Getting Help From an Unlikely Source

September 04, 2013

When was the last time you looked forward to dealing with the IRS? Most of us only interact with the IRS when it’s time to file our income taxes or respond to a filing inquiry (i.e. an audit). We probably all know someone who has had challenges with the IRS, and hopefully we never fall into that category, but believe it or not, there are several helpful tools and resources this often belittled agency makes available to taxpayers to help them manage their taxes better. Here is an overview of what I consider some of the more useful resources that may be just a click or phone call away:

Tax Tips

Every year, the IRS publishes a series of Tax Tips that offer taxpayers ideas on how to save on income taxes.  Tax-saving strategies usually include how to maximize tax credits, exemptions, and deductions, as well as where to go for more information on new or less-than-familiar tax topics.  Don’t worry about logging in to the IRS website to get these tips.  You can simply subscribe to have them delivered to your email.

Online Tools

In addition to the tax tips, the IRS website has a section dedicated to online tools to help you manage your taxes more efficiently:

Free File let’s you file your income taxes online for free. Free File also offers tax preparation software at no charge to taxpayers with adjusted gross incomes (AGI) of $57,000 or less.  For taxpayers with AGIs above $57,000, they may still file their taxes for free using Free File Fillable Forms, but they will have to prepare the returns themselves (i.e. there’s no software to calculate what goes on the forms).

The IRS Withholding Calculator helps taxpayers estimate the appropriate number of allowances to claim on Form W-4 so that they withhold enough federal income tax to cover their liability without withholding so much as to get back a large tax refund. Some taxpayers don’t mind having too much tax withheld because they see it as a forced way to save, but others may prefer to get that money now in the form of a larger paycheck rather than waiting until they file their tax return to get a refund.

Ask any tax professional to explain the Alternative Minimum Tax (AMT) and they may roll their eyes at you. The AMT is designed to make sure high-income earners pay a proportionately “fair” amount of income tax, but each year it seems more and more taxpayers fall into this definition of “high-income earner.”  There is no simple way (aside from using tax preparation software) to know if you will have to pay AMT, so the IRS has developed the Alternative Minimum Tax (AMT) Assistant. The AMT Assistant is intended to provide a simple test for taxpayers who fill out their tax returns without using software to determine whether they may be subject to the AMT.

Taxpayers may claim an itemized deduction on Schedule A for state income tax paid, but what if you live in a state that does not have a state income tax?  Have no fear.  As an alternative, the IRS allows taxpayers to claim a deduction for state sales tax instead.  You could keep track of all the state sales tax you paid over the course of a year or simply use the Sales Tax Deduction Calculator.  It may not be exact, but it beats holding on to all those receipts!

If you ever do find yourself in a situation where you owe more in taxes than you reasonably can afford, you may be eligible to make an offer-in-compromise with the IRS.  You must meet certain criteria to be eligible for this relief, so the IRS provides an Offer in Compromise Pre-Qualifier Tool to help taxpayers determine if this option is available to them.

Taxpayer Advocate Service

If you ever do run into tax problems with the IRS and you are unable to resolve the issue on your own, the Taxpayer Advocate Service (TAS) may be the best place to go for help.  Taxpayers that are facing financial difficulties because of a tax problem may qualify for the service.  Qualifying taxpayers will work with an advocate to try and find a resolution to the problem.  Even if you’re not sure if the TAS can help, it doesn’t hurt to give them a call.  Their phone number is (877) 777-4778, or you can visit a local TAS office.

They say there are two things you can be sure of: death and taxes.  A doctor may be able to help you with the first. Don’t overlook the IRS for help with the second.