In this world, nothing can be said to be certain, except death and taxes. This unfortunate condition means that we regularly have to pay something to the government just for possessing assets and having an income, something that can easily drag us into debt if we’re not careful about it.
And because the world of taxes is fraught with complications, official forms, and deadlines, many of us come actually end up with hard-to-pay debt to the state. This very difficult situation is made worse because the IRS usually has little to no sympathy for any outstanding cases, so it’s up to us to manage around it and get rid of those pesky bills so we can continue our normal life.
Make a Deal with the IRS
The best possible scenario you can look forward to is that the IRS will be willing to make an agreement with you so that you actually pay less than what you own. What we mean here are “offers in compromise” that are contracts signed with those who have debts too large to be paid because of financial hardship (such as not being able to find a job or if handicapped) This is a situation where both the IRS is trying to get a hold of at least some money, and the taxpayer is given the chance to pay it off without ending up penniless.
But be warned that not every application will be accepted. If you are an individual taxpayer you will have to at least settle your taxes for the current year before being given a compromise for previous debt.
Contribute to a Retirement Account
If you have an individual retirement account, IRA for short, you can reduce a part of your income tax by investing in it. This move is beneficial two-fold, it lowers your yearly tax rate even for over a 1000$ and it also means you are saving for retirement too.
The investment made into the retirement account may be a deductible from that year’s income tax. But this can only apply to traditional IRAs and not the Roth IRA. The other limiting factor for this kind of deductible is whether you already have a retirement plan as part of your work – if you or your spouse have one there is a limit to how much you can reduce your tax for an individual one.
Claim a Home Office Deduction
As we have seen in the previous period when a lot of people were driven from their offices to work from home – a living space can easily double up as a working space. The IRS allows for 5$ per square foot of home space to be deducted if that space is often or always used for conducting business.
For all of those working from home consider moving into a larger room so you can fit into the 300 square feet maximum that they allow and you will be able to easily reduce at least part of your taxes!
Even though we never perceive them as fair, taxes are still needed to keep the whole country’s machinery running. So like it or not we will always have to pay them, but we can at least manage a smaller amount when debt starts choking us.