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This Tax Break Could be Yours if You Make the Right Moves

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.

During tax season, most taxpayer’s goal is to save as much money as possible and to receive the biggest refund check. Regardless of your age, salary, and financial situation, no one wants to deal with a tax bill after filing their tax return. 

There are a few tax breaks that are difficult to come by. For example, if you don’t own a home, you won’t be able to itemize any expenses such as, mortgage interest on your tax returns. It’s important to keep in mind when filing that if you’re a moderate to high income earner, you may miss out on certain tax credits that low-income filers may qualify for.

Taxpayers should research what tax breaks they will qualify for based on their filing status and financial situation. Here is a way for taxpayers to get a tax break when filing their next return:

Max out your retirement plan contributions

It’s necessary for most people to start saving for their retirement as early as possible and now, there are tax benefits to save money while putting it away in your retirement. 

Both traditional IRA and 401(k) contributions are made with pre-tax earnings. Every dollar put into your retirement, is a dollar of income the IRS can’t tax you on. The savings associated with your retirement will determine the tax bracket you fall into.

If you’re looking to get a tax break on your 2021 taxes, be sure to contribute to a traditional retirement plan, not including a Roth account. If you’re investing in Roth contributions, you need to know that it’s made up of after-tax dollars so you won’t see the benefits of immediate tax savings. 

For those wanting to lower their tax bill in 2021, try maxing out your retirement plan in order to see the most savings when filing your taxes. This could potentially lead to you receiving a higher refund or reducing your tax bill.

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

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Businesses Might have to Pay for Higher Unemployment Taxes

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.

States are currently in position to raise taxes on businesses starting next year and decrease jobless benefits for workers as the pandemic continues and the economy takes a downturn due to the increasing amount of businesses closing down and many Americans still out of a job.

Industries such as bars and restaurants were impacted the most by the employment crisis and may also have to deal with the largest tax hikes.

Millions of Americans received government aid during the past six months in order to make ends meet, and hundreds of thousands file new unemployment applications for aid each week.

The unemployment insurance system was created in 1930 and has already depleted the trust funds states use to pay benefits. Multiple states have already needed to borrow money after these trust funds had been drained. It is expected that many other states will need to do so by the end of the recession, according to unemployment experts. 

Because trust funds are funded solely by payroll taxes that are levied on employers, it is almost certain that levies alone will not recover all the money used to assist with unemployment. States will need to increases taxes in order to replenish the money that has already been lost.

Although a state tax increase is inevitable, tax rates will depend on the balance in state unemployment trust funds. In many states, low balances will automatically trigger higher tax rates, and vice versa. 

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

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

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The IRS to Contact Taxpayers Who are Eligible for a 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.

The IRS has started to reach out to over 9 million Americans who may be eligible for a federal stimulus check but have yet to claim their coronavirus relief payment. 

Those who qualified for the past stimulus check but didn’t receive it will be sent a letter from the agency regarding the money they are owed on September 24th. The letter will inform recipients that they are eligible for the payment if they meet the certain criteria. Taxpayers must be a citizen or a resident alien and also have a valid social security number.

Currently, Washington, D.C., has the largest share of Americans who are entitled to a check, based off the state data issued by the IRS. Alaska is currently in second, with about 4.2% of the state’s residents who are expected to receive a letter from the IRS notifying them about claiming their money.

California has the most residents, at 1.2 million, which could be eligible for claiming their check but still have yet to. Texas currently has 796,000 pending, Florida has 567,000, followed by New York with 538,000 and Georgia with 349,000 unclaimed stimulus checks.

The relief payments are meant to target middle to low income households by providing $1,200 for single taxpayers, $2,400 for married couples and $500 per child under 17 years old. In order to deliver the first round of stimulus checks as quickly as possible, the IRS relied on taxpayer’s most recent tax returns which included either their banking information or home addresses for paper checks.

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

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Taking a CARES Act Retirement Withdrawal could Lead to a Tax Liability

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 taxpayers still dealing with the financial fallout from the COVID-19 outbreak, many are falling on hard times and needing to get cash quick. The Coronavirus Aid, Relief and Economic Security Act, also known as the CARES Act, has a provision that can aid Americans that are financially strapped.

The CARES Act makes it easier for taxpayers to withdraw funds from their retirement accounts like 401(k)s and traditional Individual Retirement Accounts (IRAs). The temporary changes made to retirement accounts allows taxpayers to make early withdrawals without worrying about tax penalties as well as relaxed rules on loans you take out from your retirement.

Here is everything you need to know about the CARES Act.

Eligibility on early withdrawals from retirement accounts with the CARES Act

Some tax-advantaged retirement account holders may not qualify for some of the CARES Act’s relaxed early distribution and loan provisions. Legislation restricts relief to certain participants with a valid COVID-19 related reason in order to receive early access to funds. This includes:

  • If you have been diagnosed with COVID-19.
  • If your spouse or dependent is diagnosed with COVID-19.
  • Experiencing a layoff, furlough, reduction in hours, or inability to work due to COVID-19.
  • Lack of childcare because of COVID-19.
  • Closing or reducing hours of a business due owned or operated by an individual or spouse due to COVID-19.

Additional rules for early distribution

Eligible participants in tax-advantaged retirement plans typically have 401(k)s, 403(b)s,457s, and Traditional IRAs. This includes taking an early distribution of up to $100,000 during the calendar year 2020 without having to pay the 10% penalty tax that is typically imposed on most retirement account withdrawals before an account owner is 59 ½.

The act also suspends the mandatory 20% tax withholding requirement that is typically applied to early distributions from a 401(k) or other workplace retirement plan. The CARES Act allows taxpayers up to three years to redeposit the withdrawn money back into their retirement account or pay it all back in 2020 if your income is much lower this year. 

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

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If a Second Stimulus Check is Approved, When will it Arrive?

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 negotiations underway to pass a new economic rescue package with a second stimulus payment also being mentioned, we can forecast that qualifying Americans could be getting paid by the government a second time this year. Should a second stimulus check become a reality, it will depend on how quickly the IRS can start sending out money to taxpayers. Here are some important stimulus payment facts American should know about.

Recently, House Speaker Nancy Pelosi as well as House Democrats provided a new relief proposal. Pelosi has also agreed to resume negotiations with Treasury Secretary Steve Mnuchin to discuss laying out a new bill that includes another stimulus check, as well as other items like aid for airlines and restaurants. 

If another stimulus check is passed, it could take about a week to orchestrate the first payment. Potential dates have also been speculated, based on the House of Representatives and Senate, to happen anytime in October to the middle of November. This is of course contingent on a bill being passed that includes Americans receiving a stimulus check.

So far, the IRS has sent out money to at least 160 million people in three different ways. There are those who filed for direct deposit, taxpayers who chose to receive a paper check, and others with more complicated scenarios who are still waiting for their payments. It is expected that if a second round of stimulus checks are distributed, the IRS will use the same system they previously used when the first checks went out.

Taxpayers who have their direct deposit information on file with the IRS or add their direct deposit information if the registration opens up again, should be the first in line to receive their second stimulus check. An electronic transfer of funds is a faster and much more efficient way to receive your money.

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

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President Trump Pushes for Stimulus Checks and Massive Economic Relief

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.

President Trump recently called on congressional Republicans to back a massive economic relief bill that contained “much higher numbers” and larger stimulus payments for Americans suffering financially from the ongoing pandemic. The bill was just recently proposed and is completely different from the plan from what the Senate GOP was backing in the most recent days.

Although President Trump has expressed support for this new bill, he has yet to endorse it. The $1.5 trillion plan was unveiled on Tuesday by a bipartisan Problem Solvers Caucus in the House. If passed, the proposed bill would provide another round of $1,200 stimulus checks to qualifying Americans, a provision that has currently been omitted from the $300 billion plan the Republican senate has been attempting to pass. 

Congressional leaders in both parties recently made it clear that they don’t support the Problem Solvers proposal. Many Republicans agree that the new bill would cost too much and Democrats don’t think the bill provides enough relief for many businesses and Americans.

With President Trump’s renewed interest in providing such generous aid to the American people, it could possibly open up additional talks between Democrats and Republicans to come together and find a reasonable solution to assist U.S. citizens.

Signs are pointing to possible movement with coronavirus relief legislation being worked on. A growing number of House Democrats and House Republicans continue to work towards finding a resolution.  

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

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

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Wealthy Americans are Prepping Their Finances Based on the Presidential Election. Here’s Why.

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 the 2020 presidential election just around the corner, taxpayers are starting to review their current financial circumstances and determining when it would be beneficial to make moves with their money or refrain from investing in the future. 

If Democratic candidate Joe Biden wins the presidential election, it is assumed that a tax plan would be put into place where the marginal rate for top earners back at the Obama-era 39.6%, which would be an increase from the current rate of 37%. The new rate would apply to capital gains for taxpayers who earned more than $1 million. In addition, a potential tax proposal where the top 1% earners would pay for about 80% of an increase in taxes. 

The Republicans’ tax overhaul in 2017 boosted the threshold at which the 40% federal gift and estate exemption phases out. In 2018, the exemption level increased from $5.45 million to $11.4 million for individuals.

The provision will end in 2025, and it is suggested that Biden wants to end it much sooner and bring estate tax back to its historic norm.

Presidential hopeful, Biden, wants to also end the so-called step-up in basis. This tax rule dictates that if an heir sells inherited assets, capital-gains taxation on any future sale is added to an asset’s value at the time of inheritance, not the date of the original purchase. If the asset appreciates greatly over time, the step-up basis saves an heir a large amount in capital gains.

The 2020 presidential campaign comes with a short-staffed Internal Revenue Service auditing fewer returns. Data shows that the IRS audited 1.73 million returns in the fiscal year 2010 compared to 2019 where just over 770,000 returns were reviewed.

 According to Biden’s campaign, the IRS could gain $535 billion if it brought audit rates back to their level from 10 years ago and begin to focus more on the wealthy.

The IRS has announced that it will be launching hundreds of new audits of high-net-worth individuals. Biden has also released a plan for universal preschool and higher caregiver pay. This would be a $775 billion plan that would increase tax compliance for high-income earners. 

Depending on who wins the upcoming presidential election, taxpayers will need to investigate what future financial events will happen and how they should handle their money, assets and investments. As Election Day creeps closer, it is important for taxpayers to have access to their permanent records related to the cost of any capital assets to ensure that they properly file and don’t face any future audits from the IRS.

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

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Is My Social Security Number Required in Order to File My Taxes?

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 this year coming to an end, it’s time to start preparing for tax season next year. If you’re a first time tax filer or you’re filing on your own for the first time, it can be intimidating and you may even be unsure of what information you may need to provide to the IRS. 

Do you need to file a tax return?

The first thing a taxpayer needs to know is whether or not they need to file their taxes. The answer to this question depends on whether or not your income hits a certain threshold. If you earn less than the standard deduction amount when filing your taxes; $12,200 for those filing single, $18,350 head of household, and $24,400 if you filed married filing joint, then you may not need to file your taxes.

For those who are self-employed, you will need to file a tax return if your net self-employment income is $400 or more. You will also need to report any income that was reported on a 1099-Misc.

Others who may not need to file their taxes include:

  • U.S. resident aliens who need to file tax returns
  • Spouse or dependents of a U.S. citizen or resident alien
  • Nonresident aliens with a tax filing requirement

The U.S. government issues social security numbers to citizens, which employers can use when reporting taxes they withheld.

If you are applying for a visa and immigrating into the U.S., you may also apply for a social security number.

What’s an Individual Taxpayer Identification Number?

If you don’t have a social security number and you have to file your taxes, you can file by using your Individual Taxpayer Identification Number (ITIN).  Your ITIN is a nine digits and is similar to a social security number, but not the same. 

You can apply for an ITIN by:

  • Filling out a W-7 form
  • Proof of identity
  • Foreign status documents
  • Prove that you need an ITIN

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

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How Long does it Take to be Placed on an IRS Agreement?

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.

Dealing with the IRS can be a stressful ordeal, especially if you owe a tax liability. When attempting to set up an installment agreement with the IRS, it can take anywhere from a few hours to a few months depending on the type of agreement you’re attempting to qualify for. 

The IRS allows taxpayers to set up payment plans, such as extensions to pay and “streamlined” installment agreements. For more complicated agreements, the IRS will require that you provide financial information in order to verify whether or not you qualify.

Here are your options when attempting to get on a payment agreement with the IRS:

Request an extension. If you need more time to pay off your tax liability, the IRS allows taxpayers to request an extension for up to 120 days. The IRS will grant this extension for any tax balance amount as long as taxpayers pay their balance owed before the deadline. If the bill is not reconciled before the due date, the IRS will place the taxpayer in question back into collections. 

Set up a simple payment plan. These agreements are typically called streamline installment agreements and can be set up by a taxpayer that has a tax bill of up to $50,000. Taxpayers must pay their balance back within six years and generally the IRS does not file a tax lien. 

If you were previously set up on an agreement and defaulted, you may need to contact the IRS to set up another one and provide your current financial information.

Taxpayers that owe between $25,000 and $50,000 will be required to pay by direct debit or a payroll deduction in order to avoid a lien being filed against them. The typical time frame to set up this agreement is between 4-6 weeks.

Request a payment plan for a tax bill over $100,000 OR currently not collectible status. For those who have a tax balance over $100,000 or you’re financially strapped and unable to pay back the IRS within an 84 month period, the IRS does provide assistance. A taxpayer can request a currently not collectable status if they are in financial hardship and don’t have the ability to pay their tax liability. 

A taxpayer must submit their financials and prove that they are in a hardship in order to qualify for this agreement. The IRS typically files a tax lien for those who owe more than $10,000.

The agreement can be requested over the phone however, it can take months to complete. This is because the IRS requires a taxpayer’s most current financials as well as additional detailed information. If this agreement is requested via mail, it will typically take the IRS 1-2 months to consider your request and could even ask that a taxpayer forward more information if they deem the documentation they have on file is insufficient. 

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

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What Does IRS Code 9001 Mean?

There are still many IRS terms and codes that are a mystery to the average taxpayer. Tax terms can be confusing, whether you’re a first-time tax filer or have been filing tax returns for years. IRS Code 9001 is a common error code, but many people don’t know what it means. We’ll explore what the IRS Error Code 9001 is, and how to avoid it.

IRS Code 9001

You filed your federal income tax return a while ago and you are expecting a refund. You can check the status of your return and your refund check (for paper returns) or direct deposit (for electronic returns) at the IRS.gov website. The “Where’s My Refund?” portal also provides an estimate of when you should expect your refund.

If you receive an error code such as IRS Code 9001 when you check the status of your return, you may worry that your return has been flagged for an audit. Relax. In fact, IRS Code 9001 is one of an entire set of codes that are included within the Internal Revenue Manual, or IRM, which is the set of guidelines used by the IRS. This is not an audit flag, but rather an error code generated when taxpayers attempt to access return or refund results using the wrong Social Security number or TIN.

Where’s My Refund?

The IRS established the “Where’s My Refund?” portal to allow taxpayers to check the status of their federal income tax return and refund. To access the portal you need three pieces of information: your Social Security Number or Taxpayer Identification Number (TIN), your filing status and amount of the refund that you are expecting. This refund amount should be listed in whole dollars and must match the amount listed on your tax forms exactly.

Taxpayer Identification Number (TIN)

Most taxpayers include a Social Security number on their tax returns. But certain taxpayers, such as resident and nonresident aliens, are not eligible to get one. The Taxpayer Identification Number (TIN) is designed to allow individuals to file federal and state income tax returns, without an SSN.

How To Fix a IRS Error Code 9001

In most instances, when you check the status of your return on the “Where’s My Refund?” portal, you will receive a message stating that your return is being processed or that your refund is on its way. Occasionally, you may receive one or more error codes, including IRS Code 9001: “Taxpayer accessed Refund Status using a secondary TIN. Refund Status could not be returned. Get a Primary TIN Analyze account and follow appropriate IRM.” The fix is simple – enter the proper Social Security number or TIN into the “Where’s My Refund?” portal. If you still receive error messages, contact the IRS or an expert such as an attorney with Optima Tax Relieve for further assistance.

Wondering where your tax refund is? Read our dedicated blog to learn more. If you need tax help, contact us for a free consultation.