Monday, December 06, 2010

Questions for the Tax Lady: December 6th, 2010

Check out the following new Questions for the Tax Lady answers and feel free to ask me questions through one of the links below. You can send me an email, direct message or @ reply, and I will do my best to get an answer for you!

Question: Question: If I owe the IRS, can they place a levy on my husbands wages?

Answer: Good question. If you file jointly, it is possible that the IRS would come after your husband’s wages to cover your debt. When you file a joint tax return with your husband the IRS goes by the concept of “joint and severable liability”. Which means you can both be subject to collections for unpaid debts.

Now, there are things you can do to avoid this situation. First, if you have an existing tax debt, tell your spouse. Second, don’t file a joint tax return. This should go a long way toward keeping your debt from affecting your husband’s taxes.

Another issue you might discover, if you file jointly, is that the IRS may keep your husbands tax refund to pay your tax debt.

Question: Is it true that making an extra mortgage payment before the end of this month can help lower my tax liability?

Answer: Absolutely! Prepaying deductible expenses, like mortgage interest, is a great way to reduce your tax burden. Just a few things to remember: All payments must be made by December 31, 2010. You should also be aware that the Form 1098 your mortgage lender sends you may not show the early payment. You can still deduct it, you’ll just have to make sure you hang on to receipts and canceled checks as backup documentation. And finally, no double dipping! That early payment cannot be deducted on the following year’s tax return if you use it on this year’s, so plan accordingly.

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