tax refund Archives - Northern California Bankruptcy Lawyer

Get The IRS To Feed Your Savings

Lucky enough to get a tax refund this year?

Then celebrate America Saves week by telling the IRS where to put it.

I mean, where to deposit it.

Refund jump starts savings

A tax refund is the perfect place to boost your savings. And you don’t have to choose between spending it all or saving it all.

Turns out, the IRS has a form (you knew they would, didn’t you?).

Form 8888 allows you to split your refund between a savings account and your checking account.

You can even use the form to buy U.S. Savings bonds.

Or deposit it in your IRA or 401(k). You do have a retirement savings account, don’t you?

If not, get with it and open one. The average Social Security check is $1300, not enough to live comfortably in old age.

Stand out with savings

A frightening fraction of Americans don’t have enough savings to pay for a $400 unexpected expense.

Four hundred dollars isn’t much in today’s world. And emergencies are seldom thoughtful enough to come in modest sizes.

The last government shutdown sent hordes of regularly employed folks to FOOD BANKS because they didn’t have reserves sufficient to go a month without income.

Hit the savings bank, not the food bank. Stock up on cash.

Make saving a habit

Habits are powerful. Bestsellers have been written about how they direct our behavior.

One healthy habit is to put yourself (and your family ) first when it comes to money.

Which comes first: getting out of debt or saving

Pay yourself first each month, preferably with an automatic deduction at work, if you get a paycheck. If not, write the first check each month to yourself, before you pay the rest of your bills.

It doesn’t have to be a big amount to make it a habit.

Tips on saving

The non-profit America Saves site has savings tips and tricks to get you started. Their tag line is right on: Start small, think big.

Your Tax Refund In The Crosshairs In Debt Collecting Season

By Cathy Moran

Who knew that there was a season for debt collecting? My friend and colleague attorney Mike Cardoza does. See what he says.

The beginning of the year through about the end of March is the big season for debt collection!

Why? Because collectors are pretty sure that you have some money in your pocket – right now – in the form of your IRS income tax refund.

Collectors want your tax refund

At the beginning of every year, debt collection companies work like the devil to attempt to calculate exactly when the IRS will issue those refund checks so that they can time their collection efforts for that perfect moment after you’ve gotten your refund, but before you spend it.

Since the IRS is close-lipped about its refund operations, debt collectors closely track when you’ll get your check by using other reliable sources of data, like Walmart’s report of how many IRS refund checks were cashed nationwide in the prior week. I’m not kidding about this stuff.

So, from now through the end of March, you’re going to get more phone calls and debt collection notices. You’ll even get offers to settle old debts for dimes on the dollar.

Should you settle with debt collector

A settlement could be a good deal for you – but be careful. I recommend that you don’t make any partial payments – particularly on debts that are getting old.

Any payment on a debt restarts the statute of limitations.

That gives the debt collector a brand new bunch of years to SUE you to collect it.

If a debt that’s been delinquent for more than 7 years ago, by law it can’t appear on your credit report. So you have to ask yourself, “who cares?”

Old debts may still be legally enforceable, even if they can’t be reported on your credit

Same thing goes for debts (in California) that are older than 4 years since delinquency – they can’t get a judgment against you anymore to collect it (unless you make a partial payment), so, “so what?’ (Remember, that paying an old debt WILL NOT remove it from your credit report).

Even though it’s debt collection season, collectors still have to follow the rules – and if they don’t, they may be liable for violating the law. Their missteps could wipe out your debt and entitle you to compensation.

What’s the best use of tax refund

Cathy: So now you know that you are in the debt collector’s cross hairs since they expect you to have a tax refund to “share” with them. What should you do?

Ask yourself the following:

Is my tax refund earmarked in my budget for some necessary expense? Lots of my clients use tax refunds to pay property taxes or essential bills.
Will settling this debt solve my debt problems or is this just one of many delinquent bills? Maybe the tax refund should fund a bankruptcy.

In the bigger picture, is your tax refund better spent funding your retirement savings? You do plan on a long, comfortable old age, don’t you? More on whether to pay debts or fund retirement.

Don’t get bitten making a “good faith” payment on old debt

Who to pay when you can’t pay everyone

Disarming the debt collector

You've arrived at the Bankruptcy Soapbox, a resource of bankruptcy information and consumer law.

Soapbox is a companion site to Bankruptcy in Brief, where I try to be largely explanatory and even handed (Note I said "try").

Here, I allow myself to tell stories and express strong opinions on how I think law should work for the consumer and small businesses when it comes to debt.

Moran Law Group
Bankruptcy specialists for individuals and small businesses in the San Francisco Bay Area