Is there a Deduction Limit on Charitable Donations?

Optima Tax Relief provides assistance to individuals struggling with unmanageable IRS tax burdens. To assess your tax situation and determine if you qualify for tax relief, contact us for a free consultation.

If you’re debating whether or not to donate to charity, it’s important to understand the tax benefits and tax-saving opportunities that could be available to you. Here’s a breakdown of what you need to know when understanding what you could qualify for when it comes to charitable donations.

Some donations may not be eligible for deductions. In order to make a donation, it must be to a charity with a tax-exempt status determined by the IRS. This means that charitable donations cannot be made to friends, relatives, or groups that do not fall under the tax exempt status. The list of approved organizations are the following:

  1. A community chest, corporation, trust, fund, or foundation, organized or created in the United States or its possessions, or under the laws of the United States, any state, the District of Columbia or any possession of the United States, and organized and operated exclusively for charitable, religious, educational, scientific, or literary purposes, or for the prevention of cruelty to children or animals.
  2. A church, synagogue, or other religious organization.
  3. A war veterans’ organization or its post, auxiliary, trust, or foundation organized in the United States or its possessions.
  4. A nonprofit volunteer fire company.
  5. A civil defense organization created under federal, state, or local law (this includes unreimbursed expenses of civil defense volunteers that are directly connected with and solely attributable to their volunteer services).
  6. A domestic fraternal society, operating under the lodge system, but only if the contribution is to be used exclusively for charitable purposes.
  7. A nonprofit cemetery company if the funds are irrevocably dedicated to the perpetual care of the cemetery as a whole and not a particular lot or mausoleum crypt.

Some contributions may lead to only a partial credit. For particular donations, a taxpayer will only receive a portion of a credit. For example, if you purchase a shirt that is a part of a charitable cause, the entire price of the shirt is not deductible. The fair market value must be determined and subtracted from the cost of your purchase in order to determine the amount of your donation.

When determining how much of a charitable donation you would like to make, it is important to know there is a limit on all donations you make throughout the tax year. Total charitable contributions are generally limited to no more than 50% of your adjusted gross income. 

If you need tax help, contact us for a free consultation.

By |Taxes & Your Savings|Comments Off on Is there a Deduction Limit on Charitable Donations?

$600 Unemployment Benefits Expected to Fall to $200 or $300 a Week

Optima Tax Relief provides assistance to individuals struggling with unmanageable IRS tax burdens. To assess your tax situation and determine if you qualify for tax relief, contact us for a free consultation.

With unemployment due to end this week, unemployed workers may see their additional benefits cut in half to $200 or $300 a week. This proposal outlined by Treasury Secretary Steven Mnuchin was announced last Thursday and negotiations are still proceeding to work out the finer details.

Currently, a new coronavirus relief package is being put together to assist millions of Americans who are financially struggling during the pandemic. The prior bill passed in March provided out-of-work Americans with an additional $600 per week, funded by the federal government. 

Discussions regarding the extension of unemployment benefits have been ongoing. It is expected that Congress will announce a new plan to provide the unemployed a reduced amount of $200 or $300 a week depending on data that is collected to determine what is feasible to distribute. 

Although taxpayers should expect a lower amount of unemployment funds coming their way, it is still expected to help them get by month to month. In addition to extending the length of time to receive unemployment checks, those out of work will also most likely receive a stimulus check to ease their current financial burdens. 

If you need tax help, contact us for a free consultation.

By |COVID-19/Coronavirus Tax Relief News|Comments Off on $600 Unemployment Benefits Expected to Fall to $200 or $300 a Week

Will Taxpayers Receive More Money in their Next Stimulus Check?

Optima Tax Relief provides assistance to individuals struggling with unmanageable IRS tax burdens. To assess your tax situation and determine if you qualify for tax relief, contact us for a free consultation.

Time is drawing near for a decision to be made as to whether or not a second stimulus check will be distributed to millions of Americans. Multiple bills have been proposed to provide relief to those that are financially struggling due to the coronavirus pandemic.

For weeks, Senate Majority Leader Mitch McConnell has worked with Treasury Secretary Steven Mnuchin on a relief package that would distribute stimulus checks only for those who have been financially impacted the most during the ongoing pandemic.

Negotiations have been ongoing throughout this week to make a decision as to who will qualify for the second round of stimulus checks as well as working out the details on how they will build upon the CARES act in order to assist businesses and Americans that are currently struggling to make ends meet.

Treasury Secretary Mnuchin confirmed that the proposed second stimulus check will be the same as the first, meaning taxpayers who qualify will receive up to $1,200. The guidelines for who qualifies for the stimulus check have not changed and will remain the same as the first: 

  • Single filers who earn less than $75,000 a year will receive the full $1,200. For those earn more than $75,000 should expect to see their check reduced by 5% of the amount they earn.
  • Joint filers who earn less than $150,000 a year will receive the full check however those who earn more will see their check reduced by 5% of the amount they earn over $150,000.

As negotiations continue, there is a general expectation that a decision regarding the expansion of the CARES act, as well as when the second stimulus check will be distributed, should be made before the end of July.

We will continue to update you with new information as this story develops. 

If you need tax help, contact us for a free consultation.

By |COVID-19/Coronavirus Tax Relief News|Comments Off on Will Taxpayers Receive More Money in their Next Stimulus Check?

Can I File My Taxes Separately from My Spouse?

Optima Tax Relief provides assistance to individuals struggling with unmanageable IRS tax burdens. To assess your tax situation and determine if you qualify for tax relief, contact us for a free consultation.

Filing a joint tax return with your spouse has many advantages, like receiving one of the largest standard deductions every year and providing several tax breaks for those who choose to file jointly. When deciding whether or not you want to file jointly, it is important to consider both the positive and negative aspects and how you can be directly affected. 

Married Filed Joint

The advantages of filing jointly with your spouse can allow you to deduct a significant amount of your income. Couples who file together will typically qualify for the following tax credits:

  • Earned Income Tax Credit
  • American Opportunity and Lifetime Learning Education Tax Credits
  • Exclusion or credit for adoption expenses 
  • Child and Dependent Care Tax Credit

Those who file jointly receive higher income thresholds for certain taxes and deductions. If you and your spouse earn a higher amount of income, you could potentially qualify for tax breaks.

Married Filed Separate

If a couple chooses to file separately they will receive fewer tax benefits compared to those who file jointly. Those who file separately from their spouse will only receive a standard deduction of $12,200 compared to those who file jointly and receive a deduction of $24,400.

  • Filing a separate return will automatically disqualify from several tax credits and deductions.
  • Separate filers are limited to smaller IRA contribution deductions.
  • You cannot take a deduction for student loan interest.
  • The capital loss deduction limit is $1,500 each when filing separately, instead of $3,000 on a joint return.

If you are unsure of how you want to file this tax season, consider filing both separately and jointly to see which way will be beneficial for both you and your spouse. Always be sure to double check your calculations as well as the amount of income you are placing on your return and review if you have a net refund or a tax liability. This should help you decide how you should file moving forward in order to receive the most out of filing your taxes. 

If you need tax help, contact us for a free consultation.

By |Tax|Comments Off on Can I File My Taxes Separately from My Spouse?

Can Retirement Contributions Impact your Tax Bill?

Optima Tax Relief provides assistance to individuals struggling with unmanageable IRS tax burdens. To assess your tax situation and determine if you qualify for tax relief, contact us for a free consultation

Retirement plans were created in order to provide employees with additional savings to put aside \ for retirement. Whether you’re choosing between a tax-deferred 401(k) or a Roth 401(k), both plans can help you build financial security.

Here are some of the tax benefits and implications you could face with a 401(k):

Tax-deferred 401(k)s reduce the total amount of taxable income. A tax deferred 401(k) allows you to save taxes on the earning of your contributions. This does not mean that you are completely exempt from paying taxes. When you withdraw your earnings, you should expect to pay taxes on the amount you took out. 

When you retire, your income will inevitably decrease, meaning that you will be in a lower tax bracket compared to when you were employed. The money that you take from your 401(k) will be taxed at a lower rate. 

  • Withdrawing early from your 401(k) can lead to a 10% early withdrawal penalty.
  • The IRS allows taxpayers to withdraw without penalty at age 59 ½.

Roth 401(k)s lower post retirement taxes. Earnings for a Roth aren’t taxable unless:

  • You’re 59 ½.
  • You’ve had an account for five years.

Contributions to a Roth 401(k) don’t affect your taxable income that is deducted from your paycheck. The funds are removed after taxes, not before, meaning you are paying taxes as you contribute to your retirement fund. This means that when withdrawing the funds, you may not need to pay taxes. 

Tax benefits are typically based on the total amount of income that is earned and the filing status you use on your taxes. Contributions made to a qualified 401(k) could reduce your tax bill through the Saver’s Credit. This credit can reduce your taxable income based on the percentage you put into your 401(k).

If you need tax help, contact us for a free consultation.

By |IRS Collections|Comments Off on Can Retirement Contributions Impact your Tax Bill?

What is the Difference Between Form 1099-Misc and 1099-K?

Optima Tax Relief provides assistance to individuals struggling with unmanageable IRS tax burdens. To assess your tax situation and determine if you qualify for tax relief, contact us for a free consultation.

Being self-employed comes with a lot of benefits like being your own boss and making your own hours. Although there are a lot of perks to being self-employed, there are also a lot of additional responsibilities you will have to take on that most W-2 employees don’t have to deal with. For instance, you are responsible for keeping track of all your expenses you incur throughout the tax year, tracking your mileage and maintenance associated with your work vehicle, and ensuring that you are making estimated tax payments throughout the year to avoid owing when filing your taxes.

If you are self-employed or have worked on a contract basis where no taxes were withheld from your pay, it is extremely important to understand the difference between a 1099-MISC versus a 1099-K when filing your taxes.

1099-MISC

This form is issued to independent contractors or those that are self-employed who have been paid $600 or more. If you were paid under $600, this may not trigger a 1099-MISC to be generated, however, you are still responsible for reporting all tax income that you have received throughout the tax year. It is also required to report all self-employment income if your net earnings are $400 or more. 

When a taxpayer receives their 1099-MISC form, they can also claim deductions against their income that should be listed on their schedule C. Adding any work expenses as deductions can help reduce a possible balance you may owe at the end of the tax year.

1099-K

A 1099-K, also known as a Payment Card or Third Party Network Transactions, is used by credit card companies and third-party processors like Paypal and Amazon to report payment transactions they process for retailers or other third parties. You’ll typically receive a 1099-K if you have accepted credit cards or third-party processors and also had more than $20,000 in sales as well as over 200 individual transactions through a third-party processor.

If you need tax help, contact us for a free consultation.

By |Tax Planning|Comments Off on What is the Difference Between Form 1099-Misc and 1099-K?

Four Reasons Why You Should File a Tax Extension

Optima Tax Relief provides assistance to individuals struggling with unmanageable IRS tax burdens. To assess your tax situation and determine if you qualify for tax relief, contact us for a free consultation.

Although all tax returns are traditionally filed on April 15, due to the coronavirus pandemic, the deadline was extended to July 15 this year. If you have yet to receive all your tax documents or are unable to make a tax appointment with your tax professional before the tax deadline, you can fill out Form 4868 and submit it to the IRS in order to be granted an extension to file your tax return. It is important to know that even if you file an extension, you must still pay your taxes owed in full by the tax deadline in order to avoid penalties. 

Here are a few additional reasons why you may need to file an extension:

  1. Unexpected life events. Even if your intention was to file your tax return before the deadline, sometimes life events will interfere with your ability to do so. If you have an unexpected death, illness, or natural disaster with you or your family, you may be unable to file. The IRS doesn’t expect taxpayers to list a reason as to why they are filing an extension but will allow you additional time to recover your tax documents and file at a later date.
  2. Incomplete tax documents. If you file an extension, it will allow you more time to review your taxes in order to ensure that your tax return is accurate. If you’ve lost any tax forms like your W-2 or 1099 that your employer sent you, you can request a copy be mailed again to you. It may also be beneficial to request an extension when waiting for additional tax information to be sent to ensure that all income has been properly reported on your tax return. It will also help you avoid having to make future corrections on your tax return.
  3. Tax laws are constantly changing. Should you choose to file a three-month extension, you might be eligible for brand new tax deductions or a change in taxpayer status. Tax laws are always changing so if you decide that you need a while longer to file your taxes it may be to your benefit.
  4. Avoid the tax filing chaos. As the tax deadline draws near, more taxpayers will be scrambling to make last minute appointments with a tax preparer to file their taxes. If you are unable to get an appointment before the tax deadline or you know that your tax return will be complex and will take time to file, consider filing for an extension and making a tax appointment after the initial tax deadline. This will help you avoid the crowds and get additional one-on-one time with a tax preparer.

If you need tax help, contact us for a free consultation.

By |Tax Planning|Comments Off on Four Reasons Why You Should File a Tax Extension

Trump Backs Tax Breaks for Baseball in Order to Increase Fan Attendance

Optima Tax Relief provides assistance to individuals struggling with unmanageable IRS tax burdens. To assess your tax situation and determine if you qualify for tax relief, contact us for a free consultation.

White House officials have been discussing a possible approval of new tax breaks for baseball games to encourage Americans to return to the ballpark. 

Many are questioning whether the baseball season itself will even occur this year.  Minor League Baseball has already announced that no additional games will be played this year, and there is the expectation that many Major league baseball stars may opt out of the season due to fears of the coronavirus pandemic. The Washington Nationals and Houston Astros, the two teams that faced off in the World Series last year, were forced to cancel their Monday workouts due to complications they have been having with player testing. Not only have the amount of baseball games scheduled to be played this season already been greatly reduced, fans will not be permitted to attend any games for the foreseeable future. 

The White House, as well as President Trump, have been pushing for a spectrum of tax breaks that are meant to assist Americans with the transition back to normal economic life as well as assist businesses that are currently suffering due to the pandemic. 

President Trump has also endorsed the Explore America tax credit which would reimburse taxpayers up to $4,000 should they choose to travel within the U.S. This credit is meant to boost the economy by encouraging Americans to travel throughout America and shop local in order to revitalize struggling businesses – which could allow Americans the opportunity to fly to the city where their favorite team plays and catch a game.

Although the White House strongly supports tax breaks to taxpayers who want to travel within the U.S. and attend tourist attractions, their plans may fall flat as many of the businesses that were meant to be a part of the proposed plan, such as Major League Baseball teams, are now operating in a much different manner – or have even closed their doors – during the ongoing outbreak. 

If you need tax help, contact us for a free consultation.

By |COVID-19/Coronavirus Tax Relief News|Comments Off on Trump Backs Tax Breaks for Baseball in Order to Increase Fan Attendance

Taxpayers will Stop Receiving an Extra $600 in Unemployment by July 31

Optima Tax Relief provides assistance to individuals struggling with unmanageable IRS tax burdens. To assess your tax situation and determine if you qualify for tax relief, contact us for a free consultation.

At the beginning of the coronavirus pandemic, our government provided not only stimulus checks to taxpayers, but also an increase in unemployment benefits to assist those who were suffering financially. But the tens of millions of Americans that are currently on unemployment (with the additional boost of $600) may have to prepare for an extreme reduction in their benefits as the unemployment package may be ending sooner than expected. 

The Federal Pandemic Unemployment Compensation program was originally passed by Congress as part of the $2.2 trillion Cares Act in late March, which is scheduled to end on or before July 31, 2020.

Because unemployment benefits will be ending on July 31, which falls on a Friday, it could greatly affect those currently receiving unemployment. States typically pay these benefits out on a weekly cycle that ends on Saturday or Sunday, but because of wording stipulated in the CARES Act, states will end their additional payments of $600 on July 25 or 26 rather than on the last day of the month.

With an estimate of 33 million Americans who are still receiving unemployment benefits, many will be left with whatever unemployment compensation they received prior to the CARES Act. This will be a dramatic decrease in the amount of money they will receive from unemployment on a monthly basis, which could leave many Americans struggling to stay financially afloat. 

If the extra $600 in unemployment benefits expires, it could potentially cause more job loss than already has been seen in either of the recessions that took place in the 1990s and early 2000s. Because of the widespread impact of the coronavirus and the massive amounts of Americans that are applying for unemployment, there will likely be a push for federal lawmakers to extend the benefits in order for taxpayers to pay their monthly expenses. 

If you need tax help, contact us for a free consultation.

By |COVID-19/Coronavirus Tax Relief News|Comments Off on Taxpayers will Stop Receiving an Extra $600 in Unemployment by July 31

Taxpayers May Not Receive a Second Stimulus Check. Here’s What to Do.

Optima Tax Relief provides assistance to individuals struggling with unmanageable IRS tax burdens. To assess your tax situation and determine if you qualify for tax relief, contact us for a free consultation.

Discussions of a second stimulus check have been ramping up in order to provide additional relief for taxpayers during the coronavirus pandemic. President Trump has even voiced his support for another round of checks ever since the announcement of a recession and record high unemployment rates were released. 

Even if another stimulus check is passed, Americans will most likely not know until the end of July. In addition to this, the stimulus check will not cover most monthly household expenses meaning that you could be left to handle the rest of your bills on your own. It is important for taxpayers to avoid relying on receiving a stimulus check and to create a backup plan in order to avoid any financial struggles during the ongoing pandemic. 

  1. Review your spending habits. Most people tend to pay for services that could be considered a luxury rather than a necessity. Taxpayers should review their monthly expenses several times a year in order to ensure that they are not spending excessively on food, shopping, cable, or anything else that may be considered frivolous. It is also advised that you start reviewing what your necessary expenses are every month in order to determine what your disposable income is. 
  2. Reduce your debt. A lot of the time we may not realize how much we spend on a monthly and weekly basis. Make sure that you look at the amount of debt that you are accruing on a monthly basis as well as your total overall debt. Focus on lowering your overall debt and creating a budget for yourself in order to stay within your financial means.
  3. Look for ways to earn more. With such a high number of Americans going on unemployment, it may seem odd that there are companies that are still hiring. Luckily, there are tools available for people to use when looking to make some side cash, and many job websites offer job listings for temporary or remote work. Even places like Uber or Lyft are constantly hiring people, letting you choose your own hours and work when it’s convenient for you.
  4. Put extra money on the side. Although this may seem like an obvious solution, it can be difficult to do, especially during these difficult times. It’s never too late to start saving and putting money aside every paycheck. Ideally, you should have at least six months’ worth of living expenses saved up in order to have some cushion room just in case of an emergency. 

If you need tax help, contact us for a free consultation.

By |COVID-19/Coronavirus Tax Relief News|Comments Off on Taxpayers May Not Receive a Second Stimulus Check. Here’s What to Do.