With the holiday season in the rearview mirror, we are all getting back into our normal routines. Unfortunately, that means starting to think about tax season 2012. April is right around the corner, after all, and if you foresee an inability to pay your full tax bill in full, this can be quite disconcerting. To help ease concerns, the California Society of CPAs recently announced some important strategies for dealing with the Internal Revenue Service (IRS) if you cannot cover your total tax toll.

Before we get to them, however, there are a few things that you need to know about the IRS, its practices, and the terminology you can expect to come across when dealing with an inability to pay:

In a previous article, I made the case that usury laws are counter-productive. Usury laws, which cap interest rates for lenders, completely fail to serve their intended purpose of forcing banks to deliver affordable loans and instead result in the declining availability of loans for anyone whose credit history merits an interest rate above an arbitrary cap. While this is still true for regular interest rates, I would like to suggest one particular feature of our contemporary lending industry that could actually benefit from usury laws: Penalty rates.

Why? Because penalty (or default) rates on loans and credit cards currently dictate the order in which consumers repay their debt obligations during times of crisis and invite banks to engage in reverse competition over who can charge the highest interest rates.

There are millions of people across the United States who have to deal with the constant problem of not having enough money to pay their bills. They may have debt from student loans, credit cards, mortgage, cars and many other types of debt. However, when it comes down to it, the debt needs to be paid or the company that holds the debt will continue to hound you for a long time to come and your credit score could be severely damaged. That much you know, but what can you do about it?

For some, debt consolidation may be the answer. A first step in debt consolidation is to figure out exactly how much debt you have. Take a look at all of your debt. This means car loans, home loans, boat loans, RV loans, credit cards, gas cards, store cards, home equity loans and student debt. You may even have additional types of debt that do not apply to these categories. Check it out ASAP! You want to be sure that you are covered in case you end up having to pay the debt back.

American consumers paid down 26% less credit card debt during the first quarter of 2011 than they did in the same period last year, according to a recent credit card debt study conducted by Card Hub – a fact which portends a significant rise in debt throughout the remainder of the year as well as the possibility of dangerous consumer overleveraging.

While one might consider any debt pay down to be a positive one, context is needed to explain why the Q1 2011 data is so concerning. During the first quarter of each year, consumers inevitably pay down a portion of their debt thanks to holiday bonuses, tax returns and a desire to rid themselves of balances remaining from holiday shopping. It’s normal.

Anyone who has ever been in credit card debt knows just how burdensome it can be. Debt seemingly pervades your entire life, limiting your disposable income, causing stress, and potentially dragging down your credit score. If debt is mishandled, not only will these effects be magnified, but the possibility of a lawsuit will arise as well. As a result, it’s no surprise that indebted consumers are typically desperate for a solution. They want to stop hemorrhaging money on interest, and most importantly, they want to have one less worry on their minds.

A debt settlement—agreeing to payoff your defaulted debt with a lump-sum payment that is less than what you actually owe—can therefore seem like an extremely attractive option for consumers who are in serious financial trouble. However, in jumping at such an opportunity, many people fail to fully consider the overall pros and cons and ultimately benefit less than they initially imagined they would.

Back in 2009, Wallet Blog broke the story that Chase had reneged on a promise it made to certain customers not to increase the interest rates on balances transferred to the company’s credit cards. While Chase did not increase interest rates per se, the company did begin assessing $10 monthly fees that increased the cost of consumer debt nonetheless. Working together with the New York Times, Wallet Blog made the story national news, causing then-New York Attorney General Andrew Cuomo to threaten legal intervention against the financial giant. As a result, Chase repealed the monthly fees and even provided refunds to the customers it had already charged.

Such actions were taken because, from a regulatory standpoint, there is no practical difference between interest rates and fees. Both are considered finance charges. In its Federal Truth in Lending Act (Regulation Z), the Federal Deposit Insurance Corporation defines finance charges as:

There has recently been a great deal of talk about rules proposed by the Federal Reserve that seek to require credit card companies to consider the merits of applicants based on individual rather than household income. These rules, critics contend, stand to significantly affect stay-at-home mothers by preventing them from establishing credit history in their own names, which would be extremely important to garnering a loan, renting or buying a property, and/or landing a job in the case of divorce or the death of a spouse.

Given that 2010 Census figures show men to be the sole breadwinners in 28.2% of couples with children under the age of 18 and women to be the only earners in about 4% of such families, roughly 7.3 million women and 963,000 men would face a difficult time garnering access to credit if the claims made by the rules’ detractors prove to have merit.

Two common complaints about the new credit card law, which celebrated its one-year anniversary on Feb. 22, 2011, are that it led to the extinction of 0% balance transfer credit cards with no fee and that it caused increased interest rates. One of these complaints is rooted in fact, but neither serves as a valid criticism of the law.

Yes, the CARD Act’s passage effectively signaled the beginning of the end for credit cards that offered 0% APR on balance transfers and had no fee for the service. However, no one really has the right to complain about this.

Your credit score is important. You’ve heard it a thousand times, from your parents, financial advisors, TV advertisements, and seemingly everyone in between. They are, of course, correct. Your credit score impacts how much you will pay for a credit card, mortgage, or any number of loans. Many things affect your credit score, but there are also numerous factors that play no role in how this all-important number is computed. Here are twelve things that you don’t need to worry about when it comes to establishing a good credit score.

Anything not in your credit report - There is a wide range of information in your credit report, including payment history, level of indebtedness, length of credit history, and types of credit used. Your credit score won’t take into account anything outside of the credit report.

Debt collectors make their money by successfully getting you to pay your debt, often with threats that are not even allowed by law. If you find yourself in a situation where debt collectors are hounding you, it’s important to know the rules that govern their conduct in order to deal with them effectively.

The Fair Debt Collection Practices Act determines the rules for many kinds of collections efforts including dishonored checks, rent, medical bills, utility bills, insurance bills and claims, student loans, credit cards, condo fees, attorney’s fees, judgments, and other personal debts.

Knowing when and how to dispute accounts on your credit report can make a huge difference in getting inaccurate information removed from your credit profile. Despite some promises to the contrary that you might come across, dispute letters are not the be-all-end-all of the credit repair process. There is no special formula to writing a carefully-worded argument that will convince the credit bureaus to drop your bad credit history as soon as they receive it.

Yet this myth continues to persist, so I thought I’d take the time to set the record straight on disputing your bad credit history. The trick to writing dispute letters that work is that there is no trick; it’s about knowing how and when to use them.

I received an e-mail just the other day from a nice woman living in Milwaukee, Wisconsin (Go Pack!) who wanted advice about efficiently improving credit standing. You see, her son was a senior in college and had opened a 0% APR credit card because he thought it sounded too good to pass up. He then proceeded to rack up charges which he could not pay for. However, instead of telling his parents about his credit card debt and asking for help, he just ignored the situation, hoping it would go away. After all, he was just a kid and could probably say “I’m sorry, I didn’t know any better,” and all would be forgiven, right? Well, that seemed to be the case for a couple weeks until more and more letters started coming from his issuer using words like “past due” and “account suspended.”

At this point, the young man (whom we’ll call Sean) finally consulted his parents. “What should I do?” he wondered. They told him that he needed to become current on his bill in order to avoid falling deeper into delinquency and incurring more significant credit score damage. Since Sean didn’t have much money of his own, his parents loaned him the cash, effectively closing the account, under the condition that he find a job at school so that he could pay them back.

While many of us might think that the term “statute of limitations” is only relevant to criminal prosecution and TV shows like Law and Order – Special Victims Unit, it’s actually quite important to personal finance matters as well.

In general, a statute of limitations is how long something remains relevant under the law. While it certainly can be used to describe the amount of time following a crime that someone can be prosecuted for committing it, the term may also be used in the context of a lawsuit to recoup credit card debt, for example.

Coming out of the Great Recession, the last thing anyone wants is for financial history to repeat itself. However, when it comes to consumer debt, that is exactly what’s happening. Many people think that overall credit card debt is decreasing just because consumers paid down over $43 billion in debt during the first quarter of 2010. However, this is merely a reflection of what occurred in the same quarter last year. Numbers from the second and third quarters of 2010 show that—like in 2009—consumer debt is actually rising and is on track to wipe out most of the reduction observed in Q1.

According to the Q3 2010 Credit Card Debt Study conducted by CardHub.com, consumer credit card debt increased by almost $6.5 billion in the third quarter of 2010 alone.

I recently got a call from a college friend who wanted advice on how to get approved for the best credit card possible . He said he had applied and applied but for some reason had still not been given use of a single card. What should he do differently, he wondered, when applying for cards in the future?

My advice to him: immediately stop applying and open a secured credit card because it provides both guaranteed approval and a safe way to rebuild credit.

Often, the holiday season—with its emphasis on gift giving—serves as an unwelcome reminder of any financial problems people may have. While this notion might seem depressing, it should actually be viewed as an opportunity. Instead of getting bummed about your situation, simply take the reminder as impetus to remedy your financial woes. The lowering of credit card debt, for one, can be approached and ultimately achieved through the consideration of five simple steps.

Step 1 – Evaluate your necessities
Approach your lifestyle with an exceedingly critical eye, and you will most likely discover that you spend money on things that you can certainly live without, though you might initially believe this to be impossible. You shouldn’t waste money on things like cable TV packages, cell phone data plans, dinners out or fancy vacations. Instead, fund only your means of subsistence—things like food, housing and health insurance—and use your savings to pay down your debt. While this step is the most obvious way to lower your debt, it is also by far the hardest to execute because it is often difficult to part with luxuries you have grown accustomed to.

In an uncertain economy, securing your financial future may seem harder and more important than ever. As anyone who has struggled with their finances knows, there is no magic formula to solving your financial woes. I recently spoke to Laura Rowley, Yahoo! Finance personal finance expert, who says that everything to do with money ultimately comes down to trade-offs.

“If you’re trying to get a handle on your finances, keep in mind that you’re paying for the things you buy with your life’s energy,” Rowley said. If you want a $500 Prada handbag, for example, how long and how hard do you have to work in order to get it?

This guest post was written by Bob Brooks, host of the Prudent Money Radio Show and President of Prudent Money Financial Services. For more information please visit www.prudentmoney.com.

About a year ago, I wrote that things might really start to change in the process of how credit card companies go after consumers who have defaulted on their accounts.

The storyline in recent months has been that we are in better financial shape than we were this time last year. While that may be true by some measures, CardHub.com released the Q1 2010 Credit Card Debt Study this week, which revealed that consumers are on track to end up with more debt at the end of 2010 than 2009, despite positive signals in the economy.

The CardHub.com study focused on consumer debt data from the Federal Reserve’s G19 report in conjunction with quarterly charge off data to determine how much of the decline in consumer credit card debt is actually due to consumers paying down their debt versus bad debt being written off. The study also made projections on how much debt consumers will accumulate in subsequent quarters of 2010.

This guest post was written by Manny Davis. Manny is President of Back Taxes Help, LLC, a tax resolution firm that helps businesses and taxpayers pay back taxes. Visit BackTaxesHelp.com for more information on various IRS tax settlement solutions.

Every year millions of Americans find themselves with back taxes or tax bills they cannot afford to pay all at once. Whatever the cause, the IRS is willing to work with taxpayers and offers a variety of Installment Agreements (IRS Payment Plans), depending on the total amount they owe. An IRS Installment Agreement (IA) will allow you as a taxpayer to pay off your taxes through monthly payments that can last anywhere from three to five years depending on the amount you owe.

I had a fascinating conversation with Mr. Herb Weisbaum, AKA the MSNBC.com ConsumerMan, about the scams we should all be aware of. It was an eye-opening conversation, one that I hope will save you a lot of pain and anguish.

Surprisingly, your credit card account is not on the scammers’ most-wanted list. “Con artists are trying not to use credit cards [in their scams] because the charges can be reversed,” Weisbaum said.

More and more American families these days are learning to live within their means.  They’re making trade offs about what they want, what they need, and what they can afford.  They’re trying, during these hard times, to make their dollar stretch as far as possible.  You’ll notice that what they aren’t doing, or at least not in great multitudes, is borrowing against their future so as to maintain their lifestyles.  Sure, the draw to live as one has become accustomed is strong, and likewise, the ability to buy on credit is still a possibility.  Were there no repercussions, were it simply a case of someone saying, “here take this, no strings attached,” we wouldn’t need to make sacrifices so that we can live within our means.  However, when we know that there will be repercussions for our spending, that the credit card bill will come or that the bank will want their money back, we also know that we are going to have to do more with less.

Note, this is not a post about family budgets, but a post about national budgets.  America, like America’s households, needs to learn to get more done on less money.  Just as with those households, it is easy for the country to buy on credit, on the assumption that we can repay at some later date… far too easy in fact.  Very little will stand in the way of our nation going deeper into debt, but just as with a normal household, someone has to eventually pay the bill.  That money is not given to us—it comes with repercussions.  Our President seems to be operating in the same mode as his predecessor:  putting our nation into deeper and deeper debt so as to pay for all the projects that he wants to start or maintain.  Congress raised the federal deficit cap in February of 09, they raised it again this month, and are poised to raise it again next month as part of a larger economic bill, currently before the Senate.  Simply raising the amount of debt the federal government allows itself to accrue is easy enough to do.

On January 14th, Congress voted to increase the federal deficit cap to $12.4 trillion having  raised it from $12.1 trillion February of last year.  The bill was a concession by Democrats who had planned an attempt to increase the federal deficit cap by $2 trillion in order to prevent having to call another vote before next year’s midterm elections.  Already, Democrats are pushing to increase the deficit cap again by mid-February to prevent the U.S. government from spending more than it is allowed and therefore default on certain obligations.  Because the government tax revenues simply cannot cover the rate of government spending, both the national debt and the interest on that debt continue to grow.  For most Americans, this is cause for concern.

Not for Congress though.  The increase to the deficit cap follows on the heels of  last year’s huge omnibus spending bill signed into law on December 16, 2009 which earmarked $446.8 billion for special projects and increased federal spending by 10 to 12%.  Its the kind of thing that can only make it into legislation in December when lawmakers are in rush to make it to the holiday recess and haven’t had the time to give proper vetting to the measures on the table.  It was a holiday surprise for the average tax-payer and a gift to the numerous special interest groups that, sadly, have influence on our lawmakers.  We may recall that it was just such an omnibus spending bill that legalized Credit Default Swaps.  In 2009, despite the fact that the federal government had reached the limit of money that it could borrow, the omnibus spending bill wrapped together 6 different lesser spending bills and had provisions for over 6,000 back home projects for the lawmakers who sponsored it.

If you haven’t received a notice from your credit card company that your rates are increasing, well, you probably don’t have a credit card. What some people are missing among the fine print is that many cards are changing their rate structure from a fixed rate to a variable one. So, what’s the difference, why is this happening, and is this a big deal?

According to the OCC, a fixed-rate credit card  means that the Annual Percentage Rate on the account “is not tied to an index that may change periodically.” Variable rates are generally tied to an index rate, such as the Prime Rate.

The bulls are pointing to the end of a recession and a robust recovery ahead for the American economy.  Their optimism is based on a definition of the recession, in economic terms.  For economists, a recession ends when the economy ends its negative growth.   These terms, however, are theoretical.  In practice, a robust recovery must parallel a robust recovery at the American household level, which is unlikely to happen for a number of reasons: 

• The Unemployment rate:  We hear a good deal of optimism coming from economists concerning the fact that the unemployment rate is slowing, but we ought to remember that it isn’t actually going down, but continues to rise.  According to the Associated Press, we are at the worst unemployment crisis since 1983 and economists are predicting the unemployment rate to peak above 10% by the middle of next year. 
• State Deficits:  We are suffering huge deficits at the state level which the Federal Stimulus package can not correct.  This means additional job losses for state employees.
• Unemployment Insurance:  Not only is America facing a dangerously high unemployment rate, but the unemployment level in this country has been high for so long that benefits are now running out.  We are in a situation far worse than simply having people who are out of work; they are out of work, have few prospects for new jobs, and are receiving no income.
• Continuing Bank Failures:  Despite the federal government’s intervention, we continue to see banks fail.  The number of banks on the FDIC’s “Problem List” (banks in danger of failing) has gone from 305 to 416 at the end of June ’09.  Some analysts are afraid that the FDIC will go into the red by the end of this year.
• Continuing Credit Crunch:  In these uncertain times, credit markets continue to be very tight.  Because of the continuing failure of the nation’s banks, regulators and bank executive remain cautious, which means less credit availability.  Companies who need to deal with debts that are coming to maturity are likely to find less opportunity to refinance.  As a result, we can expect more corporate bankruptcies and more job losses.   
   

Many economists are calling for more stimulus money by the federal government, but it is clear that what the country really needs is smarter spending.  We desperately need to make investments with government funds that will deliver strong returns on the nation’s money, and thus, we believe that the federal government ought to invest in new technologies that will turn America’s trade deficits into strong surpluses. It is precisely for that reason that this is the right time for a ‘Manhattan Project’ on energy independence.