Credit Tips

Credit Repair Programs: Benefits of Choosing the Right Company and Raising Your Credit Score

There are many benefits of joining credit repair programs, as long as you stick with the ones that are legitimate. Cleaning up your credit report and maintaining a high score will allow you to keep more money in your pockets since your interest rates will be lower and you won’t have to worry about getting sued. You’ll be more likely to get more credit if and when you need it, and it will be easier to get an apartment. Application processes will be faster, if not instantaneous. Also, a higher credit score means you have more bargaining power when it comes to negotiating with retailers, banks, and credit card companies. Need a new car all of a sudden? A high credit score will make that easy to get.

No matter how or why you ended up with bad credit, whether it was poor money management on your part or you experienced an emergency that cost a lot of money, there still might be some things about it that can be fixed. Negative items could potentially be removed. You could contact the credit bureaus yourself and try to have them removed, but that could take some time and your chances of being successful aren’t very high. It’s better to compare some credit repair programs and contact the one that seems to fit your needs the best.

Use Only Legitimate Credit Repair Programs

You absolutely must familiarize yourself with the Credit Repair Organizations Act so that you’ll know how to avoid scams. You do have legal rights when trying to get your credit report fixed. Before spending any money, you should be provided with a free consultation and a detailed guide explaining the services the company will perform. There should also be some sort of money back guarantee just in case you are not happy with how things are going.

Since there is absolutely no way of knowing 100% sure how the creditors and credit bureaus are going to deal with every single negative item on your report, stay away from any company that claims that it is going to provide you with specific results in a certain amount of time.

None of these programs will be able to do everything for you. You will still be responsible for making your payments on time. What they will do is help you get some of your previous credit problems resolved.

Check and see which credit repair programs are available in your area. If Lexington Law offers services in your state, you’ll definitely want to consider it, as it is a highly-rated and reputable organization.


A Review of IRS Fresh Start Programs

In 2011, the IRS announced the expansion of the "Fresh Start" program as an attempt to help financially distressed taxpayers. But the problem we have is that, similar to all other IRS announcements, this one also claims that they are always on your side. But they aren't and the fact is, they don't have to be.

Let's find out which of the three main IRS Fresh Start programs is actually the most helpful for resolving your tax problems.

1. IRS Fresh Start for Tax Liens

The first one is the IRS Fresh Start Federal Tax Lien program. The IRS claims that the new standard for Notice of Federal Tax Lien filing is in the taxpayers' favor as it has raised the minimum liability for filing a tax lien from $ 5,000 to $ 10,000; this sounds good. But it is pretty much useless. And what is there for the IRS to secure something from people when they don't have anything to pay? It will only serve to ding your credit score by 100 points or more and make it difficult to get approval for new credit to repay the IRS. The new change is not retroactive and the IRS cannot automatically withdraw a previously filed lien. Rating: Two thumbs down; a highly ineffective program.

2. Installment Agreement and the Fresh Start Program

The next program is the IRS installment payment plans. If you owe $ 50,000 or less in combined tax, interest, and penalties, you can participate in an installment plan by providing minimal financial information to the IRS (if you owe less than $ 25,000, you do not have to submit anything). The timeline for paying under the streamlined installment agreement has been increased to 72 months. Rating: Good.

If you owe more than $ 50,000, you need to complete Form 433-F, the Collection Information Statement. You have to conduct a lot of negotiations with the IRS over a reasonable monthly plan as the payment amounts are at the discretion of the IRS representatives.

3. Fresh Start Offer in Compromise

This definitely stands out as the best IRS Fresh Start program to settle back taxes for less than you owe. The IRS has now added more flexibility when calculating a taxpayer's ability to pay when requesting relief under an Offer in Compromise . One significant change is in the calculation of the taxpayer's reasonable collection potential. The IRS looks at only two years of future income for offers paid within 24 months, which is a reduction from five years. The changes allow more individuals to qualify for OIC programs, providing them with a new opportunity to resolve their tax debts with the IRS. Rating: An excellent program. Go and make full use of this opportunity.

Dealing with the IRS

The IRS Fresh Start Program has opened the doors to new possibilities to resolve back tax problems, but it should be utilized in the right way. You should understand that knowing all the details pertaining to the new Installment Agreement policy or having an IRS Offer in Compromise accepted remains remains challenging for many people. There is no guarantee that the new relaxed policies will stay forever, so there is no better time than now to start negotiating with the IRS.


How Government Student Loan Debt Forgiveness Programs Create Huge Tax Debt

Those breathing a sigh of relief that their student loan debt is now in line with their income may want to re-evaluate the guidelines that set the income based payment in the first place. There could be a tax time bomb looming, slowly ticking away. And with America’s focus on student loan debt and job security, defusing it is not a big part of the policy discussion in Washington at the moment… but we have been keeping a watchful eye and our projections might shock you…

Should You Have to Pay Taxes on Forgiven Student Loan Debt?

If you’re enrolled in the income-based repayment program, should you have to pay income taxes on the loan balance that the government dismisses?

This potential tax bill is a byproduct of federal efforts, including the newly expanded income-based repayment program, that allow you to limit the monthly payments on most federal loans to what you can afford to pay. There’s a formula that uses your income to determine your payment. Then, the federal government forgives any remaining balance, usually after 10 to 25 years.

The catch comes with the forgiveness, since you generally have to pay income taxes on any forgiven debt (unless you were in a program for teachers or worked in a public service job, in which case the taxes go away). For many people, especially those who finished graduate or professional school with six figures of debt, the tax bill could be well into the five figures. And when it comes, you are supposed to pay in full, immediately.

Figuring out just how many people will be in this situation – and just how high the tax bill could be – is a tough task, and not many experts have tried it.

Sorting it all out begins with the repayment programs themselves. Some people signed up for income-contingent payments back in the 1990s. The income-based program came along more recently, and the Obama administration then tweaked it to make it more generous by shortening repayment periods and adjusting the formula used in figuring out the monthly bill.

As of Oct. 31, about two million people had applied for income-based repayment, according to Education Department figures. About 1.3 million had low enough income and high enough debt payments under standard repayment plans to qualify for reduced payment under the terms of the program. Another 440,000 applications were still pending.

In the 2011-12 school year alone, more than 10 million people took out the popular federal Stafford student loans, according to the College Board’s Trends in Student Aid report. Cooper Howes, a Barclays analyst, estimated in a report earlier this month that more than half of all borrowers would be eligible for payment reductions because of their incomes.

If you or your children are borrowers and the income-based repayment program is new to you, you should consult the Project on Student Debt’s site, which is about as clear as this complicated topic can get. The Education Department’s site is worth a thorough look, too, as is the New America Foundation’s income-based repayment calculator. I’ve stuffed the Web version of this column with links to these and other pertinent information sources.

Trying to pinpoint the scope of the looming tax issue starts to get more complicated pretty quickly. Not all eligible students will sign up for income-based repayment, since some will not hear about it, will ignore it when they do, will assume or be told (incorrectly) that they can’t qualify or will worry that there is some kind of catch. For those who sign up, it’s awfully hard to predict how many will eventually have some debt forgiven a couple of decades from now.

But Jason Delisle, who has written extensively about the income-linked repayment programs as director of the federal education budget project at the New America Foundation, points to an Office of Management and Budget effort that took a stab at it. The O.M.B. assumed that 400,000 borrowers from 2012 through 2021, each with a beginning average loan balance of about $39,500, would each eventually receive loan forgiveness of about $41,000. Yes, you read that right. The forgiven debt will be more than the original balance, albeit many years later.

At $41,000 of loan forgiveness, the federal tax bill could easily be over $10,000 depending on your tax bracket. There are also state income taxes to contend with, depending on where you live.

But the numbers can go much higher. Stephanie Day earned her bachelor’s degree in her 40s after a divorce, intending to enter the field of social work. She finished in the depths of the recession and could not find work, so she returned to school to get a master’s in psychology to bolster her credentials.

Even then, the jobs available near her home in Seattle were slim, so she moved to a town on the border of New Mexico and Texas for a position there. One home invasion and 12 months of misery at being apart from her children later, she’s now back in Seattle and paying just $30 each month on her $80,000 or so in debt via the income-based repayment plan.

Ms. Day has run the numbers and can foresee a situation where the government will forgive more than $100,000 of her debt, given that her unpaid balance keeps growing thanks to the low payments. And while she expressed dismay that so few people were aware of the tax bill in their future, she does not necessarily mind paying it. “I think it’s perfectly fair,” she said. “I guess I’m old school.”

I do wish to mention that worries about a tax bill a couple of decades from now shouldn’t scare you away from signing up for the income-based repayment plan if you need it. But however the numbers turn out, anyone enrolled in the plan ought to be thinking hard about salting away some money, somewhere, for the eventual tax bill.

After all, no matter how high the bill, there are severe penalties for not paying it right away. The Internal Revenue Service, alas, has programs available to settle tax debts if you are facing a financial hardship (e.g your expenses outweigh your income). Additionally, if you are insolvent (which most people are) you may be able to write off a large portion of the forgiven debt on your tax return! Yet another reason why consulting a Tax Practitioner at Advocate Tax Solutions is paramount to avoiding a hefty future tax burden! Call us toll free at 888-737-0200 today for a free and confidential tax consultation.

Student Loans

How The Student Loan Debt Relief Programs Can Help Graduates With Outstanding Credits

In a Forbes article last 2009, a 2008 College Board study showed that two out of every three undergraduates will leave their college or university with some kind of student debt. And a more terrifying research shows that an average college or university’s graduate’s loan debt is around $ 26,000.

With such statistics, education really can be a very expensive commodity nowadays. And though education is always said to be a “right” for everyone, the sad reality today is with the costly course fees alone, education is becoming more and more of a “luxury” now.

The young ones, on their own or supported or encouraged by their families, still do strive and work hard to complete a college degree. And in the USA, they do this by applying for and using either a federal or private student loan, and sometimes, even a combination of the two.

In case a student decides to go for a federal loan, the federal government will subsidize or pay the interest on the loan while the borrower is still in school. In a federal loan, the interest rate is mostly fixed and it will permit the borrower to limit the amount to be repaid monthly based on his or her earnings. If the student decides to take out a private loan, the funds will be provided by a bank, credit union or any financial institution. Private loans, unfortunately, do not come with flexible repayment terms or any kind of protection, such as an insurance, that are typically included in federal student loans.

To help graduates ease the burden of exorbitant and multiple student loan repayments, several programs were initiated. Students and graduates with federal loans can enroll in alternative repayment programs, such as Income-Based Repayment. This program will help them get a more affordable plan using the student or graduate’s income as percentage for their loan repayment.

Lastly, borrowers, more often than not, will have more than one student loan to their name. And because of this, they will have a hard time keeping track of each one and ensuring on-time payment of all these loans. To assist graduates with these financial difficulties, they can avail of any of the available student loan debt relief programs so that they can also have loan consolidation. Loan consolidation means that multiple loans are combined into just one, single loan. And because there is only a single monthly payment to keep track of instead of several, a borrower can have a much easier time managing the repayment of his or her loans.

Student Loans

Student Loan Forgiveness Programs: Educating Public Service Workers

With the U.S. student loan debt creeping up on $1 trillion, it is a shame that more people are not taking advantage of student loan forgiveness programs offered by the Department of Education. The Consumer Finance Protection Bureau is working on a plan to educate those with student loan debt about their repayment options and rights.

The CFPB efforts are focused on the 33 million people working in “public service” jobs. Federal student loan forgiveness programs are aimed at those working in the following fields – armed forces, teachers, emergency service personnel, social workers and other qualified non-profit workers.

Because these jobs are not high salaried positions, the government offers the forgiveness in order to keep them employed in their position. The forgiveness programs work over time which will eventually end up in forgiving a good portion of the worker’s student loan debt troubles. The debtor will have to pay in to their loan for a number of years to qualify for forgiveness.

Many borrowers in the public service field do not know about these forgiveness programs. The education set forth by the CFPB will help reduce the debt for borrowers who remain in their public service jobs. Currently, there are many federal student loan debt relief services that are educating and assisting borrowers to find relief with their loans. Too many of these workers are leaving their jobs to find better paying jobs.

CFPB is in hopes that along with helping current public workers with their debt that spreading information about loan forgiveness programs will entice new students to go to school in public service fields. The forgiveness programs are set up to allow individuals to work through the programs themselves. The relief is a free service from the Department of Education.

Whether you are a new or a student in the past, if you are facing loan debt and your work in a public service position, it is in your best interest to find out if you qualify for the forgiveness program ahead of time. You can call one of these services for a free consultation to see what programs you may qualify for.

If you are skeptical about working with a paid service, you can go to the Department of Education’s website and look up the programs directly. You will want to know what type of federal loan or loans it is that you owe in order to help define your qualification standings. Not all loans will offer forgiveness, but they may be handled in a different manner to provide relief. It is the complications of multiple loans with various savings programs which drives borrowers to use professional services for federal student debt relief.

Even if you are not a public service worker and are looking for loan relief, there are federal programs to help out. There are consolidations to consider as well as the Income Based Repayment program. The IBS is its own form of forgiveness program with set qualification standards.


IRS Tax Relief Programs – How to Get Enrolled

So you've made all your workers independent contractors instead of employees to save payroll taxes you've been paying. It sounded like a great idea.

  • You saved thousands of dollars on employment taxes
  • You didn't have to worry about filing payroll (941) tax returns
  • You saved the quarterly payroll processing charges you've been paying
  • Maybe even your accountant suggested it to you

Well, its a bad idea … and now you know it.

  • You're worried sick that you're going to get caught
  • You've read that the IRS launched a pilot program specifically targeting this issue that's about to go into full force in the next few months
  • You realized that having your workers sign an agreement isn't worth the paper its written on
  • And you're months (if not years) out of compliance

What are you going to do?

Your probably asking yourself

  • If you start paying payroll taxes now, aren't you going to raise red flags?
  • What about the back taxes? How are you going to pay these?
  • What if you just start a new Company? Will that work?
  • What about the workers? Are you going to have to pay them more now that you're withholding payroll taxes?
  • What about the 1099 forms you never gave them?

Great questions, but you need to know more.

The New Voluntary Classification Settlement Program In late September 2011, the Internal Revenue Service (IRS) launched a new tax relief program that may help you resolve your past worker classification issues and come clean at a relatively low cost to you [Announcement 2011-64] . This is part of a larger "Fresh Start" initiative to help business taxpayers clear up their tax debts from the misclassification of workers known as the new Voluntary Classification Settlement Program (VCSP). Under the program, eligible employers can obtain relief from past federal payroll taxes if they treat workers as employees going forward.

Who is eligible? To be eligible, you must:

  • Consistently have treated workers in the past as non-employees
  • Filed all required Forms 1099 for the workers for the past 3 years
  • Not currently be under IRS audit
  • Not currently be under audit by the Department of Labor or state agency regarding the classification of workers

What will the tax relief program cost you?

Employers accepted into the New Voluntary Classification Settlement Program program will pay roughly one percent of the wages paid to the reclassified workers for the past year.

What are the benefits of the tax relief program? The benefits are huge. You'll pay no interest or tax penalties. And you will not be audited on payroll taxes related to these workers for prior years. Payroll tax penalties are huge and can save you thousands.

What else will the tax relief program cost you? For the first 4 years under the program, you will be subject to a special 6 year statute of limitations, rather than the usual 3 years that applies to payroll taxes.

How to get started To get started, contact your taxpayer resolution advisor or CPA. This is not the kind of do-it-yourself program when the risks can be great. If you contact your CPA, make sure they know how to do this, or at the very least have heard about the program and can help you. Otherwise, call us!

You will need to complete Form 8952, Application for Voluntary Classification Settlement Program at least 60 days before you want to begin treating your workers as employees.

As this is a voluntary compliance program, your taxpayer rights will be protected once you qualify. Paying a 1% charge is nothing compared to the penalties you can be charged.


Mortgage Loan Modification Programs – Are They For Real?

I have a reputation — perhaps well deserved — among my friends and colleagues as being someone who knows a little bit about everything. I wouldn’t exactly say that I’m Cliff from cheers, but it’s safe to say that if someone is looking for an opinion about a subject that they don’t know much about they feel comfortable asking me.

Recently a new subject has come up, and so of course as I usually do I’ve done some research into it and found out what I could in order to help people who ask me.

What we’re talking about here are mortgage loan modification programs. There’s never been a greater need for this kind of thing than now. With the financial mess that we’re in, it’s no wonder that so many people are finding it harder and harder to make that monthly mortgage payment.

But are loan modifications for real? And what’s more, do they really help?

First, let’s adjust some of the reasons why people think they don’t work. Most of the negativity surrounding loan modifications stems from some early media reports that seemed to suggest that a lot of people who had successfully gone through them actually wound up back in financial difficulty just a few months later.

So let’s address that right up front. The problem with these reports, as I found out, is that they’re based on people who got loan modifications back before the economy totally tanked. Why does that matter? Because during that time, banks were not as willing as they are now to actually gave real relief.

So the people that they’re using for case studies in those reports, are not at all representative of the kinds of cases that you’re getting now, with the banks desperate to work with homeowners.

What you’re finding now are that loan modifications are making a much bigger difference in people’s lives than they were even six months ago. Banks are actually now willing to step up to the plate and offer real, and substantial, reductions in payment. Sometimes they even cut some of the principal off of your loan.

It’s not uncommon, with the right help behind you, to cut your payments by between 30% and 50%. Compare that to the token reductions people were getting just a few months ago, and you can see why loan modifications that are being done today are totally different than the loan modifications that were being done just a few months ago.

About 30 million homeowners qualify for a loan modification. Of course that doesn’t mean it’s necessarily right for you, but chances are if you’ve been affected by this economy at all, you probably have a good chance and should at least look into it.

Now, the issue is who do you turn to help? No, I don’t recommend that you try and do this on your own. This can be a tricky business, and having someone in your corner who knows the ropes is your best play here.

Below I have links to two resources that I think will be invaluable to you as you navigate the one modification maze. Please check them out right away. They’ll be a big help.

Finally, I do want to point out the loan modification can be used even if you’re worried that you might face foreclosure. This is not refinancing. You don’t need good credit to get along modification. You’re not applying for a new loan at all. You’re getting your lender to change the terms of your current one.

In fact, it may actually be easier to get a loan modification than to refinance, depending on what your credit looks like. But that’s why you need the help of someone whose experience and all of us to help you work through it.

I know this is been useful to you, and please don’t forget to check out the resources below. Thanks for reading and, as always, good luck!


HUD Refinance Programs To Stop Foreclosure

There are a number of programs to assist homeowners who are at risk of foreclosure that the Obama Administration has implemented. Many of these programs are administered through the United States Department of Treasury and HUD. Today I want to talk about what refinance or modifications programs that are available. Below is a brief description of these various programs.

Your first step should be to contact your lending institution directly about what programs are available to you. If you are experiencing a difficult time contacting your financial institution then go to the bottom of this article to get information on companies that can help you get in touch with your mortgage lender.

MHA Program (Making Home Affordable)

This is a crucial part of the Obama Administration’s broad strategy to assist homeowners is preventing foreclosure, while improving the nations housing market and still improve the country’s economy.

Homeowners can decrease there monthly mortgage payments and into a more comfortable loan at today’s historic low interest rates. For the hundreds of thousands of people out there who have an unaffordable mortgage payment, this program can provide an exit with out getting foreclosed on. There is even an option for unemployed homeowners along with homeowners who owe more than what there home is worth. Below is a list of various programs the government has to offer. I suggest you read through all of them and find a program that best fits your situation and needs.

Refinance or Modify Your Existing Loan for Reduced Loan Payment

1. HAMP (Home Affordable Modification Program): HAMP decreases your monthly loan payments to 31% of your stated monthly pre-tax income to make your payments easier to pay. The standard HAMP modification results in over 35% drop in your monthly loan payment. Eighteen percent of HAMP homeowners decreases there payment by $900 or more in some cases.

2. PRA (Principle Reduction Alternative): This program is designed to help homeowners who are more than what the property is currently worth to get the lenders to reduce the principle amount that is owed on the property.

3. 2MP (Second Lien Modification Program): If you are currently under the HAMP program on your first mortgage lien then you may be eligible to qualify for 2MP on your second mortgage lien. If you have a HELOC (home equity line of credit) that is making it difficult for you to make your monthly payment then you may qualify for a 2MP as well.

4. HARP (Home Affordable Refinance Program): This program is designed for homeowners who are current on there mortgage loan but are unable to refinance because the home value has dropped. HARP was created to help these homeowners refinance into a more stable and affordable monthly l oan payment.

If you are experiencing difficulties getting a hold of your mortgage company then click here to get more information on companies that can assist you in getting a hold of them.


Mortgage Loan Modification – Discover the 3 Different Programs Available to You to Modify Your Loan

There are various mortgage loan modification programs available to homeowners who are struggling to meet their mortgage repayments. However having a wide variety of choices can lead to you becoming confused and overwhelmed with all the information you have to take on board. Therefore in this article i would like to introduce you to the 3 main mortgage loan modification programs.

1) The Fannie Mae streamlined modification program. This mortgage loan modification program is openly available to those of you who have a mortgage that is either serviced or owned by Fannie Mae. I would hazard a guess that the majority of home loans fall into this category. Your mortgage payments will be lowered to 38% of your monthly income. This is done by either lowering your interest rate to as low as 3% or extending the term of your loan. Depending on how bad your circumstances are, you may even have some of your principal balance reduced.

2) The next program is the FHA partial claim mortgage loan modification. This will be available to you if your home is insured by the FHA. Usually if you are in arrears on your loan, another "deferred" loan is put in place to pay for these arrears. It is not until you decide to sell or refinance your home that you will have to make any payments to this new deferred loan.

3) Many individual lenders now offer mortgage loan modifications. In conjunction with the government, these lenders have agreed to lower your monthly mortgage repayments to a maximum of 31% of your monthly income. Once again this is achieved by either lowering your interest rate, extending the term of your mortgage or by reducing some of your principal balance. Although this is a government backed scheme, individual lenders may publish their own guidelines for approval to their mortgage loan modification program.


What Are the Targeted Areas in California Veteran's Home Loan Programs?

How do you stop renting and start owning? Well, there are a few options that military veterans and active duty personnel should explore, like the Cal Vet home loan program. The Cal Vet home loan program has helped countless California veterans attain the American Dream of home ownership. Cal Vet's home loan program offers numerous advantages for borrowers, including below-market interest rates and low or no down payment. Now that eligibility requirements have been expanded, virtually every veteran who wants to buy a home in California qualifies for a Cal Vet home loan.

Cal Vet home loans are designed to save you money and protect your investment. If you buy a home in a designated target area (TA) with your Cal Vet home loan, you could qualify for even more benefits. Purchasing a home in a (TA) gives you greater flexibility because the first-time homebuyer requirement is waived and there are higher sales price limits in all areas and higher income limits in most areas.

The Definition of a (TA)

Areas that have been targeted by the Federal Government were identified in the Federal Census as areas where 70 percent of families have an income that is 80 percent or less than the statewide median income. Cities, counties, and other governmental agencies may have specific areas in their jurisdiction that are "targeted," but only census tracts identified by the Federal Government as "targeted" are used for Cal Vet home loan purposes.

To encourage Cal Vet home loan recipients to buy homes in (TA's), homebuyers are provided with certain incentives. Home loans provided through the Cal Vet program for the purchase of homes in targeted areas are funded from State Allocated Qualified Mortgage Bonds (QMB). QMBs are tax-exempt private activity bonds.

Benefits of Buying a Home in a (TA)

Approximately 33 of the 58 counties in California have targeted areas, but Los Angeles County has almost half of all the targeted areas in the state. Typically, QMB loans require you to be a first-time homebuyer, but that requirement isn't enforced if you buy a home in a targeted area. The maximum allowable income limit is also higher in most targeted areas, giving borrowers expanded homeownership opportunities. The limit on the price you may pay for a home is also raised in order to provide buyers with a wider range of available properties.

The purchase price for homes in targeted arreas cannot exceed 110% of the average area purchase price for the statistical area or county where the property is located. The income limits that applicants must qualify for are issued annually by the US Department of Housing and Urban Development. For example, as of June 25, 2013, the income limit for one to two people who purchase a home in a targeted area in Los Angeles County is $ 101,160. Purchase price limits in targeted areas in Los Angeles County are $ 823,308 as of the aforementioned date.

QMB loans are only available for single-family residences, including condominiums, and mobile homes located on land that's owned by the applicant. To determine if the home you'd like to purchase is in a targeted area and qualifies for a QMB loan, get in touch with the United States Department of Housing and Urban Development.