Optima Tax Relief is one of the “Best Places To Work In Orange County”

The Orange County Business Journal recognized top businesses in the area this past July with their Best Places to Work list. For the second year in a row, Optima Tax Relief made this year’s list as one of the best companies in the medium, 50-259 US employees, employer category.

To maintain our standing, we participated in a two-part assessment given by Best Companies Group, the independent third party of the OC Business Journal. Combined scores from both a questionnaire on company policies, practices and demographics, and a confidential employee survey earned us a spot in the final ranking.

“While we are honored to make the list again, we are even more grateful for the sincere feedback from our staff. Each and every employee here at Optima plays a key role in making the firm successful and it is our goal to create an environment where employees are recognized and rewarded for their efforts,” says Harry Langenberg, Co-Founder and Managing Partner of Optima Tax Relief.

So what do we think makes us worthy of the “Best Places To Work in Orange County” title? Feedback says our work/life balance, dynamic work environment, and healthy camaraderie. Add to that our open communication policy, and the respect and support we give Optima’s employees. We’re sure that our monthly contests, sports teams, and local fundraisers also have a little something to do with it. This weekend, we’ll be participating in the 2013 Long Beach Marathon to raise money and awareness for a charity of each employees’ choosing.

Our VP of Digital Strategy & Technology Miron Lulic has raised $2,200 so far with his team for Families of SMA (Spinal Muscular Atrophy).

Though we’d like to think that it’s all fun and marathons, the reality is that we would never have made it this far without an amazing team behind us. As Raul Carranza, Case Manager says best, the focus on our employees is what makes us stand out from the rest.”Optima Tax Relief is one of the few companies out there where senior management listens to staff and goes out of its way to make sure employees are appreciated and happy.”

Lauryn Hill Was Released from Prison Today

Earlier this year, hip-hop singer Lauryn Hill was sentenced to 3 months in federal prison for failing to pay over $1 million in taxes. This morning, October 4th, Lauryn Hill was released from prison, a Danbury, Connecticut facility.

It was suggested by some that the Grammy-winning artist wouldn’t actually serve time, and would get out of it like many celebrities do. Pras, former co-member of the Fugees questioned “If Lindsay Lohan doesn’t do any time then why would she do time?” Tax evasion is a criminal offense, and despite the naysayers, she had to report to prison July 8th..

Why didn’t Lauryn pay her taxes? She claimed she couldn’t afford it as she’d dropped out of the music industry and needed to protect her six children. This was after making some $2 million from 2005 to 2009 from side businesses.

To assist in paying off her tax bills prior to serving jail time, the singer signed a record deal with Sony and shared a link to a new single with her fans. Now, just hours after being released, she’s put out a new single called “Consumerism.”

Hill speed-raps through a laundry list of societal ills over a chaotic rhythm that’s more Death Grips than “Killing Me Softly.” Her pointed voice brutally targets “corporate greed in Jesus’ name,” decrying ageism, sexism, racism, fascism, “compromised commercialism” and “neo-McCarthyism.” —Rolling Stone

She used her tax woes and pending imprisonment to craft the pre-jail song, and had it mixed while she was serving time. “I couldn’t imagine it not being relevant,” Hill said to Entertainment Tonight, which is probably why this new track was released in such a timely fashion.

Still, even after paying $970,000 in taxes in penalties back in May and spending 3 months behind bars, Lauryn Hill gets to spend the next 3 months on house arrest. Following house arrest, she has another year of supervised release and a $61,000 fine to send to the IRS.

Photo: Community Journal

IRS Targeting Small Businesses for Underreporting Income

“Your gross receipts may have been underreported,” begins recent letters from the Internal Revenue Service to small business owners across the US.

All around the country, businesses are being “targeted” by the IRS with letters asking if they are underreporting revenue.  Earlier this year, news of the IRS targeting conservative groups didn’t work out so well, and this doesn’t look so good for them either.

Receiving a notice from the IRS at all is enough to make any taxpayer squirm with fear. Is this an audit? Do I owe more money? Did I make a mistake? If you’re on the IRS’ radar, there’s a good chance that any news is bad news. But the latest scandal has the IRS targeting small businesses, particularly small mom-and-pops, to prove that they aren’t underreporting cash sales in order to lower their bill come tax time.

It’s common knowledge that the IRS is automating and streamlining many of its processes, specifically the use of highly sophisticated computerized algorithms when selecting candidates for audits. It’s also well-known that popular sites like Facebook and Amazon use cookies to follow consumers’ movements and searches online to better target advertisements throughout the web.

It is less known that the tax collectors are also able to track what citizens do on social media (good example, Rashia Wilson), who they’re sending emails to, and what digital transactions they’re making. Using big data info to go after individuals and small businesses is to supposedly help the IRS close the “tax gap” by chasing down the estimated $300 billion in lost revenue each year.

Just a Notice, Not an Audit

The letters that tens of thousands of Americans are receiving in the mail aren’t meant to be seen as audits, but more like double-checks to gather information that business owners may have missed.

The IRS is looking at Form 1099 matching—including new merchant reporting of credit cards, mysterious average statistics the IRS uses for comparison and—gulp—cash reporting. Did you remember to record and pay tax on all cash transactions? The controversial IRS notices are titled ‘Notification of Possible Income Reporting.’ — Forbes

Sounds fair, right? Although these are technically not audits, one of the major red flags for an IRS audit is having a cash-only or primarily cash run business. Taxi companies and bars, for example, are seemingly less likely to report all income because of the lack of a paper trail or digital evidence of transactions.

But what the IRS is doing is targeting local stores, independent contractors and mom-and-pops based on secret reports from banks and credit card companies. If the IRS believes that a business has reported an “unusually low” cash amount, with mostly digital payments, the owner has 30 days to make their case.

It’s unlikely that a small business has actually done anything wrong to provoke the notice, but it’s hard to refute a letter from the IRS when a business owner doesn’t know where the data came from or what data went into the algorithm.

It’s Not That Simple

As explained in the Internet Tax debacle, reporting every transaction accurately every time is nearly impossible.

An electronics store that sells big-ticket items like HDTVs and home entertainment systems will most definitely report a low cash amount because customers are more likely to pay with credit or debit cards. Also, when paying with cards, customers have the option of getting cash back, also pushing up the digital payment tally.

It’s especially difficult to match credit and cash transactions when you take into account things that get tacked on during a sale, like sales tax.

“There are so many reasons why, even if you’re the most honest tax payer, you’re not going to match” what card records show, says Fran Coet, whose company advises about 250 small businesses. Ms. Coet cited sales of gift cards, which for accounting purposes don’t count as a sale, but look that way to a credit-card company. — The Wall Street Journal

While large corporations have departments dedicated to protecting their company by managing tax and legal issues, small businesses are much less likely to have the help. Not only are they less financially capable of hiring accountants and lawyers to keep the books up to snuff, taking the time off of work to comply within the tight time constraints to avoid further investigation is tough. They’re losing billable hours in order to protect themselves simply because the IRS has decided to go “fishing.”

And fishing seems like an appropriate term for what the IRS is doing. Instead of looking more closely at the businesses they’re investigating before sending out letters, they’re using their robo-audit software to find discrepancies between digital transactions and tax returns and auto-send the notices. About 20,000 letters have already been sent out with more to follow.

“An important component of this project is [to] help ensure that people who are non-compliant don’t get an unfair advantage over those that play by the rules and follow the law,” says the agency. But if you’re one of the many small business owners that know nothing about why you received a letter or how to respond, contact Optima Tax Relief today for assistance.

Photo: Thomas Hawk

Man Slits Wrists In Suicide Attempt, Blames the IRS

New York man makes suicide attempt, blames the IRS for his financial troubles.

Last Thursday morning, outside the “Today” show, Pak Chong Mar slit his wrists in protest of the IRS.

“I had to do something desperate to fight the corruption, fight the IRS,” the 70-something year old man told a Daily News reporter. “They are so powerful.”

It was discovered by NY Daily News that Pak had made a similarly violent public statement in 1995. He had just been kicked out of his Brooklyn apartment, and was carrying letters protesting the eviction notice to share with passersby. Rejected, at the Hong Kong Dragon Board Festival in Queens, New York, he used a meat cleaver to chop off his own left pinky, ring, and middle finger to throw into the festival crowd.

But on June 7, 2013, Pak arrived at Rockefeller Center just before 8 AM. ranting about government corruption and holding a stack of documents. He claimed that he had been a millionaire upon emigrating from China to New York, but that the IRS ruined his life and left him with nothing. Not only that, he stated that they were supposedly fining him $1.3 million.

After attempting and failing to get the tourists who were standing outside the show to read the IRS-related papers, he threw the stack up into the air. “I’m going to cut myself!” he shouted, before attacking his wrist with a box cutter. A bystander wrestled the cutter out of his hand, but he pulled out another knife and began cutting his other wrist.

“If I don’t do something drastic, sooner or later these guys are going to kill me anyway. I couldn’t even pay rent this month,” Pak explained.

Immediately following the wrist slashing, he was pepper sprayed by police officers and tackled before being rushed to St. Luke’s Hospital. Though his physical injuries were not fatal, his mental condition is still being evaluated.

Mandatory Five Day Furlough for the IRS

Mandatory Five Day Furlough for the IRS

Budget cuts are forcing the IRS to shut its doors and its phone lines for at least 5 days this year. You may have already noticed a change with longer lines in-office, longer wait times on help lines, and delays in tax refunds.

May 24, June 14, July 5, July 22 and August 30 are the dates that the Internal Revenue Service will be closed–don’t bother calling in or going to an office for assistance.

The IRS has got it rough these days, with rallies against the budget sequestration and the recent scandal of them targeting conservative groups seeking tax exemptions. Some would say that the closings are a well-needed reprieve.

“Due to the current budget situation, including the sequester, all IRS operations will be closed on those days,” the IRS said in a press release. “This means that all IRS offices, including all toll-free hotlines, the Taxpayer Advocate Service and the agency’s nearly 400 taxpayer assistance centers nationwide, will be closed on those days.”

Work for the IRS? You’ll be furloughed without pay on the posted dates, and may be required to take additional furlough days in the future.

They’ve purposely pushed these days so they fell after the April 15th tax deadline, but the break will still affect individuals who’ve yet to file their taxes, or have questions about their tax situation.

Mark the furlough dates between May and August if you think you’ll need to talk to the IRS.

What if my original tax filing or payment deadline falls on a furlough day? The deadline won’t change, but…

  • The IRS will not accept or acknowledge receipts of filed returns on that day.
  • You will have until the next business day to comply with any document requests the IRS requires.

Basic online tools and automated phone services will still be active and usable. These include the IRS Withholding Calculator, EITC Assistant, and Tele-Tax. Where’s My Refund? and the Online Payment Agreement will not be working, however.

A little bit of tax relief does come with the budget cuts though: it doesn’t look like the IRS will be starting any new audits any time soon.

Should Lauryn Hill Serve Jail Time for Tax Evasion?

Some ask: Should Lauryn Hill serve jail time?

Last Monday, Lauryn Hill was sentenced to time in federal prison for tax evasion. 3 months in prison, followed by 3 months of house arrest and a year of supervised release is the consequence for failing to pay over $1 million in taxes to the IRS.

She is meant to report to prison on July 8th, but some doubt that Lauryn Hill should serve jail time at all.

Pras, former member of the Fugees, is convinced that the 37-year-old won’t actually do the time.

“I doubt she’s going to do three months. Listen, if Lindsay Lohan doesn’t do any time then why would she do time?”

Tax evasion is a serious criminal offense, and is the illegal nonpayment or underpayment of tax. Not to be confused with tax avoidance, evasion refers to the efforts to avoid paying the IRS taxes due. People do so by declaring less income or gains than they actually earned, overstating deductions, or just refusing to file.

Not filing tax returns is perfectly legal for some individuals. If you earned less than $9,500 in 2012 you were exempt from having to report that income. But here’s a tip: Even if you’re able to forgo filing your taxes, consider it anyways. By reporting any taxed income at all, you’re eligible for thousands of dollars in tax credits that you otherwise would miss out on like the American Opportunity Tax Credit, or the Child Tax Credit.

Lauryn Hill didn’t have this problem, having earned approximately $2.3 million over a five-year period. Up until the most recent trials and sentencing, she refused to pay her back taxes, penalties, and fines.

So why does it seem unlikely that she’ll serve her full sentence? Though tax evasion is a criminal offense, it’s the first time Lauryn Hill has ever been to court. She’s fully paid her federal and state tax fees and penalties through 2009, and tax evasion is a non-violent, low-risk crime. Not to mention, other celebs have gotten away with much worse.

Internet Sales Tax: Why the Conflict?

The Internet sales tax bill is simple, isn’t it?

Do you remember paying sales tax on that quick Amazon purchase you made before Mother’s Day, or on that quirky graduation gift you got on Etsy? Most of us don’t pay close attention to the money we spend online, happily clicking “Buy Now” without a glance. But recently, there’s been quite a stir from the Senate—they just passed the Marketplace Fairness Act which makes the Internet sales tax a lot more complicated than it used to be.

Last year, states lost $238 billion due to not being able to collect out-of-state sales taxes. $11.4 billion was from internet sales.

The Marketplace Fairness Act doesn’t just affect online sales, but also includes purchases made through catalogs, telephone orders, and radio ads. If the business makes more than $1 million in sales annually, they’ll have to start collecting sales tax.

You might not look closely at the payments you make on purchases, but other’s do. A lot of people have avoided paying sales tax by buying products online instead of in-store. For a long time, this didn’t matter. Online retailers didn’t make all that much money for sales tax to matter. Not only that, with 9,646 tax jurisdictions in the US, requiring online retailers to charge sales tax would not only be a hindrance, but an impossibly complex task.

It’s not as simple as knowing that the tax rate in Tennessee is 9.75%, and Michigan’s is 6%. If that were the case, it’d be relatively easy for retailers to find the rates of each of the 45 states and collect the tax accordingly. But with so many jurisdictions, counties and cities, specific items fall into separate tax categories. “In one jurisdiction, cotton candy is food; in another it’s entertainment or candy,” says Overstock.com CEO Patrick Byrne.

Figuring out and paying these out-of-state taxes has actually been the responsibility of the taxpayer. When filing state income taxes, under the section of “use tax,” filers are supposed to enter the dollar amount of products consumed in their home state if they were bought elsewhere or online. Very few people, though, actually remember or care to pay those taxes.

So what is the current law on Internet sales tax? In order to collect sales tax for internet purchases, the retailer or company has to have a physical presence in the state it’s selling to. This could mean a storefront, or a distribution center. If you purchased something online from Walmart, which has stores across the country, you paid the sales tax required by your state. But with a retailer like Ebay, you might live in a state that doesn’t have an Ebay office, and haven’t had to pay sales tax.

How would the law change affect me, the customer? If you live in a state like Oregon or New Hampshire that doesn’t have sales tax, and have purchases sent to your home state, you will continue to be sales tax-free. But for everyone else, you’ll have to pay as much tax on your online buys as you would if you went to a local store.

How would the law affect me, the seller? If you earn less than $1 million sales, you won’t be affected at all. If you earn more than that, well, you’ll have to start tracking (and updating) a lot of information. But, the bill says that states must provide free software to sellers, to help in determining the sales tax where each shopper lives. Additionally, states will have to provide a single entity to receive Internet sales tax revenue, so you don’t have to send out taxes to individual counties or cities.

When would this new law start? The earliest the new law could go into effect is October 1, 2013.

So, what’s the problem? Supporters say that the proposed law will “level the playing field” between online sellers and storefronts. If storefronts have to charge and pay sales tax, online sellers should as well, right? Most storefronts have an accountant, and only one set of tax laws to abide by. Giants like Walmart and Target can afford to sort through the laws and rates—they have entire departments dedicated to this.

“While it attempts to make tax collection simpler, it still has a long way to go,” Rep. Bob Goodlatte of Virginia said in a statement. “Businesses would still be forced to wade through potentially hundreds of tax rates and a host of different tax codes and definitions.”

Online sellers are usually individuals, or small teams that can’t handle the expensive burden of collecting sales taxes from nearly 10,000 sales tax jurisdictions around the country. Small businesses aren’t easily able to hire extra manpower to go through thousands of transactions to determine how much tax goes to each jurisdiction. Also, most online retailers can’t afford to update their accounting software, or hire a programmer to update their shopping cart system to reflect the changes. If you have a lot of products, each product will have to be plugged into the new taxing software. There’s a good chance that the software provided by each state won’t work with every retailers digital shopping cart.

Allowing states to collect taxes from Internet sales, some worry, would give states too much power to cross state lines and enforce their tax laws. Some say that it’s nearly impossible to correctly collect sales tax for all states, all the time. Because of this, out-of-state businesses are more prone to being audited, not just by their home state, but by every state they sell to.

The issue of the Internet sales tax is a complicated one, and still has to get through the House of Representatives to become law. Supporters of the bill say that states are trying to make it easy for online sellers to collect taxes, and consumers to pay the taxes they’ve owed anyways. Opponents hold firm that the Marketplace Fairness Act isn’t fair at all, giving too much power to states and harming online commerce with complicated taxes.

Lauryn Hill Sentenced to Federal Prison for Tax Evasion

Grammy award-winning hip-hop singer Lauryn Hill was sentenced on Monday to 3 months in federal prison for failing to pay about $1 million in taxes.

Last year, the 37-year-old New Jersey resident pleaded guilty for failing to pay taxes between 2005 and 2007, on income totaling $1.8 million. Yesterday’s sentence takes into account 2008 and 2009, years she also failed to pay federal and state taxes.

Hill claimed that she had always meant to pay taxes on the income, but couldn’t afford to at the time. “I needed to be able to earn so I could pay my taxes, without compromising the health and welfare of my children, and I was being denied that.”

Hill began her career with the Fugees in the early 1990s alongside well-known artist Wyclef Jean. She went solo in 1998 with The Miseducation of Lauryn Hill, an 8x platinum record, before an indefinite hiatus from the music industry.

Even though she’d been inactive musically while raising her six children, Hill earned more than $2.3 million from 2005 to 2009. She operates four companies, and had been preparing for a comeback with her studio album, The Return, which is due for release later this year.

“I love being able to reach people directly, but in an ideal scenario, I would not have to rush the release of new music,” said Hill after being forced to share a link to her first new song in almost a decade. Her comeback was rushed due to her legal situation, and Hill signed a record deal last month with Sony Worldwide Entertainment to assist in paying off her tax bills.

Despite recently paying more than $970,000 in back taxes and penalties, the singer was still sentenced to serve 3 months in federal prison. Following jail time, she’ll have 3 months of house arrest and nearly a year of supervised release. Additionally, Hill must pay a $60,000 fine to the IRS.

Bill seeks to extend state tax relief for mortgage debt forgiveness – Will It Happen?

One of the near-casualties of the Fiscal Cliff earlier this year was the Mortgage Debt Forgiveness Relief Act, which expired on December 31st, 2012. However, on January 3rd, 2013, President Obama signed The American Taxpayer Relief Act, which extended the deadline of the Mortgage Debt Forgiveness Relief Act one more year to December 31st, 2013.

The Mortgage Debt Forgiveness Relief Act was originally enacted in 2007 to accommodate the rising number of homeowners who had to do short sales as a result of the housing crisis.

A short sale occurs when a lender allows the homeowner to sell their home at a price that is lower than what is owed on the mortgage. The difference between the amount owed and the sales price is “forgiven” by the lender.

As with most forms of debt relief, the amount forgiven by the lender has been historically treated as taxable income by the IRS (adding insult to injury for the home seller).

When the housing crisis began to unfold, Congress and the Legislature decided not to consider canceled housing debt as income. This applied to canceled debt from foreclosure, the refinancing of a home loan or the short sale of a primary residence up to $2 million.

The California state law providing more relief, the Mortgage Debt Forgiveness Relief Act of 2007, expired at the end of 2012. This excluded up to $500K from taxable income in the form of debt forgiveness.

In California, AB 42, a bill that seeks to extend state tax relief for mortgage debt forgiveness was presented by Assemblyman Henry Perea, D-Fresno earlier this month. AB 42 would mirror the federal law and extend state income tax relief for debt forgiveness up until the end of 2013.

The Franchise Tax Board estimated the local impact to be a $50 million reduction in state income tax for 2013.

Since California’s mortgage debt forgiveness bill could affect state revenues, the measure was set aside until further analysis could take place regarding next year’s budget projections.

Brenda Harjala is a staff writer for Optima Tax Relief. Her mission is to help consumers stay financially savvy, and save some money with tax relief.

IRS grants Boston taxpayers 3-month extension

IRS grants Boston taxpayers 3-month extension

After the Boston Marathon explosions on Monday, the Internal Revenue Service announced that those affected taxpayers would get a 3-month extension on the April 15 deadline.

“Our hearts go out to the people affected by this tragic event,” said acting IRS Commissioner Steven Miller. “We want victims and others affected by this terrible tragedy to have the time they need to finish their individual tax returns.”

Details on the extension were shared by the IRS yesterday answering these three unavoidable questions: Who qualifies? When’s the new deadline? What if I have questions?

We’ve compiled answers to those questions and a few more below.

Who is eligible for this 3-month reprieve?

  • All Boston-area (Suffolk County) taxpayers are automatically eligible for the new extension. No further action is necessary.
  • Bombing victims and their families, first responders, and others whose tax preparers were affected also qualify.
  • Starting April 23, 2013, eligible non-Suffolk County residents who have not yet filed their 2012 tax returns can also claim this relief by calling 1-866-562-5227.

When is the new due date?

  • Eligible taxpayers now have until July 15, 2013 to file their 2012 returns and pay any taxes normally due on April 15.
  • No penalties will be due as long as taxes are filed by the new deadline.
  • Taxpayers needing an additional extension to October 15, 2013 need to file a Form 4868 by July 15, 2013.

Additional questions:

  • What if I start getting penalty notices? Before filing or making a payment, call 1-866-562-5227 to identify yourself as eligible for the extension.
  • Is there interest on the late payment? The annual rate of 3% interest compounded daily will still apply to any payments made after the April deadline.
  • Will my state return be affected? The Massachusetts Department of Revenue has extended the deadline to at least April 23, 2013.

Have other, unrelated questions? Answers can be found on IRS.gov, and by contacting the IRS toll-free number at 1-800-829-1040.