Many people face troubles in paying their IRS debts and the back taxes. If you have not been paying your taxes for a long time, the government can take your home, car or many other valuable things to recover the previous dues. If you are facing similar problems, it is time that you should look for some solutions now before it gets too late. You will find many sources on the internet that can help you fight against these problems or help to settle it.

If you have not been able to pay your tax debts for a long time, don’t wait for something bad to happen. Your best bet is to contact the IRS and explain them about your current financial situation and why you had not been able to make payments in the past. This will make things a lot easier on your behalf. You may apply for a penalty abatement which will eliminate all your previous penalties.

If you are applying for a penalty abatement, make sure that you show a very genuine reason of not been able to pay taxes. This can be in relation to death, illness, receiving false tax information, or anything that has been a financial detriment for you. Not paying the taxes in time has fatal consequences like your work payment will decrease and you will be deprived of any social security or disability benefits. More importantly, the tax debt is not going to go away by not paying it. The longer you postpone filing for your taxes, the tax payment is going to get bigger and added with penalties over the period of time. So make sure that you get rid of this federal/state debt as soon as possible.

Every year thousands of people make big purchases on their homes. These new homes come equipped with all the latest amenities like granite counters, new appliances, the fresh smell of paint and new carpet. Borrowers are very excited to move to their new furnished home. It’s that home for which they have worked so hard to own. Later, facts start coming after the second year of their living on that home. The property tax comes due. Follow this simple illustration below. I and my wife together purchased a home for $200,000 in July of 2007.

Since the home was new, the taxes were on the land only since it’s an unimproved property. The tax was calculated by the cost of the land times three percent or $35,000 x 3% making the total $1050 per year or eighty-seven dollars per month. Everything is going fine until the taxes hit in the month of November 2008. Now, the new taxes will be calculated on the basis of improved property times three percent or $200,000 x 3% making the total new tax bill $6000 dollars per year or $500 dollars per month. Based on the old escrow account, I would have saved eighty-seven dollars per month times twelve months in the year. I accumulated $1050.00 but owe $6000. I am almost 5000.00 short in the escrow account. In case, I can’t come up with that money, the mortgage company will gladly pay it for me.

Now, since the mortgage company has paid my taxes, they will increase the mortgage payments by $500.00 per month to recoup the money they paid the taxes with and adjust the payment by $413.00 dollars per month to set the new escrow account up correctly. At the end, I realize that my mortgage payments have jumped up by almost $1000. I may not be in a situation to afford the new payment. The bank will foreclose the property and I will have to move to another apartment. My credit is ruined and the dream is turned over to a hard terrible reality.

Now, the question in your mind that comes first is to have a solution for a situation like this. First, it’s very important that you deal with a reputable mortgage lender. He will give you the time to explain how to set up the escrow account correctly. Anytime, when a new deal is finalized, the lender has the option of working with the borrower and set up the escrow account in such a manner so that you don’t fall into a shortage. They can set it up on the basis of improved or unimproved taxes. It’s always a good decision to have more than sufficient in your escrow account than to run short of the required amount. Before the escrow account shapes up a big problem, it is better to have a solution always ready and it can only happen when you have the required funds available. At the end you must question yourself one thing. Can you afford for a $1000.00 per month jump in your mortgage payment?

Have you started a new business and are puzzled about tacking your taxes? Go through some of the tips here to know the basic idea on what taxes needs to be paid and how to pay them. All taxes are paid differently and it all depends upon the legal status of your individual business. Sole proprietorships and partnerships report their net income on the owners’ personal tax returns. Corporations will have to file a corporate tax return.

Sole proprietors – People doing sole proprietor’s business must report their company’s net business profit (or loss) under the Self-Employment Income section of their personal tax returns.

You must report the gross and net income for your business and file either a Statement of Business Activities or a Statement of Professional Activities form. The basic difference between the two is that some professional activities may differ from other types of businesses activities.

Partnerships – Two or more individuals can have a partnership business. They are more compared with a sole proprietorship than a corporation. The partnership does not pay income tax or file a tax return. Instead each partner reports his or her share of the partnership’s net income or loss. This applies whether you received your share of the income in cash or as a credit to a capital account in the partnership.

Partners also file either a Statement of Business Activities or a Statement of Professional Activities form.

A corporation is a separate legal entity. All its business transactions are entered into and conducted separately from its owners. It therefore pays tax on the income it generates and files its own income tax return.

Corporations use the T2 return form, even if the company has zero taxes payable as in the case of non-profit organizations, tax-exempt corporations and inactive corporations. If you are not clear with this, get the full explanation on the items on the T2 return or consult the T2 Corporation Income Tax Guide (T4012).

Corporate filings are complex and assistance from a tax professional is always recommended.

• How do I calculate my net profit (or loss)?

To calculate your net profit (or loss) and complete your tax return you need to have detailed records of:

• Get all business details showing all income
• all expenses, and
• All company assets.

Next: subtract the cost of goods sold and expenses you incurred in the fiscal year (whether or not you paid them in that period) from the income you earned in that fiscal year (even if you do not receive it during this year).

This is known as the accrual method, where income and expenses are reported for the year in which work is done, regardless of whether payables and receivables for the job are actually paid in that year.

• What records do I need to keep?

If you wish to run your business more effectively, keep good records because you might need all the information of your business during auditing. You need to keep records of all income that you receive. You must also keep receipts for all of your business related expenses, including:

• receipts
• sale invoices
• purchase invoices
• vouchers
• banking information
• directors and shareholders minutes
• general ledger
• special contracts
• agreements

These questions will vary as per your case. Go through these points and know how to get started.

• What are your areas of specialization?
• What is the cost of the initial consultation?
• Have you handled cases like mine before? How many? What was the outcome?
• Will you be the only attorney who works on the case? If not, who else will work on it?
• How long will it take for this case to be resolved?
• How much will my case cost? Can you take my case on a contingent fee basis?
• Can I do some of the work on the case to keep the cost down?
• Are there things I should do to improve my case, or to help you?
• How will you keep me informed about the progress of my case?
• If I contact your office with questions, how long will you take to return my call?
• If you are unavailable or on vacation, who can I speak to about my case?
• Can I reach you after hours, if I have an emergency?
• How often do you go to trial?
• If I am not happy with a settlement offer, and you want to settle, will you go to court anyway?
• If I am happy with the offer, but you think we can win more at trial, will you follow my wishes?
• Have you ever been disciplined by an ethics committee, or been suspended from the practice of law? If so, why?
• What “continuing legal education” courses have you attended during the past few years?

A written agreement is a must

Always get the written retainer agreement so that you have your rights protected. Before signing the contract, go through the points carefully and if you have any queries, get it clarified by your attorney. If you are paying thousands of dollars just in fees, you might even like to get the contract reviewed by another attorney and compare. The retainer agreement should accurately describe the legal issues for which the attorney is representing you, the amount of fees and all terms that have been discussed.

Terminating the agreement

You have the right to terminate a relationship with an attorney in an ongoing case. It must be noted that you have to pay for the services that the attorney has already performed for you. If the attorney has mentioned about recovering the complete cost of the case even if you decide terminating the agreement in between, you will have to pay the full amount.

Dispute between you and your attorney

In the event a dispute arises between you and your attorney, dispute resolutions services are offered by the state bar councils. These services are particularly beneficial in the event of fee disputes. Each state has a “grievance” procedure where you can file complaint against your attorney and have them investigated.

If you are thinking about selling your house but are concerned about the capital gains tax you may have to pay on profit made from sale then there is some good news for you.

You might not have to pay any tax on the profit made if certain conditions are fulfilled. In the following sections we will look at how you can retain the total amount of profit made from sale of your house without having to pay any taxes.

When a person sells his house and makes a profit then this profit can be exempt from taxes up to the maximum exemption limit of $250,000 if:

• He meets the use of house requirement and

• The ownership requirement, and also

• Had not used capital gains tax exemption in the last two years before the house is sold.

The exemption limit is $500,000 if:

• The seller is married & files a joint return and

• Both he and his spouse meet the use of house requirements and

• Either he or his spouse meets the ownership requirement, and lastly

• Neither he nor his spouse had used the exemption in the last 2 years before the house is sold.

Now let us look at what these, use of house and ownership requirements are.

To avail the exemption, during the five year period ending on the date house is sold a person must have –

1. Lived in the house using it as his main house for at least two years and

2. Owned the house for at least two years.

Let me add here that the two years of use & ownership during the five year period need not be continuous.

A person would meet the requirements if he can show that he owned & lived in the house using it as his main house for either twenty four full months or 730 days (365 x 2) during the five year period.

The exemption laws are somewhat different to accommodate the special needs of members of foreign services or uniformed services.

Members of foreign services or uniformed services can select to have the five year requirement period for use & ownership remain suspended during any period that such person or his spouse serves on qualified official extended duty.

It means that the person will be able to meet the two year use of house requirement even if, due to service requirements, he is not able to live in the house for the required two years during the five year period before the house is sold.

The suspension period cannot be more than ten years. Together, the five year requirement period & ten year suspension period can be as long as, but not more than fifteen years. In addition to it, the five year period cannot be suspended for more than 1 property at a time.

For applicability of this special rule, uniformed services & members of foreign services are defined as;

Uniformed services –

1. Commissioned corps of the Public Health Service.

2. The Armed Forces (Army, Navy, Air Force, Coast Guard & Marine Corps) and

3. Commissioned corps of National Oceanic & Atmospheric Administration.

Member of Foreign services –

1. An Ambassador at large.

2. A Chief of mission.

3. A Foreign Service officer.

4. A member of Senior Foreign Service.

5. Part of the Foreign Service personnel.

So by properly planning the house sale to keep note of how many years you have lived in it before it is sold & whether it was used as the main house for specified years, you can keep all of the profit made from sale without having to pay any tax on it.