Fairfax, VA - February 23, 2007 — Tax day, April 15, falls on a Sunday this year so consumers have an extra day to file their federal income tax returns. With less than two months left to prepare, consumers who have not done so need to determine how much they owe and how they will cover their tax liability.
"It is important for consumers to determine as soon as possible the tax amount they will owe," said Dave Jones, president, Association of Independent Consumer Credit Counseling Agencies (AICCCA). "The more time the consumer has to prepare for a tax liability, the better."
AICCCA offers the following tips to help consumers who owe taxes:
Find out whether you owe now.
The sooner you have this information the better. Set aside time soon to either calculate your taxes or have your taxes reviewed by a tax professional. If you're still using the paper 1040 form, consider tax software that will help you identify deductions. Be sure to double-check the numbers when you're done.
Establish a weekly savings target.
If you owe money, take a hard look at your budget and see if you can squeeze out money for taxes. Start by eliminating expensive meals, vacations and other discretionary expenses. Afterwards, look for ways to save on necessities like food, utilities and clothes. Put off big-ticket purchases like a car or a big-screen television.
Generate extra cash.
Inquire about overtime opportunities. Take a second job until your tax bill is paid. Hold a garage sale and sell those items you no longer need.
Research your credit options.
If you have to borrow the tax money, be sure to compare interest rates and terms to find the option that is right for you. Your options include a bank loan, an IRS installment plan and an IRS approved credit card. You'll pay interest on a bank loan, a processing fee and interest on an IRS installment plan and convenience fees plus interest to credit card companies.
Develop a repayment plan.
You can make a bad situation worse by falling behind on your tax loan payments. Make sure that you can live with the terms before you sign. Otherwise, you could incur penalties and late fees.
Always file.
Don't compound your problems by missing the April 16 tax-filing deadline. If you do, you may be subject to a "failure to file" penalty and a "failure to pay" penalty.
Adjust federal withholding.
Change your W-4 form with your employer so that you are withholding enough money to fully pay your federal income tax in the future. If you already claim zero dependents, you can have your employer withhold additional money each paycheck.
Consult a credit counseling professional for help.
If an unexpected expense like a big tax bill causes you to go into debt, you may not be saving enough. Treat your tax problems as a wake up call to get your finances in order. AICCCA member agencies are available to analyze your finances and make recommendations.
Founded in 1993, Association of Independent Consumer Credit Counseling Agencies (AICCCA) is a national membership organization, established to promote quality and consistent delivery of credit counseling services. AICCCA and its members are focused on improved creditor relations, efficient processes and advanced technology to best serve clients and creditors. AICCCA members are independent nonprofit agencies that advocate for debtors, counsel millions of consumers annually nationwide and provide debt management services to consumers with excessive unsecured debt. For more information or to contact an AICCCA member office call 866-703-TRUSTAICCCA (866-703-8787) or visit www.aiccca.org.
