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When Taxes Get Taxing
Tuesday, April 10, 2012

It's crunch time for tax season and the issue of taxes is intensifying throughout neighborhoods across the country and on Capitol Hill.

President Barack Obama is pushing for fairer and equal class responsibility. Today he traveled to Boca Raton, Florida to promote his support for the "Buffet Rule" which calls for a tax raise on millionaires.

This move has envoked much resistance from Republicans who claim that this "millionaire's tax" would do more harm to the economy than good. Romney campaign spokeswoman, Gail Gitcho, said that the plan would raise taxes on small businesses.

Obama's proposal calls for people earning at least $1 million dollars per year, through salary or investments, should pay at least 30 percent of that income in taxes. The current tax rate that many wealthy investors pay is half that at only 15 percent. As a result, they're able to pay less in taxes for their incomes while those whose incomes are based higher salaries have a tax rate of 35 percent.

All this is brewing with only a week left until the tax deadline. The major question that this sparks among many taxpayers is whether they'll have the means to pay the taxes they owe.

Death and Taxes...and You
Though it may seem like a tempting option, simply avoiding to pay--or worse, file--will dig you a deeper hole. Sooner or later, the government will find you.

The penalties for not filing stacked on top of what you already owe will accrue interest and most likely lead to a lot of regret. Instead, file for an extension that will buy you some time in making payments.

Filling out a Form 4868 will give you an extended six months. Paying at least 90 percent of the taxes owed by April 17th will save you from getting the late-payment penalty. It does not, however, exempt you from owing interest on any unpaid taxes.

A good rule to stick by is to pay off as much as you can as soon as you can--whatever the amount may be. Taxes come around only one time a year but the repercussions of bad tax management can last years. Paying up front may be hard, but overcoming the challenges of paying additional interest can feel almost impossible.

Catch a Break
The Internal Revenue Service (IRS) does offer help to those who need a break. One of thse hardship breaks is called Fresh Start that allows qualifying filers to request a six-month extension for paying their taxes without facing penalites.

To qualify, filers must have been unemployed for at least a month straight last year or up uptil the deadline date. Other qualifying factors are survivors of natural disasters or those on active military duty.

If you don't qualify but still owe more than you can afford there are other options you can consider. If you must, bill it to one of your credit cards. It's not the greatest option, but it's an option. Another one along the same lines is using a home-equity line or credit. Undesirable but feasible.

Seek help and advice when you can so that you know your capabilities. Having your taxes in order will help prevent further issues spilling over into your other finances and create money problems beyond your control.

You can ask the IRS for a formal installment agreement and if that doesn't go through you may just have to suck it up and face the music to the tune of penalties and interest--at least you won't be in jail.
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