Negotiating back-taxes with the IRS

Tax negotiation representation can help taxpayers needing assistance with their tax issues. Tax issues can involve many different kinds of problems including inability to pay, release of liens and audits. A qualified negotiator has seen every kind of problem taxpayers experience and knows how develop workable solutions with the agreement of the IRS.

Victim Mentality

There’s a kind of victim mentality that taxpayers develop when they have tax related issues with the IRS. This mentality is one of resignation and fear that the IRS can do whatever they want including threatening everything you’ve spent your life building. This mentality was fostered during 3 decades through the 1970s, 1980s and most of the 1990s as people read stories about taxpayers losing their homes, business and a large part of their paychecks.

The IRS is like the giant blob in the old science fiction movie, eating its way through assets and bank accounts. The victim mentality is understandable except for one thing – times have changed. Taxpayers now have certain rights that have given them negotiation power, and yet they still live in fear of the IRS. With tax negotiation representation, you have the ability to keep the IRS from eating its way through your assets.

The reason is for the fear is the fact the IRS doesn’t make the negotiation process easy despite the creation of taxpayer rights. The IRS will seize and lien and attach and levy without breathing a word about your rights. Tax negotiation representation can insure your rights are protected and the IRS does what it should be doing – working out a compromise.

The victim mentality is dangerous, because it causes inertia. You keep getting the IRS letters and notices in the mail and just keep telling yourself it’s hopeless. But there’s not a tax issue in the world that’s hopeless.

Believing in Success

Instead of maintaining a victim mentality, you should take advantage of having access to tax negotiation representation. A tax negotiator can work with the IRS on your behalf in order to find ways to resolve your tax problems. These solutions may include one of the following.

* Offer in Compromise

* Audit representation

* Penalty abatement

* Lien and levy release

* Business tax negotiation

* Installment payments

The IRS has a lot of programs that they don’t like to talk about while trying to collect money. A tax negotiator makes sure the discussion occurs so that you can obtain tax relief. A tax expert can deal with both personal and business tax problems.

If you are quietly accepting all the grief the IRS is doling out during the collection process, you probably have the victim mentality. Getting tax negotiation representation can show you how to shed the victim mentality and assume a proactive attitude about your taxpayer rights. The relief you’ll feel goes far beyond tax relief.

Your Credit Card payment just DOUBLED!

The big players have raised minimum payments from 2% to 4% of your balance, meaning you’ll get out of debt much quicker. Here’s how to cope until that day. 

 

 By Bankrate.com

Good news: Credit card companies are doubling their minimum payments.

Bad news: Credit card companies are doubling their minimum payments.

Huh?

So far, MBNA, Citibank and Bank of America have announced they are doubling minimum monthly payments on credit card balances from 2% to 4%. Others are expected to follow suit quickly. To some cardholders, that could be seen as a good thing. To others it could be devastating.

If you can handle the increased payment it’s good. Let’s face it, if you pay only a 2% minimum each month, your debt would probably last longer than most marriages. Doubling your minimum might put you back on the financial straight and narrow. Ostensibly designed to help consumers get out of debt faster, the increased minimums will force cardholders to pay off fees, interest and at least a portion of the principal each month.

But if you simply can’t make that doubled minimum month after month, it could put you and many other debtors in over your head.

Why it’s happening
Over the past few years, low minimum payback rates of between 2 and 2.5% have encouraged Americans to spend, spend, spend — and to rack up an average credit card debt of close to $10,000 per household. For the estimated 40% of cardholders who carry a balance from month to month, the low minimums free up cash. But paying off a big charge little by ever-so-little also means that a $1,000 debt can turn into a 22-year commitment — and that you’ll accumulate thousands more in interest in the meantime.

“People are now in a revolving debt cycle that they’ll never escape,” says Adam Brauer, a debtor advocate and in-house counsel for Debt Settlement USA in Scottsdale, Ariz. “So the government nudged credit card companies into saying, ‘This isn’t working.’”

Specifically, regulators with the Office of the Comptroller of the Currency began pressuring credit card companies to raise minimum payments. Another incentive for change: The newly enacted Bankruptcy Abuse Prevention and Consumer Protection Act of 2005, which requires credit card companies to post a kind of Surgeon General’s warning on monthly statements that notifies consumers about how long they’ll be in debt if they make minimum payments.

Help for big spenders
Although increased minimum payments aren’t a panacea for consumer debt, most financial experts think they’ll help.

“If you pay more per month, you’ll get out of debt quicker and you’ll pay less interest,” explains Mike Peterson, vice president and co-founder of American Credit Foundation, in Midvale, Utah.

Take the $2,000 Hawaiian cruise you charged to a card with an 18% interest rate. If you faithfully make minimum payments and never add another dime to the balance, it’ll still take you about 30 years to pay off the trip — and you’ll end up forking over almost $5,000 in interest. By making 4% minimum payments on the same debt, you’ll finish up in 10 years, and your interest payments will be around $1,100. “It’s a huge saving in time as well as interest,” says Peterson.

Another way increased minimums may cut debt is by forcing buyers who think in terms of monthly installments to take a second look at what they can afford. The new minimums will effectively double the monthly price of a purchase, turning a $40-a-month payment for a new sofa into an $80-a-month one. “People charge up to the point that they feel they have room within their budget to afford those payments,” Peterson explains. “If I’m trying to figure my budget based around what my credit card payment is going to be, I’ll be able to carry less debt.”

Bad news for big debtors
Of course, if your finances are already squeezed to the breaking point, the rate hike is a bitter pill to swallow — good for you in the long run, but hard to take right now.

“If you’re living paycheck to paycheck and your minimum payment goes from $200 to $275, spread over five cards, that’s an extra $375 a month,” says Brauer. “A lot of families can’t come up with that.” The banks already know that and are planning for it. Bank of America, one of the first to raise minimum payment requirements, worked an extra $130 million into its 2005 budget to cover projected losses from defaulting cardholders.

But default isn’t your only option if your new payment seems out of reach.

“I always tell people there are two sins: not paying, and not paying as agreed,” says Cate Williams, vice president of financial literacy for Money Management International, in Chicago. Most creditors would rather opt for the latter, so give your credit card company a call to see if you can either negotiate a reasonable payment arrangement or reduce your interest rate. Otherwise, missing a payment can quickly have you fielding calls from collections agencies — and at that point, no one will be willing to listen to you, says Williams.

Coming up with the cash
If you’ve been carrying a big credit card balance and suddenly need an extra $300 a month to make your minimum payments, now’s a good time to re-examine your finances. With some smart spending shifts and careful planning, virtually anyone can dig an extra 10 to 15% out of their budget.

Here are some ways to get started:

• Pay less to Uncle Sam. In 2004, 80% of taxpayers got a refund — on average, $2,400 a pop. By adjusting your withholdings, you can keep that money in your own pocket and put an extra $200 a month toward your debt.
• Curb your spending. Even small changes, like brown-bagging lunch or renting one DVD a week instead of three, can free up to 10 to 15% of your income, says Peterson. To find expenses you can shave, track your spending for seven days. You may be surprised at how relatively small expenses — like 75 cents for a Diet Coke from the vending machine — add up over time.
• See a credit counselor. The new bankruptcy law mandates at least two financial counseling sessions during the bankruptcy process, but if you see a counselor now you may be able to avoid reaching that point altogether. For help finding one, visit the website of the Association of Independent Consumer Credit Counseling Agencies or the National Foundation for Credit Counseling.
• Control your cards. Paying down a big debt is hard enough without adding more fuel to the fire. To avoid the temptation to spend, “Take every credit card except one out of your wallet,” recommends Williams. “Lock them away. People have frozen them in bowls of ice or given them to a trusted friend. I’m concerned about people walking around without some means of emergency cash. But we all agree what an emergency is, and a shoe sale at Nordstrom is not it.”

Originally reported by:  Melody Warnick a freelance writere in Iowa

http://moneycentral.msn.com/content/Banking/creditcardsmarts/P117014.asp

Tips on jobs, deeds and flying

How to find a ‘recession-proof’ job, how a ‘deed in lieu’ will affect your credit rating, and how to lock in a good price on air travel.

1. What jobs or industries are more “recession proof” than others? – Vikki, Florida

In reality, no job is “recession-proof,” but there are industries that fare better than others, even when the economy is suffering.

Security jobs – from transportation security to computer security specialists are one of those according to Challenger, Gray and Christmas.

One recent report estimates that the government will need to fill 83, 000 jobs in the next two years.

Healthcare is another fast-growing area. Physical therapists, home health aides and medical assistants are all in demand. Plus, employers are upping the perks including tuition and relocation reimbursement and increased time off.

And finally education is a good area – 2.8 million new teachers are going to be needed over the next eight years.

2. I own a property in Florida that is not moving like I want it to. My question is about the ‘Deed in Lieu’ option. Does it show up as a foreclosure on my credit? If not, how will it affect my credit? – Aaron

A deed in lieu is just as devastating to your credit score as a foreclosure says John Ulzheimer of Credit.com.

It will show up on your score as a deed in lieu of foreclosure. But a deed in lieu – basically when you voluntary give the keys to your lender – is a more noble way of losing your home, and lenders will view that more positively than if you went through with a foreclosure, and had to be forced out of your home.

Some of you were asking how a loan modification affected your credit score. Well, your credit score doesn’t reflect the terms of your loan, so as long as you’ve been current with your payments, a loan mod won’t have any affect.

However, the sad fact is that most lenders won’t do a loan mod unless you’ve already missed payments. And it’s up to the lender to report late payments or delinquencies.

3. In order to get the best price, when is the best time for me to book a flight for my Christmas vacation? With the current economy, I’m worried that the price will go up instead of down by the end of the summer. – Tiffany, Arizona

You have a right to be concerned. There have been 21 airfare hikes since the beginning of January according to Rick Seaney CEO of Farecompare.com, a consumer airline ticket research Web site. And we’re likely to see more hikes by the end of the year.

Airlines are also cutting 10-15% of their domestic flights. Normally, it would be a bit early to shop for holiday travel, but this year, it’s a smart move.

If you see a good price, lock it in. And then, keep track of your flight and make sure the airline doesn’t cancel it later on advises Seaney. 

This article originally written by CNN’s Gerri Willis

http://money.cnn.com/2008/08/01/pf/saving/toptips/index.htm

 

Why the new housing bill is (almost) useless.

As you know the Senate has just recently approved the new Housing Bill designed to help American Homeowners keep their homes.  For those of you that read the verbage for the bill but did not understand it this is the breakdown:

• You must have obtained the mortgage between Jan 2005 – June 2007.
• More than 40% of total income must be spent towards housing payments.

Ideally if you meet these two conditions then you’ll be able to write down the value of your mortgage to 90% of the value of your property and go with a more reasonable rate since you’ll going into an FHA-backed mortgage.  Everything sounds good doesn’t it?  Not really, not once you read the rest of the verbage and go over the costs.  First off not only will you be paying mortgage insurance with the new mortgage you’ll also have to do profit sharing with FHA.  In the 1st year you’ll have to give 100% of all profits to FHA after which it will be 90% for the 2nd year and will continually drop 10% every year after before bottoming out at 50%.  What that means is 30 years from now if you own a 1.5 million dollar property you will still owe 50% of your equity to FHA.

Some of you may be thinking that this is the only alternative option available to you short of foreclosure however in many cases you can do a loan modified by negotiating directly with our bank instead of going through the FHA process.

For those of you that are unaware of what a Loan Modification is, a Loan Modification is a permanent change in one or more of the terms of a mortgagor’s loan, allows the loan to be reinstated, and results in a payment the mortgagor can afford.  Or, to simplify, it means that you can have your mortgage reworked to give you a more affordable payment.  Generally how the loan modification process works is the Loan Modification company (LM) will contact the current lender on a homeowner’s house and request that they redo the mortgage by either dropping the balance or the interest rate (or both) to make it more affordable for the homeowner.  This is not always successful because these days every Tom, Dick, and Harry will call himself a Loan Modification Company and try to negotiate for you.  Keep in mind the reps that the LM will be dealing with are experienced and receive thousands of call everyday from someone trying to renegotiate their mortgage.  It is not uncommon for a homeowner to hire ABC Loan Modification ‘r us (who is actually ABC ex-Mortgage brokers ‘r us) to handle a loan modification, who will in turn try to negotiate for weeks going nowhere.  The process will drag out for months, nothing will happen, and the homeowner will go into foreclosure.  In any case the LM will walk away with the “upfront consulting fee” or “commitment fee” (ranging from $1,500 up to 2% of the loan balance).

The best option would be to do an attorney-based loan modification program.  How this works is an attorney will audit your loan that you have with the lender.  If any errors are found on your loan documents the attorneys will build a case for you and sue the lender on your behalf to rescind the loan.  If the loan cannot be rescinded they can renegotiate your mortgage down 90% of property value @ 6% fixed.  This will end up being the best option for homeowners.  Let’s face it if you are deciding whether to use the provisions in the housing bill or the loan modification program, that means that you’re planning on being in the house for the long haul.  I saw a special on CNN where and there are more and more attorney-based loan modification companies in Florida and California (where foreclosures are at the highest rate) popping up.  This trend has yet to affect the foreclosure rates but I believe in a year or two you’ll see an effect.  

For those of you interested in learning more about attorney-based loan modifications, you can either google it or search on the cnn website.  One company that was highly recommended in the media was Saving the American Dream (800-515-9603)

How the new Housing bill affects the American homeowner

After reading this don’t forget to read my blog “Why the housing bill is (almost) Useless”  

2008

The House is expected on Wednesday to pass a $300 billion housing rescue bill aimed at helping troubled homeowners avoid foreclosure and supporting mortgage giants Fannie Mae and Freddie Mac. If the bill is then passed by the Senate and signed by President Bush, who today withdrew his threat to veto the legislation, thousands of at-risk borrowers will be able to refinance their unaffordable old mortgages into new, low-cost fixed-rate loans insured by the FHA, Federal Housing Administration.

The Congressional Budget Office estimates that 400,000 borrowers with $68 billion in loans may benefit from the program, but the bill allows for as many as one or two million borrowers to participate.

Who’s eligible?

Qualified borrowers must live in their homes and have loans that were issued between January 2005 and June 2007. Additionally, they must spending at least 40% of their gross monthly income on all household debt to be eligible for the program They can be up-to-date on their existing mortgage or in default, but either way borrowers must prove that they will not be able to keep paying their existing mortgage – and attest that they are not deliberately defaulting just to obtain lower payments. Before a homeowner can get an FHA-backed mortgage they must first retire any other debt on the home, such as a home equity loan or line of credit. Borrowers are not permitted to take out another home equity

loan for at least five years, unless it’s to pay for necessary upkeep on the home. To get a new home equity loan, borrowers will need approval from the FHA, and total debt cannot exceed 95% of the home’s appraised value at the time.

How can I apply?

Borrowers can contact their current mortgage servicer or go directly to an FHA-approved lender for help. These lenders can be found on the Web site of the Department of Housing and Urban Development.

How does the refinancing process work?

This is a voluntary program, so lenders holding the original mortgage have to agree to rework a given loan before things can get started. The bill requires lenders to make major concessions, writing down the value of the loan to 90% of the home’s current value. In areas where prices have plummeted by as much as 20%, that will mean a substantial

loss for the lender. But lenders won’t sign off on a workout unless they think that they’ll lose less money on that than they would by allowing a home to go through the costly foreclosure process. Each loan will have to be underwritten by an FHA lender on a case-by-case basis. That means the banks will do a new appraisal to determine the home’s current value, as well as examine and verify income statements, bank accounts, job histories and credit scores.

Based on that new appraised home value, the FHA lender determines how much the original lender has to reduce the original mortgage by, so that it will reflect 90% of the home’s market value. If the original lender agrees to the write down, the new lender buys the old loan and takes over the reworked mortgage. As part of the deal, the old lender writes off any fees and penalties on the original mortgage, including prepayment penalties, and accepts the proceeds from the new loan on a paid-in-full basis. Additionally it pays the FHA an up-front premium equal to 3% of the mortgage principal.

What does it cost?

There should be little up-front costs for borrowers to bear. Loan origination fees will vary by lender, but these can usually be paid by the borrower over the life of the loan in the form of a slightly higher interest rate. However, the refinanced loans do come with many strings. For one thing, borrowers are responsible for paying an insurance premium to the FHA guaranteeing the loan, which will be 1.5% of the principal annually. Borrowers also agree to share any profits from future home price appreciation with the FHA. To do that, they’ll pay a “3% exit fee” of the mortgage principal to the FHA when they resell or

refinance. Plus, they’ll agree to pay the FHA 100% of any profits they realize from higher home prices if they sell or refinance within a year. So if the original loan principal is $200,000 and the home sells for $250,000, the borrower will owe the FHA $50,000, minus costs. After a year, borrowers will share 90% of the profits with the FHA. The percentage keeps dropping in 10% increments to 50% after the fifth year, where it stays.

What will I save?

Savings depend on what borrowers are paying for their present loan and where they live, but for most people it will be substantial, even factoring in the FHA fees. In areas that have sustained huge price drops, such as Sacramento, where prices have fallen about 30% over the past year, some loans might be reduced by more than 40%.

Additionally, the FHA loans carry reasonable interest rates which are fixed for the life of the loan, as opposed to a subprime adjustable rate mortgage that can jump higher every six months.

By Les Christine, CNN Money.com, Staff Writer

http://www.fha.com/application_ml.cfm?PPCID=102

Dealing with Debt

This blog is intended for readers interested in getting out of debt.  With the amount of Americans drowning in debt on the rise I have started this blog to answer many questions for those living in a world of uncertainty.