Month: September 2016

How To Prepare Tax Audit

Have you received a state notice of audit for sales and use tax? If so, are you prepared for the business’s sales, purchase and expense accounts to be examined by auditors trained to collect every penny of state revenue they can find? Are you aware that state tax law is the one area of law where you are considered guilty until proven innocent? This means that once the state has assessed tax, penalty and interest on a transaction it is owed to the state unless you can prove otherwise. Many state even impose what is termed a “pay to play” strategy which requires the business to pay the full assessment before the state will even consider reviewing an audit protest.

Take it from a sales and use tax expert who has supervised numerous tax audits, your best defense in any tax audit is to go on the offensive as soon as possible and start to prepare your business for the many demands an audit will have, from reviewing the transactions that make up the company’s sales, purchase and expense accounts to making sure all required tax returns have been filed. Not being proactive and thinking you will address audit issues as they arise is a big mistake. State auditors are trained to find every penny of unpaid or uncollected tax during the audit period, which is typically three to four years depending on the state conducting the audit. Auditors do not care about any good intentions you may have to address the problem later.

In preparation for the audit, ask yourself the following questions: Do you know what can be negotiated before an audit even begins? Do you know what company accounts will be examined in detail? Has use tax been accrued on all taxable purchases the business made where the vendor did not charge tax? Are you familiar with how auditors use sampling methods to test the business’s transactions for compliance purposes? Do you know how a business’s tax assessment is calculated in a sample audit?

As you can see from the basic questions listed above, a sales and use tax audit can be a very complicated matter. However, being prepared and knowing what to expect can be crucial in surviving the audit. The information provided above is just the tip of the iceberg when it comes to a sales and use tax audit. For now, begin by asking yourself: what does the state require when it comes to reporting the taxes? Has the business been collecting exemption certificates on tax exempt sales? Has any required use tax due on the business’s purchases been accrued, reported and submitted to the state conducting the audit?

The Impact Of Credit Card Charge

If you are of the opinion that paying your bills late won’t have an impact on your credit score, think again. The late payment of bills under any circumstances can tarnish your credit history. Initially (for the first 180 days),the longer the debt goes unpaid, the more it will affect your credit score. In case the unpaid credit card debt reaches a point where the lender thinks that it will be irretrievable, it will be known as a “charge off”.

A charge off enables creditors to write off the debt and claim a tax exemption. Typically, an unpaid amount is recorded as a charge off when you don’t pay the bill for at least six months. However, the tenure varies from lender to lender.

Why Avoid Charge Offs?

A charge off means that you have been delinquent in making payment on the debts that you owe. After a debt is charged off, it is no longer considered as a revolving debt. It becomes a balance that is due to be paid. If possible, it is always advisable to avoid a charge off. This is because when your account is revolving, you still have the chances to pay off the debt and bring your credit score to a good position.

Even if you pay the due amount in full, a charge off will stay on your credit report for the next seven years. This is because your past record for payments is considered as an indicator of your future behavior. In case you settle the charge off by paying an amount that is less than what you owe, both the transactions will reflect on your credit report.

Myths About Charge Offs

A myth that most people may have heard is that charge offs can be removed from your credit report. You may find it surprising to learn that your responsibility to pay off the debt does not end when it has been charged off. When your debt has been transferred to a collection agency, the contract that you signed to repay debt will stay in effect until you settle the account. An important point that you should remember when your debt is charged off, is that you may not be able to settle the payment with the original creditor, but with the company that is responsible for collection.

The Impact on Your Credit Score

Charge offs can hurt your credit score to a great extent. Whether you owe $100 or $1,000, charge offs can pose a big threat to your future investment plans. A charge off can make your credit score plunge dramatically. Like some of the other flaws in your credit report, a charge off can be a major setback in the case that you are making an effort to improve your credit score.

All About Credit Counseling

Debt is arguably the greatest plague in our society today, it has a way of creeping up on us if we let it. It’s crucial to keep debt manageable and reasonable in order not to incur painfully large interest charges or struggle to make our payments. Even for those who manage debt well, unexpected life changes can result in difficulty making ends meet.

When debt seems to overcome our lives the first course of action is to take a look at the budget. Finding unnecessary expenses to cut back on can help us pay down debts and keep monthly bills current if we aren’t in too bad of a situation. But what happens when we can’t solve our debt problems with budgeting?

Sometimes we need outside professional help. It’s hard to admit when you’re having money troubles and to go to someone else, but if you don’t gain control over your debts, your credit rating will suffer and you might live the rest of your working life trying to get out. So it is important to take control and make a change before it’s too late.

Some debtors turn to consolidating their debt as an answer to debt problems. Others may even consider bankruptcy. What they do is transfer high-interest debts to a lower interest credit card, or they put up the equity in their homes to get the money to pay them off. While these options can provide lower payments, they are not without drawbacks. Closing numerous accounts and putting all of your debt into one account can negatively affect your ratio of debt to available credit, lowering your credit score. And if you use your home equity to secure the money needed to pay off debt, you’re putting your home at an unnecessary risk.

The most popular option for those with debt problems is credit counseling. Credit counseling agencies offer help with budgeting, and in some cases, they will set you up with a debt management plan. A debt management plan involves negotiation with creditors to obtain lower interest rates and lower payments. The debtor makes one monthly payment to the credit counseling agency, and the agent forwards payments to each creditor.

A debt management plan can help you get out of debt faster, but it can also impact your credit. A note is added to your credit report stating that you are undergoing credit counseling. This means that you can’t get new credit. However, the notation is removed once you’ve paid off your debts.

An overabundance of debt can wreak havoc on our finances and our credit scores. It can also be the cause of undue stress. By seeking help at the first sign of trouble, we can often prevent our debts from spiraling out of control.

A good resource will always be a local professional that you can personally meet with, or online with a reputable company such as this one, [http://www.creditrepairs.info] although some charge for a consultation.

But there are companies that don’t charge if they don’t find a solution, like this one for example here, [http://www.moneysolution.info]

If you do decide to go the online route though, please be aware of any shady websites that ask for too much money upfront without even doing a needs analysis.

Being Adult Means Managing Your Credit Score

Age brings with it wisdom especially when it comes to taking financial decisions. A 40-year-old may be aware about more of credit repair facts and myths as compared to a 20-year-old. However, there may be instances when people may be stuck with similar credit issues irrespective of their age.

To begin with, the key to improve your credit score is – a dynamic focus. You need to seek help from a proficient credit repair specialist and then prioritize certain things as you age in order to do away with the issues that come in your credit domain.

Things to Consider in Your 20s to Improve Your Credit Score:

In your 20s, there are specific things that calls for your attention, when it is about enriching your credit health.

Attend to the five Factors:

The first step to improve your credit score is to have a clear understanding of the rules. The actual status of your credit score is determined by five factors – debt utilization, payment history, new credit, credit length, and diversification. If you were unaware of the essential factors that have an impact on your credit score, you need to work on the strategies that will help you to take care of the five factors.

Repay your student loans:

As stated by The Institute for College Access and Success (TICAS), about 69 percent of the students left college with loans in 2013. The bottom line (which was $28,400) was actually a big burden for the salary of a fresher. You have a choice to stretch the loan for whatever time span you want to (years or even decades), but you also need to keep in mind the downside of the decision.

Adding on the interest will not only increase the principal amount and will also increase the life of the loan. This will increase the overall cost of the loan that you have taken. Paying off your loans at the earliest will lead to a lower credit utilization ratio, better and more opportunity to improve your credit, less stress on your budget, and last but not the least even more opportunities to save.

The final tip:

Credit score plays a vital role in every phase of your life whether you are in your early 20’s or 50’s and beyond. Analyze your credit score regularly to ensure that you maintain a positive credit and avoid any problems related to your financial plans.