Today TaxMama hears from Frank Darsi, who sent a link to an interesting article. “Five Ways Taxes Affect Your Car Insurance.” Is the article true? Does it make any sense? Well, since the article only contains four points, not five, we’ve got to wonder about the rest of it…
First of all, let me wish you all a happy Tax Freedom Day. So far, everything you’ve earned has gone to pay nothing but taxes. For the rest of the year, your earnings are yours…in essence. Professor Paul Caron outlines how the computation works in his TaxProf Blog. Enjoy!
Now that we’ve paid all our taxes for the year, are there really more hidden taxes we should consider? You bet!
The price of everything you buy has taxes built into it. After all, every profitable business should be taking taxes into account when they determine their prices. So, the fourth point in the article about auto insurance is really moot. The third point, about fraud taxes – well, that’s not a tax at all. That’s really a hard cost passed on to us, whenever an insurance company does what it’s designed to do – pay out a claim. Unfortunately, there really is an enormous amount of fraud among those claims. Ironically, honest people sometimes avoid filing claims, even when they have incurred costs – because we know our premiums will go up – even for legitimate claims.
The second point, about insurance companies covering the cost of sales taxes on vehicle purchases, that’s an interesting concept. I don’t ever remember my husband’s attorney bringing that up during the two lawsuits we had when someone ran into him, totaled his vehicle and put him out of commission for months. That one point is something to bear in mind if you ever have an accident again. We could have gotten several thousand dollars extra had we known.
The first point of the article is that tax liens affect your credit. Your credit rating affects your insurance scores – which affects your final rates. In that case, our auto insurance rates ought to be rock bottom. Hmmm…perhaps they are. Perhaps we pay so much because we have too many vehicles on our policy. Since two people can only drive two cars at any given time, shouldn’t we only be paying an overall rate for two cars, instead of five? But yes, folks, that’s another reason not to have IRS debt – but to pay off your taxes via loan or credit card instead of using IRS easy payment plan – the installment agreement. Who knows when that will turn into a tax lien?
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