3 Factors That Determine Whether You’ll Complete a Debt Settlement Program

Posted on April 26, 2012 by Debt Dot Com

So you’re wallowing in debt and you’re not sure what the right choice is. You’ve gone over the options a few times – credit counseling, bankruptcy – and you discover in the process somewhere that there’s one more option: debt settlement. From the get go, this option looks incredibly appealing as it can potentially cut debts in half, making it much more manageable to pay. Then as you begin to do more research you learn that the likelihood you complete a plan such as this is less than 50%.  The purpose of this article it help people understand the 3 most common factors that cause debt settlement programs to fail.

Who are your creditors?

Debt settlement involves negotiations with your creditors to get them to accept a lump sum of less than you owe to fully satisfy the balance you owe. Of course, your creditors are not legally required to enter into this type of agreement this because when you signed your credit card contract, you promised to pay the full amount.

Despite this, most credit card companies will accept settlements from consumers, but not all do and the amount they are willing to reduce your balance varies quite a bit. Capital One and Discover have historically been the creditors that are toughest to negotiate with, and consumers with these two creditors may find it tougher to complete a debt settlement program since the costs will inevitably be higher.

What will happen to you 18 months from now?

Most debt settlement plans last between two and three years, and perhaps the single most important cause of people failing to complete their program is because they can no longer afford the payments. Something that was once affordable is now not due either to a reduction in income or an increase in expenses. Life is full of uncertainty and people in debt with little to no savings are usually ill-equipped to deal with these changes. Flat tires, job losses, or an unexpected tax bill can throw you off, and for this reason, debt settlement is usually appropriate for people who have savings to float them when these events inevitably occur.

Which company did you go with?

Not all debt settlement companies are created equally. Some charge steep advance fees for their services (yes, even though this is prohibited by the Federal Trade Commission). Others may charge low fees but are understaffed or lack the knowledge to do the job effectively. Some companies literally have hundreds of complaints from clients about their services. Quality debt settlement companies routinely graduate far more than the industry standard 30% of their clients.

Matthew Mckeon is a writer for DebtShield.com, a website dedicated to educating consumers about debt relief services.

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Discount Prescription Cards – The Basics

Posted on April 20, 2012 by Debt Dot Com

By: Tim Brugger, Debt.com Financial Fitness Trainer

There was a time when it seemed virtually everyone with a full-time job, and often even part-time, had access to affordable health care. Today with the cost of health insurance growing exponentially, coupled with the last few years of economic uncertainty, many companies have opted to either increase employee’s contributions for insurance coverage or drop their plans altogether. While it’s easy to see the reasons behind these moves, the results are the same: more and more American’s are left without insurance benefits.

In many ways it’s even more concerning for the self-employed or small business owner. The cost of insurance coverage for them and their families have reached astronomical proportions. And one of the most expensive and often used aspects of medical care is prescriptions. Pharmaceutical companies, like insurance companies, have continued to increase prices leaving uninsured folks with on-going prescription needs to suffer the financial consequences.

Discount Prescription Cards

For the non or under-insured among us, one option becoming more popular around the country is discount prescription cards. The way they work is very simple.

There are two different options, but both work in a similar fashion. Upon receipt of the discount prescription card all a person needs to do is present that to the pharmacist along with the prescription itself, and they’ll receive a discount off the retail prices. How much of a discount will depend on the particular drug, but for-profit alternatives suggest a range from as little as 10% to as high as 75%. More often than not the savings will fall somewhere in the lower middle of that range.

The Options

The key differences between the two discount prescription card options are the potential for savings and the cost for the card itself.

Each card issuer negotiates their own, unique agreements with local, regional and national pharmacies. So user savings will fluctuate depending on the results of those negotiations, and the arrangements between the card issuer and the pharmacy.

The other distinction is the fees, if any, to pay for the card. There are a host of private prescription card companies that provide discounts to users for a flat, monthly fee. These will fluctuate, but most are about $20 a month along with a nominal “registration fee.” Make sure the card is available in your state, not all of them are national.

There are also programs like the one offered through the National Association of Counties (NAco) that provide residents with free discount prescription cards. According to NAco users save an average of 24% off their prescription costs. For those with recurring needs this can be significant. As with the pay-for-use discount cards the savings will fluctuate based on the drug itself.

With so many Americans either without enough insurance or none at all because of employer cut-backs or cost, a discount prescription card can be a sound alternative. But review the specifics of each card before you leap, the differences can be expensive.

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Protect Your Pocketbook from Pinterest

Posted on March 9, 2012 by Debt Dot Com

“Lead me not into temptation; I can find the way myself.” – Rita Mae Brown

By: Jennifer L. Lopez, Debt.com Financial Fitness Trainer

These days, the online website Pinterest has become all the rage.  If you thought that other social networking sites like Facebook and Twitter were time-wasters, Pinterest has already entrapped 10.4 million users (and growing) into spending hours daily “pinning” their favorite items onto the online bulletin board.  You often hear of users describing their newfound interest in Pinterest as their latest “obsession” or “addiction.”

Naturally companies are taking advantage of this free, popular, and easily accessible technology to encourage consumers to take a look (and another and another…) at their product lines.  It’s actually quite ingenious that these companies are getting consumers to provide free product placement and advertising by pinning and re-pinning.  It is a known fact that buyers are more likely to purchase items from someone they know or that has been recommended to them by someone they trust (think celebrity endorsements). This marketing strategy should provide a red flag to Pinterest users that are trying to stick to a budget.  Read on to find out why you may want to hide your credit cards and cut down on the time that you spend pining for merchandise on Pinterest.

At first glance, Pinterest seems innocent enough.  You create individual boards that contain images, often from online websites.  Let’s say you want to redecorate a room: you can take items from various websites that you want to incorporate into your design (furniture, accessories, paint colors, etc.) and “pin” them onto your board for future reference, or to be shared with your followers.  If someone likes what you have pinned, they may “repin” it onto their own board.  The concept is cool, useful, and attractive.  Other harmless uses include utilizing Pinterest to collect recipes that you want to try, crafts that you want to make, or hairstyles that you want to attempt.

But according to PCMag.com, 97% of Pinterest users are women.  Let’s be honest, women are also more susceptible to window-shopping, and the consequent “retail therapy” that inevitably occurs.  A website like Pinterest and the time devoted to designing your own boards, along with looking at other people’s boards, can encourage overspending.  Why, you may ask?  Because instead of avoiding temptation, you are reveling in it.  If you are trying to avoid spending, the last thing that you need is to spend excessive amounts of time creating a virtual wish list.  Due to the fact that Pinterest is so visual, it provides an even greater temptation, as we are so influenced by images.  Many of us are less likely to be influenced to buy after just being exposed to a text description, but show us a picture, and we may fork over the funds.  That’s why commercials, billboards, ads, and even restaurant menus may place more focus on graphics than words.  Images are expressive, and stir up strong feelings in us, including the drive to obtain what we see at any cost.

If you are on a diet, the last thing that you want to do is tempt yourself by going to an all-you-can-eat buffet.  Likewise, if you are trying to stop drinking, you want to steer clear of bars, liquor stores, or friends that might encourage you to drink.  And when I want to avoid spending, I steer clear of temptation by skipping mindless online or in-person window shopping or looking at sales papers or catalogs, because if I look, I may want to buy.  Increased exposure to temptation breaks down our defenses and makes it more difficult to overcome it.  Additionally, even other forms of social media have encouraged jealousy as people are able to observe what their friends have or are planning to buy.  A website like Pinterest can spur a spike in this activity and subsequent spending in an attempt to “keep up with the Joneses.”

If you are looking to protect your pocketbook, prevent overspending, and avoid getting into debt, you may want to consider minimizing the amount of time spent on Pinterest.  Alternatively, you can make a conscious decision to only use the website in ways that will not inspire unplanned spending. As consumers, we are exposed to enough forms of spending temptation on a regular basis without knowingly leading ourselves into potential financial peril.

Photo credit: Design Indulgences

 

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How Refinancing a Mortgage Can Lower Your Tax Bill

Posted on March 9, 2012 by Debt Dot Com

By: Jessica Zimmer, Debt.com Financial Fitness Trainer

If you refinanced a mortgage in 2011, you may be able to deduct points from your taxes as home mortgage interest. Points are charges that a buyer pays to get a home mortgage. The buyer typically pays the cost of points at the time of closing. The purpose of buying points is to secure a lower interest on the mortgage. There are two types of points: origination points, which compensate the lender for offering the loan; and discount points, which are prepaid interest. You can also deduct the amount that you paid for discount points from your federal taxes. A lender typically allows a buyer to buy between one to three discount points.

The cost of a discount point is 1% of the mortgage. This means that the cost of one discount point on a $160,000 home is $1,600. Each point typically lowers the interest rate on a mortgage by 0.125%. If a bank offered a 4.5% interest rate on a mortgage, the purchase of two discount points would lower the interest rate to 4.25% (0.0425).

The IRS states that if you can deduct all of the interest on your mortgage, you may be able to deduct all the discount points paid on the mortgage. You are eligible to deduct the price of discount points if you meet certain qualifications. First, your acquisition debt: the debt to construct, improve, or purchase the home, must be equal to or less than $1 million. Also, your home equity debt, the amount you have borrowed against the home, must be equal to or less than $100,000.

In addition, you must meet six key requirements. The mortgage must be secured by your main home, the home where you live most of the year. Paying points must be a regular business practice in your area. The number of points you paid must be equal to or less than the number generally charged in your area. You must have used the cash method of accounting for 2011. This means that you report income in the year you receive it and deduct expenses in the year that you pay them.

The points must not be paid for charges usually stated separately on the settlement sheet, such as property taxes and appraisal fees. The amount you paid at or before closing must be equal to the amount of the points. This means that you cannot have borrowed money from the lender or a broker to pay the points.

If you meet all of these conditions, you likely will be able to enter the amount you paid for your points into your list of itemized deductions on IRS Form 1040, Schedule A. Generally, points that you pay to refinance a mortgage are deductible only over the life of the new loan. If you use part of the refinanced mortgage amount to improve your main home, you may be able to deduct part of the points related to the improvement in the year that you paid the points with your own money.

You may need to meet several other requirements to deduct discount points. In addition, your adjusted gross income may subject you to a limitation on some itemized deductions, including points.

For more information, consult IRS Tax Topic 504: Home Mortgage Points.

Link: http://www.irs.gov/taxtopics/tc504.html

© February 15, 2012 // Copyright all material 2/15/12 by Jessica Zimmer

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Tax Deductions for the Self-Employed

Posted on March 9, 2012 by Debt Dot Com

By: Jessica Zimmer, Debt.com Financial Fitness Trainer

If you are self-employed, you can take a number of deductions for business expenses. Before doing all of the calculations, you may ask, should I do this work, or skip it and take the standard deduction? The answer depends on whether the sum of your deductions will be equal to or greater than the standard deduction. The 2011 standard deduction, raised from 2010 for inflation, is $5,800 for singles and married individuals filing separately; $11,600 for married couples filing a joint return; and $8,500 for heads of household. If you think that you will come out ahead by itemizing your deductions, do the math using IRS Schedules C and SE.

In order for you to claim a cost as a business expense, the IRS requires that the cost be ordinary and necessary. Ordinary is defined as an expense that is common and accepted in your field. Necessary is defined as an expense that is helpful or appropriate for your business. For example, if you were an independent plumber, new tools to replace worn-out tools would be an ordinary and necessary business expense. Since small businesses vary to a great degree, pose questions to an accountant as well as several small business owners in your field.

If you maintain a home or commercial office, you should be able to deduct costs relating to this space as a business expense. A home office is defined as a space in the home that is only used to conduct business. If you determine the percentage of your home that you use for your home office, you may be eligible to deduct a portion of your rent or mortgage interest, utilities, and homeowner’s insurance. You are also allowed to deduct purchases for an office, such as furniture, including desks and filing cabinets; and necessary equipment, including computers and shredders. If you have a second phone line that you use only for business, you can deduct the cost of all calls made on this line.

A self-employed individual can also deduct the cost of office supplies, even without maintaining a home office. You can deduct the costs relating to business-related mileage; advertising; licensing fees; required or necessary continuing education; mailing; professional organization dues; and travel, including 50% of business-related meals. In addition, you can deduct health insurance premiums, retirement contributions, computer software, and industry magazine subscriptions. If you hired contractors, you can deduct their labor costs. You can deduct one-half of your self-employment tax, using Schedule SE.

When you acquire property, determine whether it is an item that decreases in value due to use. This is called depreciation. If you purchased property that you expect to last more than a year, you cannot deduct the whole cost of the item in the year you bought it. You must spread the cost over several years using Schedule C. Depreciable property is defined as property that you own, which wears out and eventually becomes unusable, and is not disposed of in the year in which it was purchased.

© February 16, 2012 // Copyright all material 2/16/12 by Jessica Zimmer

 

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Managing Time Helps Manage Debt

Posted on March 9, 2012 by Debt Dot Com

By: Suzan Bekiroglu, Editorial Consultant

The Importance of Effective Time and Debt Management

Once you develop good time management skills you can apply them to getting out of debt for good. Effective debt management skills are crucial to your financial future. The process of managing your debt effectively needs to start with a good outline and timescale for it to happen. Learning how to manage your time effectively will make you more productive and able to see the big picture more clearly. Planning out your schedule and your financial goals ahead of time will also reduce the stress that being in debt can frequently cause. By developing a clear plan, you are taking control of both your time and your money, leaving you feeling empowered and in charge.

Identify and Prioritize Your Time and Your Debt

The first step in both time and debt management is planning ahead. Think over your financial goals and schedule and figure out what you can do the every day, week and month to achieve them-such as by creating a budget and developing a schedule of your time.  By planning ahead, you save yourself time, stress and wasted energy wondering what to do next. It is essential to know what you are planning for and in what order you would like to achieve those goals. Start by organizing all of your debt by itemizing the debt from top priority to lowest priority. Develop a time line and a plan of action. Developing a time line and going over it frequently will allow you to adjust your plans as necessary. You may need a second job or to work extra hours.

Minimize Distractions and Look for Wasted Resources

Try to identify and eliminate what distracts you from reaching your financial goals and wastes your time. If you get paid on a Friday and find yourself at the mall every Friday after work, try taking a different route home and avoid the temptation of stopping in at the mall with a fresh paycheck in hand.

Find out where both your time and your money are going. Many individuals fall prey to wasting both without even realizing it. Tracking your daily activities and spending habits can help you see if you are wasting either one. You need to make your time work for you, to increase productivity and to secure your financial future. Good habits do not just happen overnight, but the more you stick to your plan, the easier it will get and the more effective it will become.

Learning good time management skills can help you learn to prioritize not only your time, but your debt as well. Planning ahead, developing a time line and looking closely for distractions and wasted resources will make your time more productive while making your debt more manageable.

 

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How Taxpayers Can Pursue the IRS

Posted on March 5, 2012 by Debt Dot Com

This is Part 6 of a 6 Debt.com series on taxes authored by Charles T. Almond of Tax Closure.

For an estimated 30 million Americans however, the suffocating feeling of back taxes and owing the IRS carries on for months and years after their April 15th deadline. There is no school in the nation that teaches IRS tax collection procedures yet there are many options for the well informed taxpayer to take back control of their tax situation. One of the best ways to resolve a back tax issue when you have no means to pay is to obtain Currently Not Collectible (CNC) status with the IRS. Obtaining Currently Not Collectible status eliminates the IRS’ attempt to collect and brings taxpayers back into good standing.

For this reason, my company Taxpayers Clinic, created a new program called Tax Closure, people who owe back taxes can take back control of their lives, eliminate back taxes and become current taxpayers with the proper knowledge. Tax Closure reveals little known information not generally available in the IRS collection process. By using this information the IRS can waive collection of many Americans’ unpaid taxes. Taxpayers Clinic has the power of a knowledge base second only to the IRS. Together with a vast network of former IRS employees and 28 years of pioneering taxpayer solutions, our newest offering navigates everyone through the IRS collection system and gives people with unpaid taxes a second chance. For the first time this proven method is available on the web to every American taxpayer for a tiny fraction of the cost other tax settlement companies normally charge.

The IRS is not in the business of ruining lives though some of their collection measures seem harsh. In fact, the IRS would rather have taxpayers current, in the system, and paying again. The IRS Collection Division is a significant component of the IRS. Learning how to communicate with this division is key to getting any resolution. Not paying and dodging back taxes does not solve the problem.

By teaching taxpayers how to properly communicate with the IRS (with the proper knowledge, forms, and financial data) most people can resolve their issues with the IRS on their own. Empowering taxpayers with the knowledge they need to get CNC status on their own changes the collection system dynamic. The well-equipped taxpayer can now go after the IRS and get out from underneath of the often unbearable burden of owing the IRS.

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IRS Notice of Balance Due

Posted on March 5, 2012 by Debt Dot Com

This is Part 5 of a 6 Debt.com series on taxes authored by Charles T. Almond of Tax Closure.

Receiving a IRS Notice of Balance Due can be a very stressful moment. Owing back taxes can effect your income and personal property. Seizures and levies are generally enforced after a Notice of Balance Due is ignored. There are many factors that determine how quickly and forcefully the IRS will act on the collection of back taxes including the taxpayers profile, duration of outstanding debt and amount owed.

The IRS’s process includes initial correspondence in the form of a IRS Notice of Balance Due. After the amount has been officially assessed by the IRS, the debt becomes formal and legally enforceable. It is at this point that the taxpayer receives an official IRS Notice of Balance Due. Ignoring this notice and letting the allotted time expire allows the IRS to become more aggressive. The case then moves into Enforced Collection Status. Even in this situation, the taxpayer still has options to get the IRS to officially stop all attempts to collect and allow the taxpayer become in good standing. Most taxpayers in this situation move from Notice of Balance Due status to Enforced Collection Status. After a short delay of enforcement, 30 days usually, the IRS can seize almost any bank account, home, land, personal property, pension, retirement, or anything else of value. The taxpayer has no say in what is taken.

My company, Taxpayers Clinic, has developed a new program called Tax Closure. If you are anticipating receiving an IRS Notice of Balance Due or you are in tax collection status, Tax Closure can give every American the tools and information they need to fully resolve their back tax debts. It uses little known information not widely available in the IRS collection process. With this information, the IRS can waive the collection. Taxpayers can create a Plan of Resolution, obtain Resolution Status, and fully stop the IRS from attempting to collect on back taxes. Taxpayers Clinic has the power of a knowledge base second only to the IRS. Together with a network of employees and 28 years of pioneering taxpayer solutions, our newest offering navigates everyone through the IRS collection system and gives people with unpaid taxes a way to stop extreme collection measures. For the first time this proven method is available on the web to every American taxpayer for a tiny fraction of the cost that other tax settlement companies normally charge. Taxpayers have very specific rights that empower them to stop the IRS from disrupting or destroying their lives. There is a way to keep the IRS from taking your possessions if you owe back taxes on TaxClosure.com.

 

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Self Representation Before the IRS

Posted on March 5, 2012 by Debt Dot Com

This is Part 4 of a 6 Debt.com series on taxes authored by Charles T. Almond of Tax Closure.

When a taxpayer receives an IRS Notice of Balance Due many thoughts cross their mind. Owing back taxes and having a short, defined period of time to pay (30 days usually) means options are limited. While the perception of the IRS being kinder and gentler may give taxpayers in this predicament some hope, being ill equipped will only make matters worse. There is a very common thought process among taxpayers who owe back taxes that basically suggests, “I have nothing to hide, I’ll just call the IRS and come clean. I do not have the money for representation but I think if I can just call and talk to them myself, I can ease the pain.”

Naked self-representation in IRS collection matters is optimistic but proves to be most ineffective. The IRS collection procedures aren’t natively known and even tax professors, CPAs and regular accountants seek out much needed help. Throughout my career, I have met many taxpayers who attempted to represent themselves without any knowledge or insights into the IRS collection procedures and it did not go well. Their intentions were good but in almost every case they were ill prepared and simply threw themselves on the mercy of the person they would speak with at the IRS because they could not afford the high cost of representation.

It is hard enough for someone dealing with the pressures of an IRS Notice of Balance Due and not having the means to pay. Adding thousands of dollars in professional fees to that is simply not an option in many cases. However, there are now ways taxpayers in such a position can communicate with the IRS themselves and gain back control of their lives and finances. By teaching taxpayers how to properly communicate with the IRS (with the proper knowledge, the correct forms, and easy to learn financial basics) most people can resolve their issues with the IRS on their own. When the IRS is going through the Notice of Balance Due cycle with a taxpayer or their company who owes back taxes, the person still has time to eliminate the ill effects.

With the new software program TaxClosure.com, taxpayers can learn how to exercise their rights as a taxpayer and have all the information they need with step-by-step instructions on how to communicate with the IRS. TaxClosure.com is a product of my company Taxpayers Clinic, and it is the creation of 28 years of successful taxpayer solutions. Taxpayers Clinic is comprised of an impressive network of former IRS Collection Division employees who all contributed to put together this revolutionary program, which costs a fraction of what the “tax settlement” firms charge for (in many cases) the mere promise of representation.

TaxClosure.com works to help taxpayers apply for “Currently Not Collectible” (CNC) status, which is generally available to approximately 90% of all taxpayers. This will stop the IRS from pursuing you or your business because it puts you back in good standing. Using the information, easy to understand instructions and videos in TaxClosure, most taxpayers can resolve their back tax problems the same day they start the program. The informed taxpayer can now communicate properly and directly with the IRS and make an effective job out of representing himself or herself. Empowering taxpayers with the knowledge they need to get CNC status or worst case . . . an affordable payment plan on their own eliminates the need to pay thousands of dollars to hire representation who in most cases won’t know this subject as well as those that buy and experience TaxClosure for themselves.

 

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Late Filing of Taxes

Posted on March 5, 2012 by Debt Dot Com

This is Part 3 of a 6 Debt.com series on taxes authored by Charles T. Almond of Tax Closure.

One common situation that taxpayers face is not being able to pay their entire tax bill. Many Americans have income that is not withheld against and run into problems paying the full amount they owe. Instead of making a partial payment, they wait until they have the full amount. However, once the tax filing date has passed, heavy penalties kick in. Obviously, the only way to avoid this is to pay taxes in full by the due date. Failing that, it is very important to still file on time. Waiting to file ultimately means a taxpayer can face a “failure to timely file” penalty of 25% in addition to other penalties.

If the return is filed, the taxpayer avoids making an already unresolved financial problem that much worse. Taxpayer rights are still available to people who at least do that. What often happens when a taxpayer in this situation fails to pay, they also fail to file. The situation escalates, they end up owing as much as 50% more because of penalties, and they become eligible to begin the IRS collection notice process. Even so, taxpayer rights are available to all Americans who owe back taxes.

No matter what stage of an ordeal a taxpayer is currently facing, they can benefit from having the proper knowledge they need to properly represent themselves. It is hard enough for someone dealing with the pressures of an IRS Notice of Balance Due and not having the means to pay. Adding professional fees to that is simply not an option in many cases. However, there are ways taxpayers in such a position can communicate with the IRS themselves and gain back control of their lives and finances. By teaching taxpayers how to properly communicate with the IRS (with the proper knowledge, forms, and financial data) most people can resolve their issues with the IRS on their own.

Tax Closure is a product of my company Taxpayers Clinic, and it is the creation of 28 years of taxpayer solutions. Taxpayers Clinic is comprised of a network of former IRS employees who put together this revolutionary program that costs a fraction of what the tax settlement firms charge. Closure works to help taxpayers apply for “Currently Not Collectible” (CNC) status. This will stop the IRS from pursuing you for back taxes because it puts you in good standing. With my product, the informed taxpayer can now communicate properly and directly with the IRS and effectively represent themselves. Using the information, detailed instructions, and videos in Tax Closure, most taxpayers can resolve their back tax issues. Empowering taxpayers with the knowledge they need to get CNC status on their own eliminates the need to hire representation and face high fees and more delays. Having the right tools to resolve back tax issues quickly and permanently can be found in Tax Closure.

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