AICCCA Says Tax Burdens Must Be Met With Preparation
Fairfax, VA — February 6, 2004 - For households with tight budgets, the tax season can strike fear in the hearts of those who may owe additional money to Uncle Sam. To compound the problem, many do not have a savings account to cover any unexpected tax payments.
"Income tax expenses should be treated just as periodically as holiday gifts, back-to-school supplies, and summer vacations," says Dave Jones, President of the Association of Independent Consumer Credit Counseling Agencies. "Tax day always happens at the same time each year and the smart consumer will budget for it and avoid the tax season dread."
For consumers who think they may owe taxes this year, AICCCA offers these helpful tips:
Calculate your taxes early. When it comes to income taxes, what you don't know can cost you. Take your W-2s and do some quick calculations to determine if you will owe additional taxes. Include all pertinent tax credits and deductions. In fact, depending on your income, you may find that you're eligible for an earned income tax credit.
Watch your spending. Discretionary expenses such as dining out and unnecessary impulse buys should be the first to go if you must come up with a tax payment. Budget to save on necessities such as food and clothes. For example, many families can slash their grocery costs by shopping with a list and planning meals in advance.
Decide how to pay. If you find that you still cannot pay your taxes with money from your own funds, there are many institutions - including Uncle Sam - who will loan you the money for a price. Your many credit options include a bank loan, an IRS installment plan and an IRS approved credit card. But interest charges will still apply to these forms of payment, and credit should be your last choice when covering your tax payment. The last thing you want to do is roll your tax bill into a revolving credit card balance that you will be paying on this time next year.
Always file. When determining this year's tax situation, don't compound your problems by missing the April 15th tax deadline. If you do, you will be assessed a late filing penalty. Therefore, if you owe taxes, pay by the deadline and know that you can always file an extension if you are not done sorting through possible deductions.
Adjust your W-4. Many people with large tax bills simply didn't withhold enough from their paychecks during the year. Still others sold stock and failed to budget for the capital gains tax. Correct both scenarios and avoid similar problems next year.
See a credit counselor. Don't despair if you are surprised by the amount of money you owe after calculating your taxes. You are not alone. Credit counselors can help with your short-term tax crisis by showing you how to develop an emergency budget and savings plan. They can also help you with long-term money management problems by analyzing your financial situation and making recommendations. You can locate a member of AICCCA by calling 800-450-1794 or visiting www.aiccca.org.
Many taxpayers do not have an emergency savings account and are paying for unexpected expenses with borrowed money. In order to avoid the creation of tax debt, a payment plan must be developed and followed.
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 (800) 450-1794 or visit www.aiccca.org.
