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Tax debt is one of those scary phrases that sends people into panic mode when they realize that the IRS demands payment from them.
It’s scarier than regular debt, which can sit with you for years while you slowly make minimum payments and pay thousands of dollars in interest.
Tax debt seems more urgent than regular debt. Like somehow, if you don’t pay it on time, the people from the matrix are going to show up at your doorstep and ruin your life.
Maybe that last thought is a little dramatic, but you get the point.
Tax debt is no laughing matter and it needs to be dealt with delicately if you want to keep a clean record and avoid any unnecessary, and very expenses, fees and charges.
If you currently have tax debt, it can be challenging to try to navigate the process on your own. Solvable is an organization that provides listings of tax debt relief experts that may be able to help you.
More than than, Solvable provides free resources like their Debt Checkup and Price Tool and others to help you assess your situation.
Solvable has helped tens of thousands of consumers find debt resolution and assist their families to find peace of mind in the last several years. They have a passion in helping you overcome this tax debt hurdle.
If you’re not in tax debt, but want to make sure you avoid it altogether, there are steps you can take to ensure less risk of tax debt incurrence.
Here are 3 Ways to Avoid Having Tax Debt
1- Understand your W-4
When completing your W-4 for your employer, make sure you understand what you are filling out. Employers won’t generally advise you on how to properly fill it out. So, you need to do your homework and read through the document before completing it.
Completing your W-4 correctly will ensure that you are charged taxes correctly, so you don’t have any unexpected surprises when you submit your taxes at the end of the year.
2- Create a Sinking Fund
Sometimes our deductions are not enough throughout the year. So, it’s a good idea to have an account that can cover any unforeseen taxes that we owe.
A sinking fund works well for this. Saving an additional 5% of your paycheck per month minimizes the risk of going into tax debt.
A sinking fund is a savings account used for a specific purpose.
Having a financial cushion will give you peace of mind and allow you to pay the tax due without getting into debt.
3- Keep Your Receipts
When itemizing your expenses, keep your receipts organized by category to simplify your documents.
Have an organized location to keep your receipts. This will help alleviate the stress and will keep your paperwork tidy. Receipts are important to validate any expenses you claim as deductions.
Your receipts are important, so store them safely and securely so they’re ready to be filed when you’re ready.
Bonus Tip! Speak with a Professional
If you’re feeling uneasy about your tax claims or filing your taxes, or it’s confusing, reach out to a trusted professional.
Tax accountants can potentially save you a lot of money and stress. Being proactive and asking the right questions early on will eliminate and tax filing mistakes that may result in additional charges or taxes due on your part.
Tax and debt are two words that bring stress to a lot of people. Put together, that stress amplifies into an expensive nightmare.
The more you read and learn, the more savvy you become in avoiding big money hurdles that come your way.
Tax debt doesn’t have to exist in your life. If you plan ahead and stay proactive, you’ll avoid common mistakes that can be costly during tax season.