Blog

What are Gift Taxes?

What are Gift Taxes?

The holiday season is upon us, and so is the season for giving. Gifts are wonderful ways to show your appreciation to those around you, but are you aware of gift taxes? By federal definition, a gift is something of value transferred to another individual. Gift taxes are federal taxes paid by the individual that gives the gift.

Read More

7 Year-End Tax Tips

As we approach 2022, Optima wants to wish you a happy holiday season and remind you to take advantage of this special time of year. The end of the year is the perfect time to organize your tax records and prepare to file! Optima CEO David King prompts thought-provoking topics as Lead Tax Attorney Philip Hwang provides comprehensive tips for year-end tax filing. Ensure your tax return is as accurate as possible and cement a successful tax season with this video guide from Optima Tax Relief!
Watch Video

Claiming Charitable Donations on Your Tax Return

The holidays often inspire more taxpayers to donate than any other time of year. Charitable donations are often deductible when filing returns and can provide you with more money back for your refund. However, if you are expecting an itemized deduction, you should know that there are limitations for qualified contributions.

Read More

IRS Changes Offer in Compromise Policy

Tax debt relief may have gotten a little easier. The IRS has just announced a major adjustment to the offer in compromise policy that will remove some obstacles for potentially eligible taxpayers. 

Read More

By |Optima Newsletter, Tax News|Comments Off on What are Gift Taxes?

2022 Filing Reminders

2022 filing

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.

When is the tax deadline?

Although 2021 was another difficult year for many Americans, the tax deadline was not pushed back for this season. The deadline is Tax Day, which falls on Friday, April 15. It’s best to complete your return as soon as possible, but an extension is available if needed.

Filing for an extension

Extensions are accessible to all taxpayers, however, the deadline to prepare and e-file extension Form 4868 is April 18, 2022. A tax extension gives you an additional six months to file your tax return, making the new deadline October 15, 2022. Please note that filing an extension is not an extension of time to pay your tax bill.

If you miss the October 15 deadline then you would need to file a paper return as the IRS stops accepting e-file returns after that date.

Recovery Rebate Credit

The Recovery Rebate Credit is helpful if you did not receive the full amount of an Economic Impact Payment, or stimulus. This credit is based on your 2021 tax information, so you’ll have to file a tax return even if you don’t usually do so. When you file, you will need to know the amount that you should have received. This amount can be found in a letter that the IRS will send (Letter 6475). You can avoid delays by ensuring that the amounts are correct.

The IRS will send Letter 6475 at the start of the year so that you can claim the amount of the third Economic Impact Payment and any Plus-Up Payments.

Do you owe back taxes?

If you find that you owe the IRS a large sum, it could be due to not filing previous years. Taxpayers who don’t meet their tax obligations may owe a penalty, and the IRS may charge interest on a penalty if you don’t pay it in full. Optima Tax Relief assists businesses and individuals with their tax case, starting with a free consultation. You can call us at 800-536-0734 to begin your journey to relief.

By |Tax Returns|Comments Off on 2022 Filing Reminders

7 Year-End Tax Tips

As we approach 2022, Optima wants to wish you a happy holiday season and remind you to take advantage of this special time of year. The end of the year is the perfect time to organize your tax records and prepare to file! Optima CEO David King prompts thought-provoking topics as Lead Tax Attorney Philip Hwang provides comprehensive tips for year-end tax filing. Ensure your tax return is as accurate as possible and cement a successful tax season with this video guide from Optima Tax Relief!

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

By |Tax Help Videos, Tax News|Comments Off on 7 Year-End Tax Tips

What are Gift Taxes?

gift taxes

The holiday season is upon us, and so is the season for giving. Gifts are wonderful ways to show your appreciation to those around you, but are you aware of gift taxes? By federal definition, a gift is something of value transferred to another individual. Gift taxes are federal taxes paid by the individual that gives the gift.

Gifts that are taxed usually have a significantly high value. Money, cars, or homes are considered to be taxed gifts. The recipient of the gift can be subjected to paying taxes if the person donating didn’t intend for it to be a gift. Of course, not every gift qualifies as one that must be taxed. The IRS sets limits on how much you’re able to give another person before paying federal taxes.

What you should know about gift taxes

Some highlights that you should remember when giving a high value gift are:

  • Anything above IRS limits is taxed (annual and lifetime exclusions are implied).
  • Gift tax ranges from 18% to 40%.
  • Gift tax is a federal tax.
  • Gifts given to spouses, political organizations, charity, or used for medical and educational expenses are excluded if the gift is valued at less than the annual exclusion amount.
  • To avoid the gift tax, gifts must be split or given in trust.

Why do gift taxes exist?

To prevent taxpayers from giving items to others as a means to avoid paying taxes, the federal gift tax was created. It also aides in preventing undue hardship, as it obliges the donor and recipients to honor their tax liability. Form 709 is the federal gift tax return that donors must complete and submit with their annual returns.

How do gift taxes work?

Rates for gift taxes are based on the size of the gift. You only have to worry about paying the tax if the amount of the gift exceeds $15,000 for 2021, or $16,000 for 2022. If you plan on giving a gift that exceeds $15,000 this year, then you must file Form 709 during the 2022 tax season.

The limit is per person, rather than per gift. You are able to give gifts up to $15,000 to multiple people without incurring a gift tax.

Charitable gifts

While you don’t have to pay gift tax on charitable donations, you may qualify for a deduction when you file. This can put money back in your pocket when you receive a refund. Read more about charitable donation deductions here.

If you find yourself in debt due to gift tax, or other tax penalties, call Optima at (800) 536-0734 for a free consultation!

By |Tax Returns|Comments Off on What are Gift Taxes?

How to Claim Charitable Donation Deductions on Your Tax Return

charitable donation deductions

The holidays often inspire more taxpayers to donate than any other time of year. Charitable donations are often deductible when filing returns and can provide you with more money back for your refund. However, if you are expecting an itemized deduction, you should know that there are limitations for qualified contributions.

What are qualified organizations?

Your chosen organization must qualify under section 170( c ) of the IRS code for you to file an itemized deduction. Qualified entities include:

  1. A state, possession of the US, the US, or the District of Colombia.
  2. A corporation, community chest, foundation, fund, trust, organized or created in the US and operated exclusively for charitable, religious, educational, scientific purposes, cruelty prevention, or literary purposes.
  3. A religious organization (church, synagogue, etc.)
  4. Nonprofit volunteer fire company
  5. Local, federal, or state law created civil defense organization
  6. War veterans’ organization or its auxiliary, post, trust, or foundation
  7. Domestic fraternal society operating under the lodge system (the donation must be used exclusively for charity)
  8. Nonprofit cemetery (funds must be used for the care of the cemetery as a whole)

What are deduction limitations?

In short, you can only deduct up to 50% of your gross income in contributions. Donations to organizations for veterans, cemeteries, fraternal societies, and some private foundations are limited to 30% of your adjusted gross income. You can utilize the IRS Tax Exempt Organization Search to indicate the limitations for your deduction.

The importance of correctly filing deductions

When you choose to utilize deductions, whether for charitable donations or work-related expenses, it’s important to only file deductions that you qualify for. This may sound like common sense, but selecting deductions that you don’t qualify for can result in a penalty from the IRS. Owing the IRS is more trouble than what it’s worth, so if you’re unsure about which deductions you qualify for, it’s best to ask a professional.

Did you make a mistake while filing?

Mistakes happen, but when the tax debt starts to pile on there are professionals available to assist you. Optima Tax Relief offers free consultations for tax debt relief at (800)536-0734.

By |Tax News, Tax Returns|Comments Off on How to Claim Charitable Donation Deductions on Your Tax Return

IRS Changes Offer in Compromise Policy

offer in compromise

Tax debt relief may have gotten a little easier. The IRS has just announced a major adjustment to the offer in compromise policy that will remove some obstacles for potentially eligible taxpayers. If you have a large tax liability, now is a great time to seek a resolution!

What is the current OIC policy?

An offer in compromise (OIC) is the most sought-after form of tax relief. In short, this resolution allows taxpayers to settle their debt for less than what they owe with proof of hardship. When an OIC is accepted by the IRS, any refunds for that you receive after an offer is accepted are kept by, or must be returned to, the IRS and goes toward the outstanding balance.

What is the new OIC policy?

Returns

The Taxpayer Advocate Service and the IRS united in a joint effort to make an OIC more attainable. One major change keeps future refunds in the pocket of the taxpayer. Under the new guidance, the IRS will no longer keep, or request the return, of a tax refund. This amendment to the OIC policy is effective as of November 1, 2021. If you would like to apply for an OIC in December of 2021 or later, your next return is yours to keep. This is monumental for taxpayers facing hardship, as we’re expecting more OIC applicants than ever before.

This change isn’t cut and dry, however, as the IRS will not allow you to keep amended returns. Should you receive a refund prior to your offer acceptance or based on an amended return for the tax periods in question of your liability, your refund must be returned to the IRS within 30 days of receiving it.

OBR Remedy

In the original OIC policy, the OBR (offset bypass refund) remedy was unavailable. Now, if you’re experiencing financial hardship, you can qualify for an OBR while your OIC is pending. An offset bypass refund aids taxpayers facing hardship. An overpayment in a return (offset refund) can be given to you by the IRS to help with your tax debt.

Applying for an OIC

Now is truly a great time to seek assistance with tax debt. The IRS is making collaborative effort to create an easy path to a resolution. The process can be long and grueling, but it’s worth the time and energy once you reach the finish line. Give Optima a call for a free consultation at 800-536-0734 and start your journey to financial freedom today!

By |Tax News|Comments Off on IRS Changes Offer in Compromise Policy

IRS Enforcement is Back! What You Need to Know

On today’s episode of The Tax Show for People Who Owe, 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. Tune in to learn what you should do if you’re facing a levy or awaiting an inevitable call from the IRS.

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

By |Tax Help Videos|Comments Off on IRS Enforcement is Back! What You Need to Know

BBB Torch Award for Ethics 2021

bbb torch awards

Optima Tax Relief is proud to announce that we have earned our second BBB Torch Award! This award puts the spotlight on businesses with exceptional dedication to integrity and ethical business practices.

The Torch Award is just the latest in the series of awards Optima has earned this year, including the Orange County Civic 50, Top Workplaces USA, and several Stevie Awards for best-in-class Consumer Service.

“The Torch Award, as well as the other awards we have been honored to receive this year, all stem from the uplifting, people-first culture that Optima is built upon,” said Kimberly Carson, Optima’s Director of Human Resources. “Having a supportive, nurturing environment, unified around always doing what is right, is what powers our success.”

You can read more about the Torch Award in the California Business Journal here.

Click here to read more quotes from our executives and learn about the work that Optima did to be a two-time recipient of the Torch Award.

By |Press Releases|Comments Off on BBB Torch Award for Ethics 2021

How to File Business Taxes for an LLC

Being an owner of a limited liability company (LLC) allows for more flexibility with how the IRS taxes your earnings. LLCs don’t have a unique set of tax rules, so how you choose to tax your earnings will determine which rules you must adhere to. Your choices for tax rules include partnership, corporate, and sole proprietor. Each of these options come with their own filing requirements.

It’s important to choose how you want your earnings to be taxed because the IRS will automatically treat your business as a partnership. This designation doesn’t fit if you’re a sole proprietor or prefer to file as a corporation. Once you choose your tax rules, you cannot change the designation again for five years, which is why you must choose wisely.

Sole Proprietorship/Single Member LLC

As a sole proprietor, you are personally responsible for all tax returns and payments. When you prepare your income tax return, you must include a Schedule C attachment. The Schedule C reports the income and deductions from your business. Any profits calculated on Schedule C are included with the rest of your income on Form 1040.

Partnership LLC

As a partnership, your tax rules indicate that you are responsible for filing annual tax returns on IRS Form 1065, but the company is not responsible for paying the tax on business earnings. Instead, each individual owner (partner) files and reports their income via their own tax returns. Each owner’s earnings are reported by the LLC on a Schedule K-1.

Corporate LLC

With a corporate designation, your business is treated as a separate taxpayer from yourself. The responsibility of reporting income and deductions falls on the business itself. This can be achieved through filing Form 1120 annually and paying income tax on time.

Although you and the other owners are not responsible to file the returns and pay the income taxes, the business earnings are taxed twice. The second tax occurs when the owners receive a dividend. Each owner of the LLC must report on the dividend as taxable income via Form 1040, which is their individual responsibility to pay tax on.

Filing business taxes for an LLC can be confusing. Should you find yourself in tax debt, give Optima a call for a free consultation at 800-536-0734.

By |Tax News, Tax Returns|Comments Off on How to File Business Taxes for an LLC

Employee Retention Credit: What You Need to Know

Employee Retention Credit (ERC) could help a lot of businesses thrive if used properly. This is a refundable tax credit that appears to be difficult to attain but is far from impossible. ERC was created to encourage employers to keep employees on their payroll under the CARES Act. Eligible employers have immediate access to ERC by reducing employment tax deposits. Employers may even get an advance payment if the tax deposits are insufficient to cover the credit.

Eligible Employers

The qualifications for the Employee Retention Credit are two main attributes:

  1. Fully or partially suspend operation due to orders from government authority. This would limit commerce, travel and/or group meetings due to the pandemic.
  2. Experience a detrimental decline in gross receipts (income).

The IRS considers a significant decline in gross receipts to be less than 80% of the gross receipts from the previous year. For example: Amazon’s gross receipts for 2020 was 152,757, so if the company earned less than 80% in 2021, then that would qualify Jeff Bezos for the Employee Retention Credit.

How much ERC are you qualified for?

As an employer, you can receive 50% of qualified wages that you typically pay in a year. These wages also include qualified health plan expenses. The maximum amount of qualified wages considered is $10,000, and the maximum credit for wages paid to an employee is $5,000.

Qualified wages

Qualified wages are compensation and health plans paid for by the employer to some or all employees. Paychecks, for instance, are compensated wages.

Qualified health plan

Qualified health plans are group plans covered by the employer that are not reflected in the employee’s gross income.

Additional information

Employee Retention Credit is not compatible with Payment Protection Program (PPP) loans. An eligible employer may only utilize one of these programs under the CARES Act.

Employers are still required to withhold federal taxes on qualified wages. ERC does not make an employer exempt from paying taxes.

Should you find yourself in need of tax relief services, contact Optima Tax Relief at 800-536-0734 for a free consultation.

By |Tax News|Comments Off on Employee Retention Credit: What You Need to Know