets or things you don’t use anymore – If you have a car, real estate, or even things you don’t use anymore, you can convert them to cash and use that to pay part of your bill.
• Borrow money – Depending on the amount, you may be able to get it from friends or family. If not, you can try getting a bank loan.
• Get a part-time job – If you work ten hours a week at $10 an hour, that’s nearly $300 a month after taxes.

When in need of additional funding to pay for taxes, title loans may be a favorable option. Car title loans may be a great way to get essential funding without all the hassles that can come with traditional lenders. One of the best things about car title loans is that they are fast and efficient. You could even receive your car title loan funding as soon as the next business day³!

Check out our application and see how you can use emergency money from a title loan to pay for taxes!

How Can I Avoid Owing Taxes?

You can avoid owing taxes in the future a few different ways:

• Determine your tax withholding – You can do this with the IRS’s withholding calculator.
• Change your tax withholding – If your employer takes out your taxes, you’ll have to arrange it with them. If they don’t, you’ll have to manage it yourself.

Owing the IRS money can be a scary thing. Especially if you aren’t sure how to pay it. Now that you know a little more about the options available to you, you can determine the best way for you to pay your back taxes. But also consider how emergency cash from title loans can help you, especially when you get your title loan!

Debt Consolidation and Car Title Loans

People living in the US have become so used to living under the crushing weight of debt that we barely even notice how damaging it is. We want to provide better resources for our customers so that they can get a better handle of their debt. Because we want you to make the best decisions for your financial future, we’re working hard to educate you on simple financial matters that may make a huge difference in your life.

Credit Services Organization (CSO) vs. Credit Access Business (CAB)

As the economic recovery struggles to gain traction and many Americans find themselves drowning in overwhelming debts, it’s far more common for consumers to consider more creative borrowing options just to get by. We’ll do our best to provide help when needed, by turning investments in a car into liquid funds.

In an effort to provide our customers with the best borrowing options for every specific situation, we are turning our focus to educating consumers about financial matters. Laws are in place to ensure that consumers are protected, and we want to help borrowers understand the difference between a credit services organization and a credit access business.

Credit Services Organization (CSO)

CSOs were formerly defined as credit repair companies, and are any establishment that provides payment in order to extend consumer credit. CSOs are regulated by the government to ensure that all stipulations are met and that consumers don’t pay outrageous fees for help with credit repair.

Credit Access Business (CAB)

The term credit access business is used in some states to refer to the new model of CSOs. Payday loan companies and car title loan companies are required to have a CAB license that is more specific and detailed regarding the laws of these loans. A credit service organization (CSO) was the former model and was an all-encompassing establishment that did little to regulate how loans are given and paid back.

The CAB license was created by lawmakers in an attempt to define strict parameters and regulations for the borrowing industry.

Debt Consolidation as a Step toward Getting Out of Debt

We all know what it feels like to deal with the smothering weight of debts we simply can’t afford to pay. It’s not a good feeling. When you are forced to make a choice between paying your bills and feeding your family, it may be time to research borrowing options that can help you out when times get tough.

Debt consolidation is a viable option for those who want to combine all their debts and bills into one place. Combining all debts into one place won’t lessen your debt, but it can make it significantly easier to pay and keep track of where you stand financially. Consumers that regularly forget payments or have a hard time making them on time may benefit from organizing their debt in this way.

Credit cards and loans aren’t in themselves bad, but if they are allowed to get out of control and amounts pile up, they can make a prosperous financial future farther away. This is the reason why consolidation of debt can be the wisest choice when there are too many different types of payments to keep track of or if the interest rates have been driven too high. Instead of juggling multiple debts, you’d have just one payment to make.

It is important to remember though, that consolidation may solve one symptom of having debt, but it won’t fix any underlying causes that led to it. For a brighter financial future, it is important to also practice responsible spending, saving and budgeting habits for a more permanent solution. Commit to making and even writing down a money strategy and stick to it. Consider getting an extra job to bring in more money, cutting out unnecessary spending and living on less than you make to start paying off your debt for real.

How Debt Consolidation Works: The Four Types

Standard Debt Consolidation 

When a peer-to-peer lender, credit union or bank consolidates your debts into a new loan, it typically has a lower interest rate than what you were collectively paying before. However, you need to be sure that you are obtaining lower rates than before because if you have a low credit score, the interest rates could be higher than what would be worth it.

Balance Transfer 

Balance transfers are when you move all of your credit card debt onto one new or existing card. Often, this is done because of promotions like low introductory rates or offer periods with no required payment. Although, usually, the low interest rates are typically just for a promotional period which means that they will expire and return to normal interest rates. Be aware of when that expiration will take place and what the regular rate will be. Sometimes putting too much debt all on one credit card can also damage your credit score. Be aware of your credit limit. It is important to avoid getting too close to or going over a credit limit. Also, avoid applying for too many credit cards at one time as this can hurt your credit score too.

Home Equity 

If you already have a mortgage and have some equity in your home, you may choose to borrow money using your home as collateral to pay off credit cards or other small debts. In order to do this, you must have a decent amount of equity already built up in your home. Equity is the value of the property after subtracting the charges against it. These loans usually have significantly lower interest rates, but don’t forget that your house would be on the line. You could face foreclosure if things go wrong, so be sure that you can make the payments each month.

Student Loan Consolidation 

This is similar to a standard debt consolidation, except borrowing is typically done from the federal government, which offers flexible payment schedules and low interest rates. Consolidating your student loan debt can give you a significantly longer time period to repay the debt which can be what you need. But be aware that sometimes you can lose some of the borrower benefits that came with the original loan when consolidating that debt.

If you hope to simplify your life and budget, debt consolidation may be a viable option for you. If you do decide that debt consolidation is the next step towards your financial freedom, then you can consider all the various ways above to go about it and pick the smartest option for you.

More tips:

• Don’t spend the money that your refinancing frees up every month. Save it or use it to repay your debt.
• Negotiate! Don’t be afraid to ask your bank, credit union or credit card provider to give you a better deal if they want to keep your business.
• Shop around everywhere before signing.

What Are Car Title Loans?

We might be able to offer you an online car title loan to get you out of a tight spot. We offer online car title loans to consumers that own a car, truck, van or SUV who need money in a short amount of time.

Car title loans allow you to use the equity in your automobile to borrow money at competitive interest rates while keeping and driving your car. Our payments are paid back over a period with no unexpected fees or balloon payments. There are absolutely no penalties for paying us back early. Title loans can be extremely beneficial when you need emergency funding because you can borrow a substantial loan as quickly as the next business day.

Are Car Title Loans a Form of Debt Consolidation?

While traditional debt consolidation may be a long-term solution to your debt problems, we offer shorter term help in the form of title loans for budgets are stretched for many reasons.

This could be because of:

• Medicals bill
• Credit card bills
• Legal debt
• Owing money to friends or family members

Whatever your situation, we offer loans that are accessible even to people with bad credit. If you have credit card debt or other payments you need to make fast, an auto title loan could help you catch up on overdue payments and debt, but it isn’t recommended necessarily as a form of debt consolidation.

When dealing with debt, it is important to act quickly. First, begin our online submission form or call us to start the process. Our team will then evaluate your vehicle and your financial situation to see if you qualify for a loan, for how much and at what interest rate. This is a free quote and you would be under no obligation to accept the loan. But, if you do, you could have money as soon as the next business day to go toward some of your outstanding bills or debts. Then, you’ll be able to keep driving your car while making your monthly payments in one convenient place.

We would love to talk to you if you are interested in discussing title loans more. Call us today at 855-422-7412 or start a chat online to speak to a friendly representative about the benefits of car title loans.