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Many will get stuck with Tax Credit Payback

November 17th, 2009

More than 15 million taxpayers may owe the government $250 or more because of how the IRS last spring set up President Barack Obama’s tax break that was designed to help consumers spend the U.S. economy out of recession.

Individuals with more than one job and married couples in which both spouses work may have to repay the government $400, either through a smaller tax refund or a larger tax bill, according to a report released Monday by the Treasury Department’s inspector general for tax administration. Social Security recipients who also earn taxable wages may have to repay $250.

The tax credit, which is supposed to pay individuals up to $400 and couples up to $800, was Obama’s signature tax break in the massive stimulus package enacted in February. The credit has increased weekly paychecks for 95 percent of working families, giving them cash to help boost consumer spending during the worst economic recession in decades.

Workers concerned about whether they are withholding enough taxes can use a calculator on the IRS Web site to find the appropriate amount that should be withheld.

Taxpayers can adjust their withholding by filing a new W-4 form with their employer. But with only a month and a half remaining in the 2009 tax year, it’s getting late to make adjustments.

Most workers started receiving the credit through small increases in their paychecks in April. The tax credit was made available through new tax withholding tables issued by the Internal Revenue Service.

The withholding tables, however, do not take into account several common categories of taxpayers. And that could force some people to repay what the government gave them.

For example, a worker with two jobs gets a $400 boost in pay at each job, for a total of $800. That worker, however, only is eligible for a maximum credit of $400, so the remaining $400 will have to be paid back at tax time — either through a smaller refund or a payment to the IRS.

The IRS recognized there could be a similar problem for married couples if both spouses work, so it adjusted the withholding tables. The fix, however, was imperfect.

A married couple is eligible for an $800 credit. However, if both spouses work and make more than $13,000, the new withholding tables give them each a $600 boost — for a total of $1,200.

There were 33 million married couples in 2008 in which both spouses worked. That’s 55 percent of all married couples, according to the Census Bureau.

Also, a single student with a part-time job gets a $400 boost in pay. However, if students are claimed as dependents on their parents’ tax returns, they don’t qualify for the credit and would have to repay it when they file their returns.

Some retirees face even bigger headaches.

More than 50 million Social Security recipients received $250 payments in the spring as part of the economic stimulus package. Those lump sum payments were intended to provide a boost for people who didn’t qualify for the tax credit.

Top Credit Repair Myths & the Truth

November 15th, 2009

Credit repair is a hot topic no matter who you ask. Credit counselors and debt managers will tell you it doesn’t exist, the FTC and Consumer watchdog groups will tell you its a scam, but the truth is, it is real… but proceed with caution.

What the actual problem with credit repair is, isn’t the repair itself, its the methods used and the lies spread through mass marketing to make it a billion dollar industry.

Lots of people prey on the desperation of a consumer to make big money off their bad situation. If you are going to even think about credit repair, do your homework first to avoid scams and pitfalls– and potentially a lot of money.

Below is an absolute legal way to repair your credit and how it should be done.

Can bad credit be fixed?
The short answer is yes. Credit reports contains a lot of information and because of federal laws, that information must be accurate. If an account IS negative but inaccurate or obsolete, it has to be removed. That IS a fact- end of story.

Is is true that Bankruptcies can be deleted?
You may not believe this, but yes. A bankruptcy record is a reported item to your credit reports and even a bankruptcy MUST be accurate in order to remain. If there is something about the bankruptcy that is false, it can be questioned just like any other tradeline. This is exactly how credit repair companies approach removing a bankruptcy. There is no secret, there is no relationship that the credit repair company has with the courts or credit bureaus- as many of them like to “lead” you to believe.

Does closing accounts improve your credit?
That depends. If you’ve got accounts in good standing that you have maintained for years, you will not want to close those because it can impact your credit score. On the other hand if you have multiple accounts open that you are not using, those should be closed. An example of this would be useless credit cards or unsecured lines of credit such as furniture loans, department stores etc. Ideally you want 3-4 credit cards only. Having 20 open credit cards on your credit reports wont make your credit score higher and in fact, can lower it. Keep the ones you’ve had for many years and close those more recent ones that you don’t use.

How does the Statute of Limitations help me fix my credit?
This is one of the biggest fundamentals of credit repair. A debt has a SOL (statute of limitations) and if that debt is expired, it cannot be legally enforced. There are two separate SOLs when it comes to accounts, and one is the SOL for reporting the item to the credit bureaus, and the other is the SOL for collecting. If a debt is legally expired in collection terms, then you can use that to stop a collection agency in their tracks and that includes lawsuits. If the debt is expired in reporting terms, you can use that to force the credit bureaus to remove it from your record.

Will paying off a past due debt erase it from my credit?
It could. Generally speaking it will not- however, that really depends on two things. Who is reporting it (creditor or collector) and have you asked to have it removed. Seems like common sense doesn’t it? Surprisingly people payoff collection accounts everyday without ever asking for it to be deleted in exchange. That’s a very big mistake because a paid collection account is still negative. If you negotiate with the creditor or collector before you pay it, then be sure to get that agreement in writing to prove to the credit bureaus that it should be deleted. FYI: collectors agree to remove tradelines every day! This method is called credit repair by debt settlement.

Is debt management credit repair?
No. People often confuse credit counseling as credit repair. Credit counseling is a service to help you manage your monthly payments with your creditors but they do not repair your credit.

Do cease and desist letters really work?
Cease and desist letters can be very effective but its not a cure all. A debt collector can still sue you even if you’ve sent them a cease and desist letter and consumers misuse them all the time, believing that it will stop a collection agency. A cease and desist letter should be used if you want to stop a debt collector from bothering you when you know the debt is not legitimate. For example: you have discovered that the SOL has expired and told the collector yet they continue to harass you or threaten suit. You can send a cease and desist letter certified mail to advise them of the facts and stop communication. If they continue to contact you, they can be sued under the Fair Debt Collections Act.

What is Validation of Debt?
Validation of debt also known as VOD is a method you use to force a collection agency to prove a debt is valid. If the collector cannot, you can cease and desist them and demand the item be taken off your credit reports. VOD simply means you are asking the collector to show you proof. If the collector sends you a bill, you have a right to ask for VOD after you receive the first notice from them. They have 30 days after that to show you proof of the debt. This is how many items are removed from credit reports because collectors often fail to show proof. The reason for this can vary, but usually its because the debt was sold to a junk debt buyer and there are no records other than a printout.

Are collection agencies able to ruin your credit?
If you believe that a collection agency has purposely reported a debt to your credit in an attempt to coerce you, then consider this. Debt collectors CAN be sued for purposely reporting a debt that is false or misleading. This method is called credit repair by civil suit. If a debt is false or does not belong on your credit (perhaps its expired) then you can sue for damages.

What is the foundation of REAL credit repair?
The FDCPA, FCRA and FCBA. These federal laws are for your protection. An uneducated consumer is an easy target for collection or credit bureau abuse. If you repair your credit using this foundation, you will absolutely be able to remove items that you have discovered to contain erroneous information or to be inaccurate. This is credit repair. Remember, 70% of credit reports contain errors. Chances are, so do yours.

Are credit repair companies really able to remove bad credit?
Credit repair companies are good at marketing probably more so than they are at credit repair. That’s generally speaking, of course. Some companies will be a good source to help you fix your credit but you need to choose wisely. If you find that doing the work yourself is just not your thing, then you can pay someone else to do it for you. Credit repair companies pop up all over the place so before you give a dime to any of them, be sure to thoroughly research them via the Better Business Bureau and the FTC.

That, my friend, IS real credit repair.

Article credit: Credit expert, Kristi Feathers contributes to this blog. If you want to use this article on your website, you must include a link back to this page. All material written here is property of Carreonandassociates.com.