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Get Rid Of Tax Debt In A Way Most People Don’t Know

Get Rid Of Tax Debt In A Way Most People Don’t Know

While the

global economy continues to showcase signs of considerable growth and diversification, personal debt remains a huge issue in developed countries throughout the world. This is a key legacy of the Great Recession, during which time numerous citizens defaulted on their financial agreements and triggered additional, interest-related debt. Tax debt is another key consideration for citizens in the modern age, especially when you consider the rising number of freelancers, independent contractors and part-time financial traders who are active in 2014. This demographic is ultimately responsible for conducting its own tax assessments and calculating repayments, and many have found themselves impacted by a fundamental lack of knowledge and awareness. coins_refund

    It is important that you look to reduce your tax debt quickly, while also keeping a level head and avoiding such issues in the future. Consider the following steps towards achieving these goals.

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    1. Understand the nature of your debt and identify key resources.

    Before you can start to diminish your tax debt, it is first important to understand its nature. Just as there are multiple tax laws and codes, so too there are several different types of debt and methods of potential repayment. Understanding the full extent and structure of your debt is crucial, as from there you can determine the best and most expeditious resolution. If you are looking for a place to start, consider contacting your country’s revenue and customs regulatory body or an independent website for more impartial advice.

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    2. Create a clearly defined plan of action.

    Once you have researched your debt liability and all viable resolutions, you can begin to create a clearly defined plan of action. This can include one or several points, so long as they are relevant to your debt and help you to move towards a resolution. It is crucial that your plan includes maintaining open lines of communication with the governing tax authority, as this enables you to discuss your options and agree on an amicable solution. Whether this involves making estimated quarterly repayments while your case is being investigated further, requesting a payment extension or scheduling installments, you will at least be able to create a foundation from which your tax debt can be diminished.

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    3. Ensure that your plan is practical and manageable over Time

    Once you have established a plan that is agreeable with the governing tax authorities, the next step is to ensure that this is manageable over time. Execution is critical, as even the most detailed and proactive plan of repayment is meaningless unless it can be sustained. So even if you have managed to negotiate an amicable installment plan to settle your tax debt, for example, you must carefully analyze your income and existing repayments to ensure that this is viable. The same principle applies if you commit to making estimated quarterly repayments, while anyone who requests an extension must guarantee that they can meet the full cost of their debt and any affiliated interest within the specified time frame.

    4. Seek help from a tax debt professional before executing your plan.

    When dealing with a governing tax body such as the IRS or HMRC, it is absolutely imperative that you deal in precise fact and meet deadlines without fail. Even though authorities such as the IRS remain flexible and are willing to allow payment extensions of up-to 120 days, for example, the failure to repay within this time frame will be met with a far more serious response. Given the need to comply with tax legislation and ensure that you make repayments according to exact terms of your agreement, it may be worth seeking advice from a tax debt professional before your finalize and execute your plan. While this may require an initial investment, it will potentially help you to reduce the cost of your repayments and make longer-term tax savings.

    5. Learn from previous mistakes and change your behavior for the future.

    On this note, it is also important that you look to learn from your mistakes and ensure that you do not incur future tax liability. Acquiring knowledge is key, so you should also look to review individual income streams and how your earnings are structured in relation to tax. If you are someone who looks to boost your income though financial trading and speculation, for example, you may want to consider considering investing in derivatives that are free from capital gains tax. In the UK and similar European countries, any earnings generated through activities such as currency trading are ineligible for taxation, as these practices are categorized as informed gambling. So long as this is not your sole or primary source of income and you are able to access a real-time price chart while trading, it is therefore possible to maximize your earnings without falling foul of tax legislation.

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    Last Updated on March 4, 2019

    How to Use Credit Cards While Staying Out of Debt

    How to Use Credit Cards While Staying Out of Debt

    Many people will suggest that the best thing to do with your credit cards during these tough economic times is to cut them up with a pair of scissors. Indeed, if you are already in huge debt, you probably should stop using them and begin a payback strategy immediately. However, if you are not currently in trouble with your credit cards, there are wise ways to use them.

    I happen to really love my credit cards so I will share with you my approach to how I use mine without getting into deep financial trouble.

    Ever since about 1983 when I got my first Visa card, I continue to charge as many of my purchases as possible on credit. Everything from gas, groceries and monthly payments for services like my cable and home security monitoring are charged on credit. Despite my heavy usage, I have maintained the joy of never paying any interest fees at all on any of my credit cards.

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    Here are some tips on how best to use your credit cards without falling into the trap of paying those nasty double-digit interest fees.

    Do Not Treat Credit Cards as Your Funding Sources

    Too many people treat their credit cards as funding sources for major purchases. Do not do this if you want to stay out of trouble. I use my credit cards as convenient financial instruments so I do not have to carry around much cash. In fact, I hate carrying cash, especially coins. When you buy things on credit, the purchases are clean and you will not get annoying coins back as change.

    I do not rely on my Visa, MasterCard or American Express to fund any of my purchases, large or small. This brings me to my golden rule when it comes to whether I will pull out any of my credit cards either at a retail or online store.

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    I never purchase anything with my credit cards if I do not have the actual cash on hand in my bank account.

    If I really cannot pay for the item or service with cash that I already have at the bank, then I simply will not make the purchase. Remember, my credit cards are not used as funding sources. They are just convenient alternatives to actual cash in my pocket.

    Make Sure to Always Pay Off Balances in Full Each Month

    The next very important part of my overall strategy is to make absolutely sure that I pay the balances in full each and every month no matter how large they are. This should never be a problem if the cash has been budgeted for my purchases and secured in the bank. I have always paid my full balances each month ever since my very first credit card and this is why I never pay interest charges.

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    Using Credit Cards with Rewards

    Most of my credit cards are of the “no annual fees” type, including one MasterCard on a separate account I keep at home as a spare in case I lose my wallet or incur any fraudulent charges. However, I do use a main Visa card which does have an annual fee because all purchases on that card reward me with airline frequent flyer points. For me, the annual fee is worth it since I do travel and I get enough points to redeem many free flights.

    You have to decide for yourself if you will charge enough purchases on credit each year without paying interest charges to warrant a credit card that rewards you with airline points (or other rewards). In my case, the answer is “yes” but that might not be the case for you.

    I occasionally use a MasterCard or American Express card on small purchases just to keep those accounts active. Also, I have been to the odd retailer that accepted only a certain type of credit card, so I find that having one from each major company is quite handy. Aside from my main Visa card which earns the airline points, the rest of my cards are of the “no annual fees” variety.

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    So this is how I use my credit cards without getting into any financial trouble with them. This strategy is recommended only if you are not in debt, of course. In fact, it is worth keeping in mind once you’re out of debt so that you can keep your credit cards active and treat them responsibly.

    What are your credit card usage strategies? Let me know in the comments — I’d love to hear what methods you use.

    Featured photo credit: Artem Bali via unsplash.com

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