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How can you evaluate your retirement funds to eliminate your IRS debts?

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Taxpayers who owe money to the IRS should sincerely work on a plan to pay off the owed amount. The accruing interest and penalties on the outstanding balance will make it unaffordable to pay off. If you are unable to pay off your taxes on time then you are subjected to wage garnishment, seize tax refunds and the IRS department can make the taxpayers subjected to additional withhold. If you are financially crippled and unable to make payment on your other bills then hire the services of a debt settlement company. Pay off your other debts and then use your retirement fund to pay off your debts.

Qualified retirement plans give opportunity to the taxpayers to use the retirement savings plan to schedule paying taxes and this plan is regulated by the IRS. The taxpayer can use the qualified retirement plans like 401k plans and pension plans to pay off the IRS debts. These retirement fund comes under taxable income and if you withdraw the money before you attain the age of 60 then penalty will be imposed on the account for early withdrawals.

You can take out from other retirement funds like the money you save in the bank or in the brokerage account. There will be no tax penalty when you withdraw money from these accounts. Remember that a Roth IRA is also considered to be a non-qualified retirement plan. The taxpayers can take out money to pay off debts without being subjected to penalty.

How to use retirement plan fund to eliminate your IRS debt?

In qualified retirement funds like 401k plans and pension plans, the account holders have to leave the job before they withdraws fund from the account. There are some retirement plans that give permission for a hardship distribution. But when you default on your IRS payment then you will not get the benefit of hardship distribution. But the retirement fund can be used for various purposes once the employee leaves the employment. Remember that any type of distribution will be subjected to taxable income and distribution before the specific period of time will be subjected to 10% penalty. Therefore, if you use fund from your qualified retirement plan to pay off your IRS debts then you are required to pay extra taxes.

But you are not subjected to additional taxes if you use fund from non-qualified retirement plans to pay off your IRS debts. So this option is beneficial than using your qualified retirement funds to pay your IRS debt.

Know about IRS debt interest and penalties:

The taxpayers who are unable to pay off taxes for them the IRS provides a payment plan. An affordable interest is charged on the payment plan so that the taxpayers find it reasonable to pay off. The interest rate is calculated on a quarterly basis and it is similar to the federal short-term rate with additional 3% points. Recently the taxpayers are looking for a repayment plan option than using their retirement fund for paying off the IRS debts.

Categories: Financial Planning Advice

Financial Planning Advice – Tips to Keep in Mind

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All of us are aware that the financial global market is in constant flux and change. Therefore, it is very important for us to get proper financial planning advice in order to stay one step ahead of the changing circumstances.

Many people desire to plan their finances all by themselves, but they are unable to do so due to lack of knowledge, resources or due to the time constraints. In such a situation, you might want to hire the services of a Certified Financial Planner, who can efficiently plan your finances in order to secure your future.

When you hire a planner, you will need to ask few important questions with them in order to make sure that you are taking advice from the right places. Please be reminded that finding a reliable expert might not be as easy as it sounds.

Primarily, your adviser must report directly to you and to nobody else, even if you do not understand the ins and outs of investments.

The three important things that your adviser must posses are:

• Knowledge
• Qualification
• Experience

Your financial planner should be certified to do his or her job. One has to pass the general securities exams to get the license. You will also need to check if the person has the required experience to run the operations smoothly and efficiently.

People often hesitate to ask questions before hiring a planner, but it is very important to know the background of the person who will be managing your funds. Tying up with the new or an inexperienced planner could also mean losing a lot of money.

Hence, you will need to have your questions ready before you decide on who your planner is going to be for giving you financial planning advice:

Important questions to ask:

• What are your qualifications?
• Do you have the necessary licenses?
• What kind of experience do you have?
• What are all the services that you offer?
• What are your payment terms?
• Will you be coordinating closely with other attorneys and insurance agents?
• How much do you charge?

These are few of the general questions which you’ll need to ask before choosing a planner. You might also want to check if he has any kind of complaints by checking with the Better Business Bureau.

If your adviser receives commissions from product sales of other companies or any referral fees, then he or she should reveal all these details to you.

Your planner may not be overly aggressive to match your financial goals. You can check if he has complete knowledge about insurance and tax saving methods. Usually they are barred from selling insurance without the license.

You can ask straight forward question on how they have helped their clients in planning their finances. Financial planning advice is important for everyone regardless of the type of job or business you do. Don’t forget it is your life, and you’ll need to plan it on time for a better future.

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