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Taxpayers are given guidance on Premium Assistance and Tax Credit for Continuation Health Coverage

The Internal Revenue Service issued out guidance on tax breaks under the American Rescue Plan Act of 2021 for continuation health coverage under the Consolidated Omnibus Budget Reconciliation Act of 1985 (COBRA).

Notice 2021-31 provides assistance to employers, plan administrators, and health insurers regarding the new credit available to them because of their providing continuation health coverage to certain individuals under COBRA. The notice also contains information on the calculation credit, how individuals are eligible, the premium assistance period, information vital to employers, plan administrators, and insurers to understand the credit.

The American Rescue Plan allows for a temporary 100% reduction in the premium that individuals would need to pay when they choose COBRA continuation health coverage following a reduction in hours or involuntary termination of employment. The implementation of the new law provides a tax credit along with it for entities that maintain group health plans which includes, employers, multiemployer plans, and insurers. The 100% reduction in the premium and the credit are accessible for events under comparable state laws which can also be referred to as “mini-COBRA.”

COBRA provides assistance for certain former employees, retirees, spouses, former spouses, and dependent children by allowing access to temporary continuation of health coverage at group rates. COBRA typically covers health plans that are maintained by private-sector employers with 20 or more full-time and part-time employees. COBRA also provides coverage for employee organizations or federal, state, or local governments. State mini-COBRA laws often provide similar benefits that are accessible for insured small employers and are not subject to Federal COBRA.

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.

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Taxpayers may have to pay back some of the new $3,000 Child Tax Credit

Child Tax Credits are expected to be distributed out to qualifying taxpayers throughout July by the IRS. Some recipients may be required to pay back a portion of their credit for the next tax filing season. Here is what eligible taxpayers need to know before receiving the credit.

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What is a Federal Tax Lien?

Owing a tax balance with the IRS could lead to an individual having a lien placed on their assets or property. Optima CEO David King and Lead Tax Attorney Philip Hwang provide helpful tips on what people could expect if a lien is filed against them and what they would need to do to resolve their tax liability.

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Taxpayers are reminded that Filing an Extension is not an Extension to Pay Taxes

Taxpayers that have filed a tax extension and also have a tax balance need to be aware that filing an extension with the IRS will not stop penalties and interest from accruing. The IRS offers a variety of options that they should consider when it comes to dealing with the IRS.

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Did you receive Multiple Notices about your Economic Impact Payment?

The IRS has issued out three Economic Impact Payments to qualifying taxpayers. The IRS also mailed out notices to those who received the payment that detailed how much of the payment they received, how the payment was made and how taxpayers should report their payment when filing their tax return.

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What is an Offer in Compromise?

An offer in compromise allows taxpayers to settle their tax debt for less than the full amount that they owe. This option should be considered for taxpayers who are unable to pay their full tax liability. The IRS will look over the following when determining whether or not an individual is a candidate for an offer: 

  • Ability to pay 
  • Income 
  • Expenses 
  • Asset equity 

When reviewing an Offer in Compromise (OIC) application, the IRS will typically approve an offer if they feel that it will be the most that they can collect from someone within a reasonable period of time. Taxpayers should also look into all other options that the IRS provides when it comes to paying back their tax balance just in case they may not be eligible for an OIC. 

How to find out if you are eligible 

Taxpayers are required to have all their tax years filed and have attempted to make estimated tax payments before being considered for an offer in compromise. If your application is rejected for these reasons, the fee included with an OIC application will be returned. Any initial payment required with the returned application will be applied to reduce your balance due. Taxpayers that are in an open bankruptcy will automatically be disqualified. 

How to submit your application 

Individuals that are considering submitting an application should utilize instructions in Form 656-B, Offer in Compromise Booklet. A completed OIC package should include: 

  • Form 433-A (OIC) (individuals) or 433-B (OIC) (businesses) and all required documentation as specified on the forms. 
  • Form 656(s) – individual and business tax debt (Corporation/ LLC/ Partnership) must be submitted on separate Form 656. 
  • $205 application fee (non-refundable). 
  • Initial payment (non-refundable) for each Form 656. 

Payment options 

Payment options will vary based on the offer the IRS provides and the payment option you choose: 

  • Lump Sum Cash: Taxpayers will be required to submit an initial payment of 20 percent of the total offer amount with their application. If the offer is accepted, taxpayers will receive a written confirmation from the IRS. The remaining balance due on the offer will need to be paid in five or fewer payments. 
  • Periodic payment: An initial payment will need to be submitted with an application. A taxpayer will be required to continue to pay the remaining balance in monthly installments while the IRS considers their offer. If the offer is accepted, a taxpayer will be required to pay monthly until it is paid in full.  

Accepted OIC 

  • You must meet all the Offer Terms listed in Section 7 of Form 656, including filing all required tax returns and making all payments. 
  • Any refunds due within the calendar year in which your offer is accepted will be applied to your tax debt. 
  • Federal tax liens are not released until your offer terms are satisfied. 
  • Certain offer information is available for public review by requesting a copy of a public inspection file. 

Rejected OIC 

  • You may appeal a rejection within 30 days using Request for Appeal of Offer in Compromise. 
  • The IRS Independent Office of Appeals provides additional assistance on appealing your rejected offer. 

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. 

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Did you receive Multiple Notices about your Economic Impact Payment?

With three Economic Impact Payments issued out, the IRS is now required to mail out a notice to each recipient’s last known address. The notice provides details regarding the payment amount, how the payment was made and how to report any payment that was not received. Some individuals may receive multiple notices that detail each payment that they have received. For the most part, most taxpayers will file away their stimulus notice with the rest of their tax documents until the next tax-filing season and will not be required to take further action with the IRS.

Here is what each stimulus notice you may have received means and what action you may need to take:

  • Notice 1444, Your Economic Impact Payment. After the first economic payment was issued in 2020, the IRS mailed Notice 1444 within 15 days of an individual receiving their payment. Some people received another Notice 1444 if the IRS corrected or issued more than one payment in the first round.
  • Notice 1444-A, You May Need to Act to Claim Your Payment. The IRS mailed this notice out last year to taxpayers who are usually not required to file a federal income tax return but may still be eligible for the first stimulus payment. People who did not get the first or second Economic Impact Payment or did not get the full amount may be eligible to claim the 2020 Recovery Rebate Credit. These individuals will need to file their 2020 tax return even if they are not typically required to do so.
  • Notice 1444-B, Your Second Economic Impact Payment. Taxpayers received Notice 1444-B several weeks after their second payment. Those who did not receive their payment should refer to the FAQs page for stimulus payments on the IRS website.
  • Notice 1444-C, Your 2021 Economic Impact Payment. Taxpayers who received the third stimulus check should have already received their notice informing them of their payment. Taxpayers should keep this notice with the rest of their tax records.

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. 

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What is a Federal Tax Lien?

Owing a tax balance with the IRS could mean that a federal tax lien has been filed against you and any assets or property that you have. Optima CEO David King and Lead Tax Attorney Philip Hwang discuss how a federal tax lien can directly impact an individual and what they need to do in order to resolve their tax liability.

Confused or scared by an IRS notice? Download the Optima®TAX APP and easily understand the severity of your tax situation.

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Military members and their families Qualify for Special Tax Benefits

Members of the military could qualify for special tax benefits. For example, they do not have to pay certain types of taxes and special rules may even lower the taxes they owe or allow them additional time to file and pay their federal taxes.

Here are the special tax benefits military members have:

  • Combat pay exclusion: Individuals serving in a combat zone may have a part or all of their pay tax-free. This will also apply to people that work in an area outside a combat zone when the Department of Defense certifies that area is in direct support of military operations in a combat zone. Military members need to be aware that there are limits to this exclusion for commissioned officers.
  • Additional nontaxable benefits: Members are provided an allowance for housing. Food and uniform allowances are several government paid items that are excluded from gross income, meaning they will not be taxed.
  • Moving expenses: Certain non-reimbursed moving expenses may be tax deductible. In order to deduct these types of expenses, a taxpayer must be a member of the Armed Forces on active duty and the move in question must be due to a military order or result of a permanent change of station.
  • Deadline extensions: Members of the military that work overseas have the option to postpone most tax deadlines. Those who qualify have the ability to get an automatic extension of time to file and pay back their taxes.
  • Earned income tax credit: Certain special rules allow military member that receive nontaxable combat pay to choose to include it in their taxable income. Individuals who qualify for the credit could owe less taxes and potentially even get a refund.
  • Joint return signatures: If a military member is unable to sign their return, their spouse may be able to sign for the other or get a power of attorney.
  • Reserve and National Guard travel: Members of a reserve component of the Armed Forces may have the option to deduct their unreimbursed travel expenses on their return. In order to qualify, members must travel more than 100 miles away from home in connection with their performance of services as a member of the reserves.

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.

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Taxpayers are reminded that Filing an Extension is not an Extension to Pay Taxes

Taxpayers are reminded that if they have yet to file their federal income tax return, they still have a variety of options that are available to them. Not only is the IRS website accessible to taxpayers, but also provides a customer help line where IRS agents are able to assist individuals who are seeking options to pay back their tax balance.

Individuals are encouraged to file their taxes electronically in order to receive their refund much quicker. In addition to this, e-filing greatly reduces tax return errors since the tax software does the calculations, flags common errors and prompts taxpayers for missing information.

Taxpayers have the option to request more time

Anyone who may need additional time to file has the option to file an extension. One of the easiest ways to do so is for taxpayers to request an extension on Form 4868, Application for Automatic Extension of Time to File U.S. Individual Income Tax Return.

It is important that tax filers understand that an extension to file is not an extension to pay back their tax balance that is due. In order to obtain an extension, taxpayers will need to estimate their tax liability on the form and pay any amount due. Tax payments are typically due by the initial tax deadline, and it is recommended that taxpayers try to pay as much as possible before the tax deadline. If a tax balance does carry over after the deadline, it is recommended that the tax filer continue to make payments or work with the IRS to set up a payment agreement to pay off the rest of their balance.

Taxpayers are reminded that they have the option to utilize IRS Direct Pay, the Electronic Federal Tax Payment System (EFTPS), or a credit or debit card and get an automatic extension to file for the next tax year. Payments that are made with an extension request will reduce or, if the balance is paid in full, eliminate interest and late-payment penalties that apply to payments that are made after the tax filing deadline.

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.

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Taxpayers may have to pay back some of the new $3,000 Child Tax Credit

The IRS is expected to begin distributing monthly payments for the enhanced child credit beginning in July. Some recipients of this child credit need to be aware that they may be obligated to pay back a portion of those funds at the start of tax time next year.

The passing of the American Rescue Plan allows for advance payments of the child tax credit to be issued out to qualifying taxpayers in periodic installments. Americans can receive up to $300 a month per child, however, the child credit advance payments will be estimated by the IRS based on the available data they have on file for an individual such as income, marital status and number and age of qualifying kids.

 If the IRS has outdated data on an individual, this may trigger an overpayment of the tax credit. This will require the individual who received the additional money to pay back any excess funds. Receiving the advance payment could mean it could reduce the refund amount or increase the tax payment for an individual come next tax season.

The IRS references 2020 tax returns and if unavailable, 2019 returns, in order to determine a taxpayer’s total tax credit amount for 2021.  The American Rescue Plan raised the maximum credit amount to $3,000 per kid ages 6 to 17, and $3,600 for younger children. The remaining half would be claimed during tax season next year.

An individual may receive a tax bill if a payer’s income increases dramatically from the income reported on a 2020 return. This may also reduce someone’s credit amount or disqualify them based off their earnings.

The Treasury Department created an online portal for taxpayers to update their information if it changed during the calendar year. The portal allows individuals to change the following: marital status, income changes and number of kids.

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.

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Here’s how the IRS will notify Taxpayers why their Stimulus Checks was less than expected

Individuals who have yet to file their tax return and have received the previous round of stimulus checks may have been sent less than expected and, in some cases, were not sent anything at all. The good news is a recovery rebate credit on this year’s tax return will allow taxpayers to submit a claim for their stimulus funds.

The stimulus checks that were issued out over the last year for up to $1,200 for married couples and $600 per person are considered advance payments of the recovery rebate credit. Qualifying individuals are reminded that they may have not received the exact amounts that they were due. 

For those who did not receive the credit or only received a portion of the amount, they can claim the credit on their tax return form – line 30 of Forms 1040 or 1040-SR. Taxpayers should state the amount of stimulus money that they have already received and calculate any additional funds that are still owed to you. The IRS provides a worksheet with the tax form or through a tax preparation software.

Once the IRS receives your return, the agency will review it to verify that the information that they received is correct. If there is a discrepancy with what you placed on your return versus what the IRS has on file, there could be a delay in processing your return and you may receive notification from the IRS via mail that corrections were made to your tax return.

Some reasons why the IRS may correct your credit amount are if you fail to provide a valid Social Security number or if you were claimed as a dependent on a 2020 tax return. If a dependent was age 17 or over as of January 1, 2020, they will not be eligible for a payment.

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.

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IRS extends e-signature authorization for 6 months

On December 11, 2020, the IRS announced that they would be extending and accepting electronic or digital signatures on certain tax forms that previously could not be electronically signed. The original authorization was from August 28 through December 31, 2020. However, due to the ongoing public health crisis, that period has now been extended from January 1 through June 30, 2021.

The IRS will allow the following forms to be e-signed remotely before being printed and mailed to the agency. The IRS believes that this will help assist tax professionals and their taxpayer clients by minimizing the need for in-person contact. 

Here is the list of forms that can be e-signed: 

  • Form 11-C, Occupational Tax and Registration Return for Wagering 
  • Form 1066, U.S. Income Tax Return for Real Estate Mortgage Investment Conduit 
  • Form 637, Application for Registration (For Certain Excise Tax Activities) 
  • Form 706, U.S. Estate (and Generation-Skipping Transfer) Tax Return 
  • Form 706-A, U.S. Additional Estate Tax Return 
  • Form 706-GS(D), Generation-Skipping Transfer Tax Return for Distributions 
  • Form 706-GS(D-1), Notification of Distribution from a Generation-Skipping Trust
  • Form 706-GS(T), Generation-Skipping Transfer Tax Return for Terminations 
  • Form 706-QDT, U.S. Estate Tax Return for Qualified Domestic Trusts 
  • Form 706, Schedule R-1, Generation Skipping Transfer Tax 
  • Form 706-NA, U.S. Estate (and Generation-Skipping Transfer) Tax Return
  • Form 709, U.S. Gift (and Generation-Skipping Transfer) Tax Return 
  • Form 730, Monthly Tax Return for Wagers 
  • Form 1120-C, U.S. Income Tax Return for Cooperative Associations 
  • Form 1120-FSC, U.S. Income Tax Return of a Foreign Sales Corporation 
  • Form 1120-H, U.S. Income Tax Return for Homeowners Associations 
  • Form 1120-IC DISC, Interest Charge Domestic International Sales — Corporation Return
  • Form 1120-L, U.S. Life Insurance Company Income Tax Return 
  • Form 1120-ND, Return for Nuclear Decommissioning Funds and Certain Related Persons 
  • Form 1120-PC, U.S. Property and Casualty Insurance Company Income Tax Return 
  • Form 1120-REIT, U.S. Income Tax Return for Real Estate Investment Trusts 
  • Form 1120-RIC, U.S. Income Tax Return for Regulated Investment Companies 
  • Form 1120-SF, U.S. Income Tax Return for Settlement Funds (Under Section 468B) 
  • Form 1127, Application for Extension of Time for Payment of Tax Due to Undue Hardship
  • Form 1128, Application to Adopt, Change or Retain a Tax Year
  • Form 2678, Employer/Payer Appointment of Agent 
  • Form 3115, Application for Change in Accounting Method 
  • Form 3520, Annual Return to Report Transactions with Foreign Trusts and Receipt of Certain Foreign Gifts 
  • Form 3520-A, Annual Information Return of Foreign Trust with a U.S. Owner 
  • Form 4421, Declaration — Executor’s Commissions and Attorney’s Fees 
  • Form 4768, Application for Extension of Time to File a Return and/or Pay U.S. Estate (and Generation-Skipping Transfer) Taxes
  • Form 8038, Information Return for Tax-Exempt Private Activity Bond Issues
  • Form 8038-G, Information Return for Tax-Exempt Governmental Bonds 
  • Form 8038-GC; Information Return for Small Tax-Exempt Governmental Bond Issues, Leases, and Installment Sales 
  • Form 8283, Noncash Charitable Contributions 
  • Form 8453 series, Form 8878 series, and Form 8879 series regarding IRS e-file Signature Authorization Forms 
  • Form 8802, Application for U.S. Residency Certification 
  • Form 8832, Entity Classification Election 
  • Form 8971, Information Regarding Beneficiaries Acquiring Property from a Decedent 
  • Form 8973, Certified Professional Employer Organization/Customer Reporting 
  • Agreement
  • Elections made pursuant to Sec. 83(b) 

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.

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