Making Friends with the Tax Laws

It can be hard to watch your money disappear due to taxes each year. However, by knowing the tax laws and by keeping abreast of any new tax laws, you can easily reduce the amount that you owe to the government every year. We understand what you are going through, and our team at PaydayLoansCashAdvance can help you to understand tax laws. We have outlined a few tax laws below to help you get started in reducing your taxes.

Avoid Giving the Government an Interest Free Loan

If you have been getting a big tax return each year, you may be able to get that money back into your paycheck. The manner in which you fill out your W-4 determines how much money is taken out of your check each pay period. If too much money is taken out, you can get that money at the end of the year in the form of a tax return.

Tax returns feel fun, but in reality, you have actually given the government an interest free loan for the duration of the year. While they have been holding your money, the interest on your own loans have been accumulating each month. You can avoid this and pay down your debts faster by submitting a new W-4. Read the form carefully and make sure that you claim the right deductions, and you will get a larger paycheck each month.

You Can Pay Non-Deductible Interest with Tax Deductible Money

There are certain types of interest that are considered to be tax deductible. Interest on your mortgage, your student loans, and some other types of debt can be tax deductible. In most cases, you must itemize your deductions to claim these particular deductions, but in some cases, new tax laws may allow you to claim certain interest deductions while still claiming the standard deduction. Other types of loans like car loans and credit card loans do not have deductible interest.

Thus, if possible, you should always try to pay off your nondeductible interest using tax deductible money. For instance, if the interest on your home equity line of credit is tax deductible, you can use it to pay off other debts where the interest is not deductible.

Never Forget Student Loan Interest

Over the last few years, new tax laws allow you to claim the interest that you pay on your student loans. You can claim up to $2,500 in student loan interest on qualified loans for you or your spouse. That can significantly reduce the amount of tax that you ultimately owe for the year.

Every day more tax laws are being signed regarding student loans, and some of them may even allow you to reduce the amount of your monthly loan payment or eliminate your bills all together. It is important to check with the IRS and any other relevant government bodies to ensure that you are getting the best deal possible. With the extra money in your pocket, you have the potential to invest more, pay down other debts or buy yourself something special.

Consider the Ramifications of Debt Settlement As It Affects Tax Laws

When a person is in a lot of debt, they may be offered a settlement by their creditor. A settlement is when the creditor erases the debt for less than is owed. However, if the debtor saves more than $599, they may have to declare that money as taxable interest. The debtor will be notified about the exact amount that they need to claim on a 1099 form. They will receive that form from the creditor sometime in January of the year following the settlement arrangement. If you settle too many debts, it can add a significant amount to your final tax bill. Luckily, there is a way to settle your debts without facing a huge tax bill.

In order to avoid claiming that money as interest or income on your tax return, you will need to declare yourself insolvent. Insolvent is when your debts exceed your assets. In order to notify the IRS of your insolvency, you will need to fill out a form 982. This form can be attached to your tax return, and it will prevent you from having to declare the savings from your 1099 forms. This can save you a significant amount of money and can really boost the amount that you potentially get back on your tax return.

Double Check Your Deductions and Credits

Every year, new tax laws give many tax payers new deductions and credits. You may be able to claim a credit for your children, for participating in certain green business activities, and for much more. Depending upon your income level, you may be able to claim the earned income credit which can boost your tax return by thousands of dollars. Your deductions can also reduce how much you owe. Depending upon your unique situation, you may be able to claim a deduction for your home office or your work expenses. The right tax preparation software or a trained tax professional can help you to understand the credits and deductions for which you may qualify.

The Benefits of Being Friends with the Tax Laws

Taxes help pay for a lot of the things that we use every day, but no one wants to pay more tax than they need to pay. Thus, it is critical that you stay on top of tax laws. By being friends with the tax laws, you will lower the amount you owe and increase the cash in your pocket.

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