5 Tax Tips for Tough Tax Situations
Filing and paying federal income taxes can be stressful enough, but there can be situations that arise that make your tax situation even more difficult. If you cannot afford to pay your taxes, cannot file your taxes in time or if your filing status has changed and you don't know what to do, then you need to follow five tax tips for tough tax situations.
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Time
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Each year, April 15 is the tax filing deadline. However, during the course of the year, events can happen that may delay your ability to file your taxes on time. A new job or a family tragedy can cause your schedule to get taken up with other things. If you do not file your taxes on time, the IRS will add penalties and fees to your tax bill. One of your options is to ask for a filing extension. The form for requesting an extension is available on the IRS website. It needs to be filed by April 15 and, according to the IRS website, if it is approved, you will have an additional six months to pay your taxes.
Amount Owed
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You may think you can handle your tax debt, but when you get the actual bill, you may realize that you cannot pay the full amount of your taxes by the filing deadline. The IRS has created an option for this. Contact the IRS either through its website or by phone at 1-800-829-1040 and ask to discuss an installment plan. According to the IRS website, you can wait until you receive your tax bill to contact the IRS about a payment plan, but if you wait until after April 15 to contact the IRS, then you will also have to pay fines and penalties for late payment. There is a $105 fee to set up a payment plan.
Spouse Death
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A spouse passing away is an emotionally difficult period. But when tax time rolls around, you will need to know how the situation affects your filing status. The IRS allows you to file as married filing jointly for the year that your spouse passed away regardless of when during the year the death occurred, according to the tax experts at the Young Money website. If you do not remarry and you had children with your deceased spouse, then you have a two-year period after the death to file as a widower with dependents. Life insurance payouts are not subject to federal income tax.
Job Loss
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Losing a job creates a difficult financial situation. However, the IRS offers a bit of relief because most of your job hunting activities are tax deductions, according to financial expert Kirk Shinkle writing on the US News and World Report website. Travel expenses to and from interviews, dry cleaning costs for your interview attire and the cost of reproducing and mailing your resume are all deductible. Hold on to all of your receipts because your job hunt deduction is considered a miscellaneous itemized deduction and is not given any specific form to file it.
Lost Income
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If you have investments that lost a great deal of money, then you can use that as a deduction on any gains, according to Kirk Shinkle on the US News and World Report website. Capital losses on investments not only can be used to offset capital gains, but also they can be used as a tax deduction for up to $3,000 on your standard income.
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