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Tax Season 2022 Guidelines

tax season 2022

The start of the 2022 tax season is just around the corner! Are you prepared?

The IRS announced that tax season will officially open on Monday, January 24, 2022. Last year, the season started almost a month later due to the pandemic, but we advise that you take advantage of filing early.

Free Filing

The IRS has also opened Free File on January 14, 2022. This program applies to you if you made $73,000 or less in 2021 in AGI (Adjusted Gross Income). Your AGI would be found on Form 1040. Note that this amount is calculated before claiming any standardized or itemized deductions.

You can file electronically to lessen the likelihood of any delays. You can use a commercial filing software of your choosing, or utilize IRS.gov/freefile to see the Free File options.

If you require filing assistance, the VITA program is also in effect. This program allows volunteers to help other taxpayers in their communities with their filing. Optima Tax Relief is a VITA partner, and our volunteers will be assisting again this year. Check with your local county office, or local tax service to see if you qualify for free assistance.

Important tax deadlines

The deadline to file income tax returns for the 2021 tax year is April 15, 2022. If you feel that you need more time, you should apply for an extension as soon as possible. You can file a tax extension for free directly through our Optima® TAX APP. Requesting an extension in a timely manner pays off, as you will more likely be approved and given until the extension deadline to file.

The extension deadline is October 17, 2022, which allows plenty of time to gather necessary documents that might be held up early in the year. However, by delaying your filing, you are also delaying your refund and there is no way of knowing exactly when you will receive it. This is why tax professionals encourage everyone to file as soon as they can. The longer you wait to file, the longer you will have to wait for your refund.

Worried about owing from previous years?

At Optima, we assist our clients with catching up and amending previous tax returns. This can possibly help decrease the amount that you might owe in back taxes and get your account in compliance.

Owing the IRS is a confusing and stressful time. To ensure that you receive the best possible outcome for tax relief, consider working with the professionals at Optima. Call us today for your free, no obligation consultation at (800) 536-0734.

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NFT Taxes: Everything You Need to Know

nft taxes

The age of digital assets dawns as we witness a rise in various forms of cryptocurrency. The latest trend has gained the attention of creatives and art lovers alike: NFTs. Whether you’re a buyer or creator, income taxes still apply to your NFT.

What are NFTs?

Non-fungible Tokens are digital content ranging from images, to video, or even music that can be bought or sold using a unique data technology. What makes NFTs especially unique is that they become logged and authenticated on cryptocurrency blockchains, which is what makes them impossible to hack or be stolen.

NFT Creator Taxes

Creating, or minting an NFT is not taxable, however, a sale where you receive subsequent proceeds, or an exchange is taxable. When you receive payments via royalties, patents, and other intellectual properties the payment is taxed as ordinary income.

NFT Owner Taxes

The four types of NFT owners are:

  1. Investor
  2. Hobbyist
  3. Business Collector
  4. Dealer

Each owner type buys NFTs for different reasons. Investors hope to profit, hobbyists are collectors, business collectors use NFTs for displays and special logos, and dealers buy and sell to the other three types. What they all have in common is capital gains tax.

An NFT sold or disposed of within the year it was purchased is subject to short-term capital gains taxes. The taxes are based on income level, but can be as high as 37%.

Donating an NFT is not a taxable event.

Long-term NFT Guidance

Because NFTs are still new, the IRS has yet to release official guidance on long-term ownership. Tax professionals are speculating that NFTs will be compared to collectibles in the future and receive the 28% collectibles capital gains tax rate.

However, for now, it seems that there is a large grey area surrounding the long-term tax rules of NFT owners and dealers.

Before Filing Returns for NFT Assets

It’s best to work with a tax professional before filing returns if you own NFT assets. Tax professionals have enough knowledge of the tax code to help prevent future penalties, which can protect your assets in the long run.

If you have a current liability with the IRS, call Optima at (800) 536-0734 for a free consultation before you file this tax season.

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Optima Newsletter – January: 2022 Filing Reminders

2022 Filing Reminders

It’s the start of a new year, which means that tax season is right around the corner. A few things have changed in the last couple of years, so it’s important to make sure you’re up to date on current tax news before you file.
Read More

IRS Enforcement is Back! What You Need to Know

CEO David King highlights the difficulties of dealing with IRS Enforcement; otherwise known as Collections. Optima’s Lead Tax Attorney, Philip Hwang, shares his insight and offers “Tax Pro Tips” ranging from IRS authority, to what you can expect when you’re subjected to IRS collection actions. 
Watch Video
Click here for more from The Tax Show for People Who Owe.

Retirement Distribution Tips

Retirement accounts can help reduce your taxable income and possibly increase your tax refund. Some accounts may have a year-end deadline for your contribution and required distributions, while others allow additional time.
Read More

Rules for Claiming a Dependent

Dependents are usually children or relatives in your household that require your care. These characteristics allow you to be eligible for some tax deductions and credits. Knowing when to claim a dependent and how will be vital to preparing your tax return this season.
Read More

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What is Expense Fraud?

expense fraud

Employees are usually reimbursed for work-related expenses. When you file or report these expenses, it’s important to make sure the numbers are as accurate as possible. Over-claiming expenses, turning in receipts for unused items, or even spending more than the allowed amount are common expense fraud offenses. Whether you’re an employer or employee, it’s important to understand what can be determined as reimbursement fraud to avoid mistakes and spot schemes as they occur.

What are examples of expense and reimbursement fraud?

A typo or honest mistake can be fixed, but ongoing fraudulent numbers can significantly hurt a company over time. Actual expense fraud is deliberate and usually a premediated attempt to inflate reimbursements. See some examples below:

  • Claims for items that weren’t purchased (office supplies, lunches, etc.)
  • Bills for canceled trips, such as hotel costs and travel tickets.
  • Bills for non-reimbursable expenses (anything that isn’t work-related or is done in leisure)
  • Separate mileage bills from employees who travel together
  • Inflated totals for any of the above expenses. For example, if an employee were to take a trip that costs $415.00, but the employee rounds up to $420.00 on the bill. This would be an act of expense fraud.

Employees often don’t associate these acts with fraud because the word “fraud” sounds so heinous. Poor judgement can easily become a case, so it’s important that companies have a clear expense policy. Expense policies are put into place to dissolve any confusion about protocols and procedures when dealing with company money.

The 4 Types of Expense Fraud

The above examples of expense and reimbursement fraud can be categorized into one of the four types outlined by the Association of Certified Fraud Examiners:

  1. Mischaracterized expenses. This occurs when an employee mixes their personal expenses with business expenses.
  2. Fictitious expenses occurs when the employee submits fake receipts.
  3. Overstated expenses are inflated costs.
  4. Multiple reimbursements occur when an employee submits multiple receipts for the same item.

How to avoid expense fraud in your company

  • It’s good to start with a clear and concise expense policy. Employees should be able to understand exactly what is expected when turning in reports and receipts.
  • Provide tools for employees to easily report expenses. Simplify the process with software, or similar resources to make reporting easy and accurate.
  • Consider your current system’s efficiency. Company cards or virtual transactions are easy to track.
  • Audit occasionally to encourage honest reporting.
  • Fair allowance rates can also prevent expense fraud. When your employees travel out of town, consider the rates of where they are and ensure the allowance can cover those expenses. Sometimes, an employee may consider expense fraud as a last resort.

Do you owe back taxes and want to regain compliance with the IRS?

Optima Tax Relief offers free consultations over the phone for tax debt assistance. Give us a call today at 800-536-0734.

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New Fresh Start Guidelines Announced. Do you qualify?

The IRS Offer in Compromise is the most sought-after tax debt resolution. It’s a settlement offer that can significantly reduce your tax liability. How do you know if you qualify? The IRS just announced new guidelines for its Fresh Start Program, which means you’re more likely to qualify now than ever before! CEO David King, and Lead Tax Attorney Philip Hwang discuss everything you need to know about the new guidelines.

Got an IRS Notice? Get a FREE Risk Review with our Optima® TAX APP with Notice Analyzer.

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Tax Relief Extended for Hurricane Ida Victims

hurricane ida relief

Hurricane Ida affected a great number of New York residents in 2021, leading the IRS to extend the October 15 deadline to January 3, 2022. Since then, the IRS has reevaluated the circumstances and updated the terms of relief and the extension. The victims now have until February 15, 2022 to catch up on their 2020 tax returns. This new extension applies to both businesses and individuals.

What else has changed for Hurricane Ida Victims?

The updated relief now covers more regions. Louisiana, Mississippi, parts of New York, New Jersey, Connecticut, and Pennsylvania all qualify for relief. The IRS provided a list of current eligible areas on its disaster relief page in the Around the Nation section.

The postponement to February applies to the following payment deadlines:

  • August 26, 2021 for Louisiana,
  • August 28, 2021 for Mississippi,
  • August 31, 2021 for Pennsylvania and
  • September 1, 2021 for New York, New Jersey, and Connecticut.

This only applies to individuals and businesses who had a valid extension to file their 2020 tax return by October 15, 2021. Tax exempt organizations, partnerships and S corporations are included in the deadline as well.

The Disaster Assistance and Emergency Relief for Individuals and Businesses page on the IRS website provides more specific details for returns, payments and other actions that qualify for the amended deadline.

Disaster areas are automatically provided filing and penalty relief. Your address must be within the disaster area for the relief to apply to you. If you receive a letter from the IRS regarding a late filing or late payment penalty, or stating that you have a due payment before the new deadline, you can call the number provided to have the penalty abated.

Are your records located in a disaster area?

Even though you don’t reside in a disaster area, you may still be eligible for relief. Your workplace, for instance, might be located within a disaster area and that could make you eligible. You should contact the IRS at  866-562-5227 to abate penalties if you are unable to access necessary records to file. The postponement also applies to workers assisting with relief activities through philanthropic and government organizations.

Additional tax relief assistance

Do you owe back taxes from previous years that accrued penalties? While this new deadline and relief only applies to those affected by Hurricane Ida, you can still receive assistance with your case. At Optima, we help our clients with their liability case and compliance with the IRS. Give us a call at 800-536-0734 for a free consultation.

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Quarterly Tax Deadline Reminder

tax deadline

For business owners and self-employed taxpayers that are required to pay quarterly taxes, the deadline is approaching. The tax season is upon us and it’s important to pay as promptly as you can to avoid penalties. The deadline for the last 2021 quarter is January 18, 2022. If possible, the IRS recommends making an estimated tax payment to ensure a hassle-free process without delays.

How to avoid penalties

Income taxes should be paid throughout the year as income is earned. This helps taxpayers make smaller payments, rather than owing a large sum in the last quarter. This is done by either withholding from paychecks or other compensation, or by making quarterly estimated tax payments. These options help taxpayers avoid surprise tax bills, which are often accompanied by a penalty.

If you did not make payments throughout the year, you can still make a payment to cover the missed quarters. By making a payment before the April filing deadline, a penalty will usually lessen and may even be eliminated altogether. This is because the penalty calculation considers the date on which your payment was made.

Who should make a payment?

  • Most people who owed taxes after filing their 2020 return may owe again when they file for 2021. This is due to a lack of withholding, or not withholding enough throughout the year.
  • You may also be in this situation if you itemized in the past, but now take the standard deduction, have a complicated tax situation, have a two-wage household, or you’re an employee with non-wage sources of income.
  • If you did not withhold taxes from unemployment, you should also consider an estimated tax payment.
  • Families who received advance payments of the Child Tax Credit during 2021 but don’t expect to qualify when filing their 2021 return, may also need to make an estimated tax payment.

Keep in mind that most income is taxable. Wages, interest, investment income (including virtual currencies), refund interest and gig economy income are all taxable.

Making an estimated tax payment

The IRS provides a Tax Withholding Estimator to help you determine if you need to make a payment. You can fulfill your payment electronically using IRS Direct Pay, or through your IRS Online Account.

Do you owe for previous tax years?

Owing back taxes that accrued penalties is a stressful time and can be very confusing if you don’t understand the tax code. To ensure that you get caught up on missed years and are in compliance with the IRS, we recommend the assistance of our tax professionals at Optima. Give us a call at 800-536-0734 for a free consultation.

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What To Do in Case of Tax Identity Theft

tax identity theft

As taxpayers recoup from the holidays, another important season rises – tax season. Unfortunately, it’s during this time that taxpayers discover alarming issues regarding their account. Issues such as tax identity theft leave many Americans with unexpected penalties and fees. While filing this year, be sure to look out for signs of tax identity theft to prevent worst case scenarios and to handle the matter sooner rather than later.

What are the signs of tax identity theft?

On average, most people don’t know they’re victims of tax identity theft until they receive a notice from the IRS. The notice will outline an issue with your tax return, but it’s important to recognize whether it’s a mistake, or possible identity theft. Some signs of identity theft are:

  • Receiving a letter from the IRS regarding a suspicious return that you didn’t file.
  • A duplicate Social Security number won’t allow you to file.
  • You received a transcript that wasn’t requested by you.
  • You receive notice that an online account was created in your name; or your existing account has been accessed or disabled without your knowledge.
  • You receive an IRS notice of owing additional tax or refund offset, or collection actions are being taken against you for a year you didn’t file.
  • IRS records indicate you were paid by an employer you didn’t work for.
  • You have been assigned an Employer Identification Number, but you didn’t request one.

What to do if you’re a victim of tax identity theft?

Should you find that any of the signs apply to you, there is immediate action that you can take:

  • Respond as soon as possible to IRS notices by calling the provided number.
  • If your e-filed return is rejected due to duplicate filing under your SS number, complete IRS Form 14039, which is the Identity Theft Affidavit. Attach this form to your return and mail it in.
  • IdentityTheft.gov provides immediate steps for protecting yourself and your financial accounts.

The IRS has a line you can call for specialized assistance if you did not receive a resolution for your case. That number is  800-908-4490.

The IRS provides Instructions for Requesting a Copy of Fraudulent Returns if you believe someone filed in your name.

Tax Debt Penalties and Relief

If you’re still unsure about why you have tax penalties and you’re seeking relief, Optima may be able to assist you. We conduct a thorough investigation of your tax history to find any anomalies that could be the catalyst for your liability. Give us a call at 800-536-0734 for a free consultation today!

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Rules for Claiming a Dependent

dependent

Dependents are usually children or relatives in your household that require your care. These characteristics allow you to be eligible for some tax deductions and credits. Child tax credit, earned income tax credit and child and dependent care credit are just a few that you may be eligible for. Knowing when to claim a dependent and how will be vital to preparing your tax return this season.

What are dependent qualifications?

Your dependent will be one of the following: a qualifying child or a qualifying relative.

Qualifying Child

To claim a qualifying child, the child must be part of your family. Some qualifying relationships include:

  • Your biological child
  • Your stepchild
  • Your foster child
  • Your sibling or half sibling
  • Step sibling
  • A descendent of either of the above (which includes grandchildren, nieces, and nephews)

The child must also be of a certain age. The IRS states that one of the following must be true of the child’s age:

  • They’re 18 or younger at the end of the year and younger than you or your spouse.
  • They’re 23 or younger at the end of the year, was a student and younger than you or your spouse. To qualify as a student, the child must be full-time for at least five months of the year in question.
  • The child can be over the age limit if they are diagnosed by a doctor as permanently disabled.

Another important key factor to claiming a dependent is that the child must live with you for more than half of the tax year. The IRS provides particular exceptions for temporary absences (such as extended hospital stay, college, or juvenile detention). Other exceptions include children of divorced or separated parents and children that were kidnapped.

Should the child in question get a job and provide at least half of their own financial support, you cannot claim them as a dependent.

The child can’t file a joint tax return with someone and be claimed as a dependent. The exception to this rule is if the child and their spouse file a joint return only to claim an income tax or estimated tax refund.

Last, but not least, the child must be a U.S. citizen, resident alien, U.S. national or a resident of Canada or Mexico.

Qualifying relative

Qualifying relatives do not have an age limit, however other conditions must be met.

  • They can’t be someone else’s qualifying child
  • They must be related to you or live with you
  • Their gross income for the year can’t be more than $4,300 in the 2021 tax year
  • You have to provide more than half of the person’s total financial support for the year

Additional assistance and tax prep services

Claiming a dependent and remaining compliant with the tax code can be very confusing. If you realize you may have made a mistake that triggered penalties and now owe a liability, you may be eligible for tax relief services. Give us a call at 800-536-0734 for a free consultation today.

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Retirement Distribution Tips

retirement

There are many benefits to contributing to a retirement account. Although saving money has never been a bad idea, retirement accounts can help reduce your taxable income and possibly increase your tax refund. Some accounts may have a year-end deadline for your contribution and required distributions, while others allow additional time.

401(k) Contributions

Tax-deferred retirement accounts can grow to a substantial sum, tax-free. This is due to the interest compounding over time. By maxing out your 401(k) contributions, you will be able to lower your taxable income. The maximum contribution amount allowed for 2021 is $19,500, but if you’re 50 or over, there is an additional catch-up limit is $6,500.

IRA Contributions

An IRA is an Individual Retirement Account. By contributing to an IRA, you can also reduce your taxable income for 2021. If you want the impact to show on your 2021 taxes, the deadline for IRA contributions is April 18, 2022. Of course, you should start contributions before then to see faster results in your account growth. Your tax-deductible contributions have a maximum limit of $6,000 for an IRA. If you’re 50 or older, you can add an extra $1,000.

Saver’s Credit

Some retirement contributors are automatically eligible for the Saver’s Credit. This credit can be worth up to $1,000 if filing single, or $2,000 if filing jointly. You can claim Saver’s Credit for your contributions to an IRA, SEP (Simplified Employee Pension), 401(k), 403(b), or 457 plan. Traditional IRA or Roth IRA contributions are also eligible. You’re eligible for the credit if you’re age 18 or older, not claimed as a dependent on another person’s tax return, and not a student.

Need help with filing?

Programs such as VITA, or Volunteer Income Tax Assistance, and Tax Counseling for the Elderly (TCE) were created to help seniors with basic tax return preparation. Optima Tax Relief has partnered with VITA in the past and continues to do so this tax season.

Should you find yourself in a situation where you owe the IRS a large sum of back taxes, you may be eligible for Optima’s relief services. Give us a call at 800-536-0734 for a free consultation today!

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