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Tax season is rarely simple, especially if you have complicated finances. What some forget, though, is that some of the toughest tax problems are actually experienced by those in debt. Below are just a handful of ways in which being in debt can actually make doing your taxes more difficult.
The Cost Factor
The first, and perhaps most obvious, way that being in debt makes doing your taxes harder is that it makes it tougher to hire someone to do your taxes for you. You may not have the money on-hand to work with a CPA or even with a reputable tax preparation business, which in turn puts more of a burden on you. If you’re stuck doing your own taxes, you might miss certain deductions that could free up more money for you in the future.
If you have bad debt that has been charged off during the year, you aren’t free and clear of those charges. In fact, you’ll have taxes that come due once you add the charge-off of the debt to your overall income. Having to factor for this type of new income can be difficult, especially if you don’t know how the relevant laws work. Unfortunately, the fact that you’re having to handle this on your own also makes it more likely that you’ll make a mistake.
Financial documents, including those about any outstanding debts are vital when you’re filing your taxes. If you don’t have all the relevant records with you, you will have to work with your bank or credit union, like Centris Federal Credit Union to get the relevant documents together when it’s time to file. Missing financial documents can cause huge problems when it comes time to file and not having the right paperwork on hand can cause you to run up against very important deadlines.
Dealing with the Costs
Finally, dealing with debt while you tackle your taxes means that you’ll have less money to take advantage of programs that could help you. Whether this means better tax filing software, the ability to take out an advance on your return or even the ability to negotiate with the IRS, you won’t be in the best position to defend your finances. Unfortunately, this can lead to even more debts in the future.
Debt can be a vicious cycle. If you are in debt, it’s still important that you find a way to get your taxes in on time. Once you can get your taxes filed properly, you’ll be able to take steps to reduce your debts in the next fiscal year.
Anica Oaks is a professional content and copywriter who graduated from the University of San Francisco. She loves dogs, the ocean, and anything outdoor-related. You can connect with Anica on Twitter @AnicaOaks.
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