Plan Now for Tax Bill Later, Suggests CCCS-SF

April 15, 2004 - Though it's too late for tax year 2003, the financial experts at Consumer Credit Counseling Service of San Francisco (CCCS-SF) suggest planning for next year now if you know you a tax bill is inevitable. By doing so, you'll buck the trend of being unprepared.

According to a recent survey conducted by the Million Dollar Round Table (MDRT), an association of financial professionals, 44 percent of Americans who owe taxes do not save for the bill, but use credit cards and loans, or tap into savings that is intended for other purposes to pay for it instead. Only six percent of those who know they will owe money budget for the bill. Even more alarming, the survey found that 46 percent of Americans at retirement age plan on using their personal retirement savings to pay the IRS.

"Avoiding a tax bill is ideal," said Erica Sandberg, Financial Education Advisor for CCCS-SF, "but if you know you will owe, it is vital that you prepare. It may be tempting to use a credit card to pay for tax debt, but if there is an existing balance and a high interest rate, repaying it becomes very expensive. And using retirement savings for tax debt jeopardizes an often fixed income stream, which puts paying for vital expenses at risk."

CCCS-SF offers the following recommendations for how to plan for a future tax bill:

• When estimating, plan on 110% of what you think your tax bill will be.
• Make saving for it part of your essential expenses.
• Have the sum automatically deducted from your checking account and deposited it into a special tax account.
• Contact the IRS (www.irs.gov) for free and reputable tax advice throughout the year.
• Invest in professional tax preparation assistance. Half of all Americans feel they aren't knowledgeable enough to get the most tax breaks, according to the MDRT survey. You may even be able to deduct the fee.