How to Obtain a Prior Year Tax Return

When you file your taxes, keeping a copy of the final return is highly recommended but sometimes not possible, or forgotten. Having that copy, though, is often required for many financial decisions. Reasons include answering questions related to an IRS audit or investigation, or on a student loan or mortgage application. If you cannot find or did not save a copy of a prior year tax return, we can help you.

Optima Tax Relief has compiled a guide to help you obtain your tax returns quickly and easily:

What Can I Request?

Upon request, taxpayers are able to obtain a tax return transcript and a tax account transcript.

Tax return transcripts contain most of the line items from your initial tax return along with line items from schedules and forms accompanying the initial filing. Changes made through amended returns, will not show up on this type of transcript.

Tax account transcripts document any modifications made by the filer or the IRS to the original tax return, including any adjustments and amendments. This document has information such as your return type, your adjusted gross income, taxable income and what your marital status is.

How Can I Request Transcripts?

Transcripts are free and can be requested via the web, over the phone or by mail. Using the IRS’s website,, requests are made using the “Order a Transcript” tool. Phone requests are made by calling (800) 908-9946 and following the prompts.

Individuals requesting a 1040A, 1040 or 1040EZ tax return transcript must fill out IRS Form 4506T-EZ, otherwise known as the Short Form Request for Individual Tax Return Transcript.

Individuals or businesses requesting a tax account transcript must complete IRS Form 4506T, also known as Request for Transcript of Tax Return.

How Far Back Can I Request Transcripts?

Transcripts are free, and available for the present year and each of the three years prior.

How Long Will It Take to Receive My Tax Return?

It normally takes 5-10 calendar days to receive your information if you request your tax information via online or over the phone. If you request your tax information by mail, it can take up to 30 calendar days.

What If I Need the Actual Copy of the Tax Return I Filed?

If you regularly use an online preparation software like TaxACT or TurboTax, retrieving old returns should be relatively easy. If not,  taxpayers can request and receive the actual paperwork they filed directly from the IRS. The current year’s paperwork and up to the past six years are available.

Individuals requesting this information must mail $57 per tax year and IRS Form 4506, Request for Copy of Tax Return. Turn-around time generally takes up to 60 calendar days.

What if I Live in a Federally Declared Disaster Area?

For taxpayers living in disaster areas, determined by the Executive Branch of the United States, the IRS may permit these individuals to request tax return paperwork. To see if you are eligible and your location qualifies, check out the IRS’ website and look for the “Disaster Relief” section. This section spells out all eligibility and application criteria.

It’s good practice to have prior year tax returns and other tax-related documents stored in a safe place and “in an orderly fashion” for a few years. You always want to be prepared in case of an audit!

How Gambling Impacts Your Taxes

No matter what type of gambler you are, a card player, a sport’s better or a Craps aficionado, understanding how your wins and losses impact your tax implications is a tax payer’s responsibility. The Internal Revenue Service would like to remind you of six easy to follow compliance tips after you enjoy every gambling experience.

How does the IRS Define Gambling Income?

Gambling Income includes more than just what happens at the casino. Along with income or losses from a casino, lottery, horse race and raffle income losses and gains fall under this definition. Cash and the fair market value of prizes including vehicles, vacation packages, and related items are taxed at their cash equivalent.

How do I report Gambling Winnings?

Gambling winnings are reported through IRS Form W-2G. Depending on how much you win and the type of gambling you undertake, you may receive this form directly from the “payer” or organization from which you won the money. If the payer withholds federal income tax from your winnings, you will receive a Form W-2G. This form, according to Robert W. Wood of, works just like a 1099 Interest Form that you receive as part of tax time preparation forms. He reminds everyone the IRS also receives a copy of the Form W-2G and reminds winners to keep it handy for tax time to ensure full compliance!

If gambling winnings do not meet the following thresholds set by the IRS for the respective type of gambling, it must be reported as “Other income.”

Bingo or slot machines:  $1,200
Keno:  $1,500
Poker Tournament:  $5,000 (excluding wager or buy-in amounts)
“Other” gambling winnings:  $600

“Other” gambling winnings are those that do not include poker tournaments, slot machines, bingo and keno – and the payout is at least 300 times the wager amount).

What if My Winnings don’t Meet the Above Thresholds?

No matter how much income is generated from gambling, it must be reported if you receive a Form W-2G or not. If your winnings do not meet the threshold, you must report your income under the “Other Income” line on the Form 1040 U.S. Individual Income Tax Return.

What do I Do if I Lose Money From Gambling?

Gambling losses may be deducted. Deductions are permitted up to the winnings amount. Losses must be reported, as an Itemized Deduction, on Schedule A, separately from any winnings.

How are Winnings and Losses Substantiated?

The IRS requires proof of losses and winnings. In case of an audit and to maintain integrity of your income tax return, the IRS recommends keeping all records related to winnings and losses. Items to substantiate gambling transactions include tickets, receipts, checks, and IRS Form W-2G (if given). Maintaining a notebook or other written documentation is highly suggested to keep winnings and losses separate and organized.

Where can I get more Information?

Consulting with legal professionals and certified public accountants (CPAs) will make sure you understand what your individual obligations are. You can also visit the IRS’ website or contact Optima Tax Relief to obtain the appropriate publications to become more familiar with this topic.

Having complete information and competent professionals to claim your gambling winnings and losses will ensure you are compliant with your tax obligations and prepare you for a potential tax audit.

Photo:  Lisa Brewster

Rashia Wilson, Queen of Tax Fraud

The Tampa Federal court has sentenced self-proclaimed “First Lady” and “Queen of Tax Fraud” Rashia Wilson to a 21-year prison sentence for multiple criminal charges. Charged with aggravated identity theft, wire fraud and a felon for possessing a firearm, she pled guilty to all charges. Her most egregious crime is stealing north of $3 million from the Internal Revenue Service (IRS) through fake tax returns. Authorities claim she actually stole $20 million. Along with her prison sentence, the court ordered her to remit $2.2 million of the traced proceeds connected with the criminal charges.

Wilson, 27, grew up with little money and a diagnosed bi-polar disorder. Her father was in prison during her childhood and her mother a reported drug addict. But recent reports have her enjoying a very comfortable lifestyle from her tax refund schemes. Spending more than $30,000 for her daughter’s birthday party with carnival games, she also reportedly bought an Audi vehicle for $90,000. This is in addition to a list of other cars and designer clothing, vacations, and jewelry.

Based on court documents, Wilson testified that she and an alleged accomplice, Maurice J. Larry, used bogus identifications and hijacked social security numbers to collect misrepresented tax returns from April 2009 to September 2012.  The two worked together out of Wilson’s home, Tampa hotels and other workspaces. Reports have her system performed so efficiently that taxpayers with legitimate claims had to wait up to 12 months.

Courts documents detail how she and the alleged co-conspirator Larry ran their scheme. Tax returns were submitted to the IRS in other taxpayer’s name without their approval or understanding. Upon acceptance, Wilson obtained prepaid debit cards and refund checks for the refunds for the fraudulent tax filings. Searches of Wilson’s home and Larry’s storage unit discovered countless medical bills among the list of thousands of Social Security numbers and names. The home also contained jewelry, a firearm and luxury goods.

After noticing a lull in drug dealing in Wilson’s area, Tampa authorities, the United States Postal Inspection Service, and other federal officials launched “Operation Rain Maker” to look into the increase in the amount of money reaching her mailbox.

According to her Facebook page, she said was “untouchable.” Comments on her Facebook page included, “I’m Rashia,” proclaiming that she is, “the queen of IRS tax fraud.” She eluded to her financial status, “I’m a millionaire for the record,” alluding to how she felt about the government coming after her, “so if U think indicting me will B easy it wont.”

The Queen of Tax Fraud was wrong. As Assistant Inspector in Charge Barney Morris stated, “The culmination of the Rashia Wilson investigation reflects what can happen when local, state and federal law enforcement agencies work collaboratively to combat these types of crimes.”

Tax Benefits for Armed Forces Personnel

As the IRS puts it, military personnel “face unique life challenges with their duties, expenses and transitions.” It’s only fitting to give them exclusive tax breaks during service and once they retire.

Modest income families with children receive significant tax benefits. For example, the Earned Income Tax Credit (EITC) can help to support these families with a tax refund. For military families, the combination of the Earned Income Tax Credit and the tax free treatment of combat pay can have major tax benefits. We spoke to Justin Clement, Tax Attorney at Optima Tax Relief who explained:

“Take, for example, a soldier who is married with two children at home. In 2012, he earned $5,000 while stationed domestically and $25,000 earned in a combat zone. Since $25,000 was earned in a combat zone, only $5,000 of the income is taxable. At $5,000, the soldier would qualify for $2,010 in refundable tax credits. However, the tax code allows military families the option of including non-taxable combat pay in their earned income for purposes of the EITC. In our example, if the soldier included the $25,000 combat pay in his earned income (a total of $30,000), his EITC credit would increase from $2,010 to $3,609. Understanding this tax law could increase a military family’s refund by thousands of dollars a year.”

According to the IRS’ website, there are quite a few additional tax benefits for armed forces personnel to take advantage of:

Moving Costs. Active duty personnel ordered to move to another military station may be entitled to deduct moving expenses not covered by employer reimbursements.

Tax-Free Income. Individuals’ fighting in a “combat zone” or classified as a warrant officer for a partial or complete month are entitled to tax free military pay for that month or months of direct combat service. Officers’ pay is tax free only up to their greatest level of pay, in addition to any “hostile fire” or “imminent danger” compensation.

Extended Deadlines. Certain members of the Armed Forces can qualify for extensions related to:

  • Meeting tax obligations
  • Claiming a refund
  • Filing their tax forms

Deducting Service Related Travel Expenses. Reservists that are required to move than 100 miles from their home to fulfill their military service obligations may be entitled to deducted travel fees not reimbursed.

Uniform Deductions. Off-duty personnel may be entitled to deduct non-reimbursed or allowance costs related to uniform maintenance. This is applicable under some circumstances when off-duty restrictions prohibit personnel from wearing their uniform.

Serving Students. Students enrolled in Reserve Officer Training Corps (ROTC) receiving Subsistence pay during advanced training do not have to pay tax on that income.  

There are tax benefits and deductions for military veterans as well:

Military-to-Civilian Benefits. Veterans acclimating back to their civilian careers and life can benefit from numerous tax deductions. Deductible job-hunting fees include travel expenses, resume updating costs, and head-hunter associated fees.  Under certain circumstances a job-related move might be a permitted tax deduction.

Disabled Veterans’ Tax Benefits. Veterans receiving disability payments from the United States Department of Veterans Affairs are not factored into gross income calculations. Examples of payments received include:

  • Money for mechanized vehicles for blinded veterans or with a loss of one or more limbs.
  • Money to modify a home to accommodate a wheelchair.
  • Monetary support from a dependent-care assistance programs
  • Pension and disability payments for disabling injuries sent directly to veterans or family members.

Military Retirement Pay. Contributions from this compensation fund that goes towards their participation in the Survivors Benefit Plan (SBP) is not taxable. This pay, according to the IRS, is not classified as earned income and is not subjected to payroll taxes for Social Security.  

Enhanced Job Opportunities. Veterans have a greater chance of becoming hired through the Work Opportunity Tax Credit. Renewed in 2013, employers who hire qualified veterans are able to obtain a tax credit. This will help veterans distinguish themselves from competing candidates.

The men and women who are serving and have served in the United States Armed Forces are unique. They are seldom in one state (or country) for an extended period of time, are often in combat zones, and sometimes come home with life-altering injuries. The expenses can seem endless, but taking advantage of exclusive tax benefits can help curb the costs.

Latest IRS Scandal: Leaked Social Security Numbers

If reports that the IRS has allegedly targeted politically conservative organizations and allegedly read tax payer’s e-mails without a warrant didn’t give this federal organization enough headaches, its latest scandal of leaking social security numbers just might. The IRS was shown to have leaked social security numbers of more than 100,000 American citizens associated with 527 political organizations.

What Happened?

On July 8, 2013, audits performed by the independent non-profit corporation discovered that the IRS accidentally published social security numbers of individuals connected to tax-exempt 527 political organizations.

A 527 is a non-profit organization formed under Section 527 of the Internal Revenue Code, which grants tax-exempt status to political committees at the national, state and local level. The most common types of 527s are those affiliated with interest groups, unions or associations of elected officials, such as the Republican Governors Association.- The Center for Public Integrity

The IRS reportedly published the social security numbers on their website’s 527 political organization database. The published information was discovered when an unrelated, but improperly checked shipment, containing IRS data was audited by the non-profit. After notified the IRS of the breach, the entire database containing all affected information was taken offline.

Who was Affected?

According to, donors were primarily affected by this leak. Individuals who prepared tax returns for the 527 political organizations were also impacted to a lesser degree. But with so many individuals’ information leaked, virtually anyone could be affected because 527 political organizations are quite prolific. These organizations can and do lobby and influence the political process on a local, county, state and national level including, but not limited to policy, voting, legislation and elections.

What Does it Mean?

There are multiple implications from this data breach. The IRS might lose even more credibility with the American public after suffering setbacks with other recent scandals. Congress members are already calling for an investigation to understand why it happened, what measures will be taken to ensure it doesn’t happen again and what parties will be held accountable.

Potential donors, tax preparers and anyone else affected by the information breach will need to find out if they have been affected. Individuals will have to take precautionary measures to minimize chances of identity theft. Donors may also limit contributions to these organizations to $200 or less, as a way to prevent future information leaks, because IRS regulations require reporting donors’ names for contributions of $200 or more.

Many believe the IRS will continue to face scrutiny because this new scandal compounds and further erodes the IRS’ competence and credibility. Donors and tax preparers are definitely less likely to donate to 527 political organizations because they don’t want to risk future publications of their sensitive information.

Photo: FDR Presidential Library & Museum

Tax Tip: Deduct Job Hunting Expenses

With many people getting laid off and unable to secure employment, some job-seekers may be able to deduct job hunting expenses from their federal tax obligations. While consulting with legal and tax professionals, the following information should give you some insight into what tax write-offs you may be able to take advantage of.

Deduction Guidelines

Contributor for, John Rossheim, gives four guidelines to see if your job search expenses might reduce your year-end tax obligations:

  • Stay on a similar career path. Job seekers that stay within their same career path, such as teaching, accounting are more likely to be able to deduct job hunting expenses. However, if your last position was in accounting, but now you are looking to become a teacher, it’s virtually impossible to write of your job-hunting expenses.
  • Don’t wait too long. While the IRS doesn’t have a defined time-frame for workers who stop looking for a job, waiting too long can disqualify you entirely. If you decide to homeschool your children or go back to school for a different career path, the IRS is less likely to look sign off on deductions. You need to be actively engaged in your career and job search.
  • First-time job seekers are ineligible. If you are looking for your first professional job in your desired career path, the IRS does not allow deductions for job-hunting expenses. Only individuals who have held a job in their respective career, and are now actively looking for one, may be able to deduct such expenses. If you held a full time job while in school that relates to your first post-grad job search, though, you should be able to take the deduction.
  • Expenses must top 2 percent of your adjusted gross income. Along with other miscellaneous deductions, job-hunting expenses must top 2% or more of the tax year’s gross adjusted income. The good news here is that even if you don’t land a new job within the tax year, if you have allowable tax expenses you can still take advantage of the tax benefits.

Understanding the theory behind the deductions is essential to keeping track of your eligibility. The following list will give you a list of real-world examples the IRS permits:

  • Staffing Expenses: The IRS permits job-hunters who pay staffing agencies fees to help them find a job.
  • Stationary & Postage: Cost related to preparing and sending out copies of your resume may be deductible.
  • Travel: If you have to take a plane, drive your car, hop on a train or otherwise travel to search for a new position, it may be tax deductible. However, IRS regulations stipulate the trip’s primary reason is your job search. For example, you cannot go on a family vacation and sneak in a interview and expect the trip to be tax deductible.
  • Continuing Education: If you take a course to brush up on existing skills or want to learn a new one during your job search, the cost of the software or the course may be tax deductible.
  • Learning how to market yourself: Taking courses, seminars and other educational resources that help you market yourself and help you develop your career may be used as a job-hunting
  • Job-hunting marketing expenses: If you have to make phone calls or place wanted advertisements looking for work, you may be able to deduct these costs. Any expenses related to actively selling yourself (business cards, etc.) to potential employers may be able to be written off during tax time.

Since everyone’s tax situation is different, certain deductions may or may not apply to your individual situation. Speaking with a certified public account and competent legal professionals is your only way to determine what deductions you may be entitled to.

Photo: Dick Thomas Johnson

Taxes and the Defense of Marriage Act (DOMA)

Edith Windsor, the plaintiff in this ground-breaking case, has recently shaken up the U.S. tax code by overturning the Defense of Marriage Act (DOMA).

State-recognized same-sex marriages are now legally recognized by the federal government with the Supreme Court of the United States’ June 26 ruling invalidating parts of the Defense of Marriage Act (DOMA). Same sex couples that marry in states that recognize same-sex marriages will be able to take advantage of the same tax benefits available to opposite-sex married couples. Lawyers, certified public accountants (CPAs), other professionals and married same-sex couples should know what the changes in taxes and the Defense of Marriage Act mean for them.

Tax-Free Gifts For All

According to TIME, same-sex couples will be able to gift their significant other property tax-free. Before this ruling and according to federal tax law, same-sex couples were subject to taxes beyond the annual $14,000 exemption. For example, if a car, house, portfolio of stocks or any other property was valued at $50,000, the receiving party in the same sex relationship would have to pay taxes on $36,000 ($50,000 – $14,000 (gift exemption)). Now, this ruling states that in states that recognize same-sex marriages, a married same-sex couple can gift each other unlimited gifts tax-free on the federal level.

Beneficial Retirement Tax Benefits

Same-sex couples will now enjoy the same retirement tax-advantage benefits as opposite-sex couples. Before DOMA, only opposite-sex married couples with retirement investment vehicles including 401(k)s and Individual Retirement Accounts (IRAs) could defer disbursements until the age of 70 ½. If a partner of a same-sex couple passed away, the other partner was forced to take a distribution. If the deceased partner was younger than 70 ½, the surviving partner would incur early distribution penalties, in addition to the regular taxes. However, this ruling permits partners in legally recognized same-sex marriages to receive retirement assets without having to take a forced distribution.

Tax-Free Health Benefits

Partners of employees who received health benefits from their employer had to pay taxes on their individual health benefits. This ruling, however, should eliminate that tax obligation because spouses in opposite-sex couples, under federal law, are not taxed.

Married Filing Jointly

The Supreme Court’s decision may also help same-sex couples take more income home in the future and when amending and filing taxes. Individuals filing individually, with the new ruling, can save as much as $6,100 come tax time. Same-sex couples, according to the Internal Revenue Service, whose unions are legally recognized in 13 states, are also able to file jointly. This would permit a same-sex couple to save as much as $12,200 annually. It gives same-sex couples more than 1,000 federal benefits.

Social Security Changes

According to USA Today same-sex couples are now able to receive their partner’s Social Security benefits. With the new DOMA ruling, the surviving partner of a same-sex couple may be able to receive their deceased partner’s Social Security benefits. Prior to this, the surviving spouse of a same-sex couple was deprived of up to $28,968.

This ruling has given same-sex couples many, if not all of the same tax benefits that opposite-sex married couples have enjoyed for decades. Since everyone’s circumstances are different, it is best to speak with legal and financial advisers to determine what your circumstances entitle you to.

Is the IRS Using Taxpayers’ Funds Effectively?

Taxes are a fact of life. Love them or hate them, taxes are the life-blood of all levels of government. When taxpayers’ money is spent for necessary services such as education and public safety, there are virtually no complaints by taxpayers. However, when this money may be used for questionable expenditures, taxpayers have every right to ask “Is the IRS using taxpayers’ funds effectively?”

According to Forbes’ contributor William Dunkelberg there is a simple explanation for government waste and why so many people question the government’s allegedly ineffective use of taxpayer’s money. Dunkelberg believes there is, “no accountability but government employees get ‘credit’ for giving money away.” He contrasts this to small business owners who are faced with making decisions that affect their survival, almost on a daily basis. The IRS’ expenditures will be looked at to see how effective their use of taxpayer’s money really is.

Dancing the Night Away?

According to a report by MSN Money, IRS employees are learning how to “Shuffle.” During a 2010 conference in Anaheim, Calif., taxpayers allegedly paid $4 million for managers to learn “The Cupid Shuffle.” In the spirit of non-discrimination, MSN also reports that no one was discriminated against. A female attendee with a cast on her ankle attempted to take advantage of the “free” dance lessons this tax-payer subsidized conference provided.

Adult Entertainment & Music

CNN Money reports that IRS employees have allegedly used taxpayers’ money for questionable business expenses. Some IRS workers, using agency-issued credit cards, are believed to have bought unrelated work items including:

  • “Thomas the Tank Engine” themed rubber bands
  • A 41 party-dinner serving its guests 28 bottles of wine
  • An order for kazoos totaling $4,000
  • Undisclosed amounts of digital pornography

All of these expenses were discovered by the Treasury Department’s Inspector General.

Beam Me Up Uncle Sam?

According to the New York Daily News, the IRS may not have Hollywood’s next actors, but is certainly good at spending taxpayers’ money. Congress has called to attention the IRS’ questionable use of $60,000 of taxpayers’ money. Parodies of “Gilligan’s Island” and “Star Trek,” based on the report, have zero instructional value, pointing out an example of government spending waste. The Star Trek video was released and comment was given from the IRS after Congressperson’s from the House Ways and Means Committee asked for it.

A Picture is Literally Worth 1000 Words

The New York Post recently came up with even more reports of ineffectively spending. They found the IRS may have spent money on the following questionable expenditures:

  • Commissioning paintings of U2 front-liner Bono and basketball great Michael Jordan. Both paintings reportedly cost $17,000.
  • Hotel rooms for the earlier mentioned California conference allegedly costing $1,500 to $3,500 per day.

Many Government Agencies See the IRS’ Spending as Wasteful

According to the Government Executive’s website, non-Executive Branch government agencies have seen this spending, including past and present waste by the IRS’s, and have implemented new instructions to reduce the likelihood of further government waste. The Office of Management and Budget’s 2012 guidelines include:

  • Net expenses per conference may not exceed $500,000.
  • If expenses exceed $100,000, excess expenses must be publicly documented on an agency’s website.

Also added to these regulations was a requirement that “any conference hosted or sponsored by Department of the Treasury bureaus costing $250,000 or more must be approved by the Secretary of the Treasury.”

The findings by the Treasury Inspector General for Tax Administration, who completed the internal overview and audit of the IRS also made additional recommendations to make sure expenses and costs for all functions, including employees and conferences, are more financially efficient. Congressional hearings, attended by many Treasury officials, have been held in June to get to the bottom of all of the allegations and get a complete and accurate accounting of the IRS’ recent spending.

These recent discoveries don’t bode well for trusting the IRS to handle tax dollars wisely. However, Congressional hearings should answer more questions and determine how extensive the allegations are and what the truth is.

Estimated Taxes: June 17th Tax Deadline

According to the IRS website, estimated tax, paid four times a year, is a way for certain individuals to make sure they are compliant with tax obligations. The second-quarter June 17th tax deadline is coming up fast, so some preparation may be in order.

What is the Purpose of Estimated Taxes?

The purpose of estimated taxes is to make sure the government gets a constant flow of tax revenue. Since the U.S. tax system functions on a “pay as you earn” basis, paying on a quarterly basis enables revenue to flow smoother than a once-a-year payment. IRS Form 505 spells out all of the intricacies of filing and paying estimated taxes in 2013.

While self-employment income constitutes the majority of estimated taxes, the tax liability for other sources of income can be estimated and filed on a quarterly basis. Other types of income include: alimony, asset sales, prize, non-withheld salary, pension payments and lottery winnings.

When is the Deadline?

While IRS Form 1040-ES has the official deadline as June 15, 2013, it is pushed back to the next business day Monday, June 17th because the 15th is a Saturday. The third-quarter estimated tax deadline is September 16, 2013, and the fourth is January 15, 2014.

Who is Impacted?

  • Generally speaking, self-employed individuals are affected.
  • Individuals who have had estimated tax liabilities in previous tax years.
  • Individuals working as a sole proprietor or business partner, a S-corporation shareholder or under any other type of self-employed circumstances are expected to pay quarterly estimated taxes if they project annual taxes of $1,000 or more per year.
  • IRS regulations stipulate that if you are filing as a corporation and you project you will have an annual tax obligations of $500 or more per tax year, you will have to make estimated payments.

How are Estimated Taxes Calculated?

Estimated taxes are determined by looking at projected revenue, expenses, deductions and credits for the tax year. Basing each quarter’s payments may be easier by looking at last year’s annual and quarterly payments. Depending on the actual figures, you may need to pay more or less for each quarter compared to last year’s estimated taxes. IRS Form 1040-ES has forms to recalculate over and under-payments.

What are Consequences of Underpayment?

If estimated taxes are underpaid for one or more quarters, penalties and interest will be assessed on any unpaid estimated taxes.

Generally speaking, filers with underpayment of estimated taxes will either be billed by the IRS or can file IRS Form 2210 to determine what is owed. However, there are circumstances that may provide taxpayers the ability to avoid this tax if one of the following criteria is met:

  • If estimated taxes are less than $1,000 for a tax year, after taking away their withholdings and credits; or
  • If at least 90 percent of the estimated taxes for the present tax year are paid, penalties may not be applicable; or
  • If all of the taxes shown on the previous year’s tax return are paid in full.
  • Many businesses, especially start-ups may be able to avoid this penalty by projecting their income across all four quarters for estimated tax purposes.
  • Payments that were not made due to a death, natural disaster, or other uncontrollable factors allowed by the IRS may permit filers to avoid the penalty
  • Disabled or retirees (after turning 62) who attained this status and failed to make appropriate payments during the present or past tax year may be able to avoid the penalty if not due to purposeful causes.

How can Estimated Taxes be Paid?

Payment options are very flexible. Each estimated tax quarter can be paid via check and the appropriate voucher from the Form 1040-ES package. Forms can be filed electronically and paid via a credit card. The IRS also has its own Electronic Federal Tax Payment System that enables taxpayers the ability to log in and pay each quarter’s estimated taxes.

How Optima Tax Relief Can Help

Claiming income and filing taxes for your business or eligible income can be tricky. Since there are many regulatory intricacies that must be followed to ensure there is full compliance, Optima Tax Relief can assist you with your estimated tax estimation and remittance needs. Don’t wait another quarter, the June 17th tax deadline is next Monday. Optima Tax Relief can help you with this quarter’s and future quarter’s estimated tax payments. Schedule a consultation with a representative from Optima Tax Relief today!