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Tax Tips for People Who Are Self-Employed

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.

As a 1099 earner, it can sometimes seem like there are more rules to follow when filing taxes and more responsibilities to manage compared to someone that is a W-2 earner. It can even seem confusing at times when filling out certain paperwork or figuring out how to report all your income to the IRS. 

Here are a few simple tips to help you get prepared for next tax season:

Estimate your business income. This may seem difficult to do if you have no idea where to start, but the best way to figure out how much you will be making for the tax year and how much you should be paying in estimated tax payments is by referring to your tax return from the year before. This will give you an idea on what to expect when filing your tax return and what to pay in taxes.

Organize your expenses. Don’t just leave all your receipts lying around the floor or tossed in the backseat of your car. Consider automating your expenses by using a finance software where you can digitally upload copies of receipts and that synchronizes with your bank accounts so it can view any payments that were made towards your business. This not only saves you time but prevents you from making a mistake when filing your taxes.

Track your mileage. If you’ve been using your vehicle for anything work-related, make sure to track the mileage that you are using. It’s also important to keep a record of any gas, oil, and maintenance expenses that you accrue throughout the tax years.

Take a home office deduction. The IRS created the Simplified Home Office Deduction for taxpayers that own a small business from their home. If you have a qualified home office, you can deduct some of your otherwise nondeductible expenses. Here are some expenses that you can deduct:

  1. Home insurance
  2. Utilities
  3. Rent

Forecast any future expenses in advance. Being self-employed means that it is your responsibility to purchase your own goods and equipment ahead of time in order to avoid any delays that could harm the amount of profit you receive. Forecasting your expenses ahead of time will allow you to understand how much money will need to be allocated to purchase these goods and still have enough left over to not only pay yourself but also your taxes.

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

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Can I Claim an Education Credit?

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.

  • Taxpayers who have been to or are currently in college may qualify for education expense credit.
  • The American Opportunity Tax Credit can be used towards required course materials as well as tuition and fees.
  • Up to $2,000 of the first $10,000 in qualifying educational expenses can be claimed with the Lifetime Learning Credit.

It is important for taxpayers who have been to or are currently in college to review what possible education expense credits or deductions they could qualify for.

The American Opportunity Tax Credit has replaced the Hope Credit and offers more perks to those looking to either reduce their tax balance or increase their refund. Here are some of the benefits you can receive from the American Opportunity credit:

  • Up to $2,500 can be claimed per student.
  • It can be used towards required course materials (books, supplies, equipment) as well as tuition and fees.
  • It can be applied against four years of higher education, compared to the Hope credit which only covered two years of higher education.

Taxpayers can qualify for this credit as long as their adjusted gross income does not exceed $80,000 for single taxpayers and $160,000 for married taxpayers filing jointly. As a taxpayer’s income increases, the credit will gradually be reduced. For those earning a lower income, they will also benefit because up to 40% of the credit is refundable. This means that taxpayers can expect a check from the IRS if they owe no taxes.

The Lifetime Learning Credit allows qualifying taxpayers to earn an annual credit up to $2,000 of the first $10,000 in qualifying educational expenses. Because there is no limit in place on the number of years of higher education that you can claim, this credit yields a higher credit amount. Taxpayers can receive up to $2,500 per student as long as their income does not exceed more than $58,000 for single filers and $116,000 for those that are married and filing jointly. 

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

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These Errors can Cause Your Tax Return to be Rejected

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.

It only takes one minor mistake on your tax return like leaving out vital information such as your name, social security number, or even claiming a credit or deduction that you don’t qualify for to completely disrupt your tax return from getting processed. 

Here’s what you can do to avoid common mistakes on your taxes:

  1. Including credits and deductions you don’t qualify for. It can become overwhelming for a taxpayer when they start reviewing the number of credits and deductions they might qualify for. When you do find credits that you feel could be placed on your tax return, make sure to read the fine print. Some credits could have phased out for you if your income exceeds the required threshold you would need in order to qualify for the credit. Or, if you have already included your tuition and fees deduction for the same expenses that you are attempting to apply for, that could also cause a rejection. Sometimes even your filing status could hinder you from qualifying for a credit or deduction.
  2. Health Care Reporting Error. There are many reporting requirements that a taxpayer must review before placing any health care information on their tax return. One of the most common errors that the IRS sees when reviewing a tax return is when a taxpayer fails to claim coverage exemption and not reconciling advance payments for the premium tax credit. 
  3. You forgot to sign your tax return. If you’re in a rush to mail in your tax return, you may just forget the most important part, signing your return. The IRS even cites this as another common mistake that a taxpayer will make when sending in their return. It’s also important to note that any unsigned tax return will not be processed by the IRS and will be considered invalid. 

Always be sure to take your time and review all the information that is placed on your tax return. Taxpayers should always review any potential credits or deductions they could potentially qualify for and if you are unsure of what those are, speak with a tax professional for assistance.

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

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Do I Need to File My Tax Return?

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.

Tax time is one of the most important times of the year for many Americans, but not everyone needs to file their taxes each year. If your income does not exceed a certain threshold, you may not be required to file a tax return. Here are a few things to consider if you’re wondering whether or not you qualify to avoid filing taxes with the IRS. 

Review your total income for the year. Consider the standard deductions that you qualify for on your tax return. The standard deduction as well as other available deductions can reduce your total taxable income causing you to have a low enough income that doesn’t require you to file. If you earn less than $12,200 you are not required to file a tax return. If your income increases in the future, you may need to file. 

Income thresholds for taxpayers 65 and older.  If you are at least 65 years old, you may qualify for an increase in your standard deduction, here are factors that could get you to qualify:

  • You are blind
  • Your spouse is also 65 or older
  • Your spouse is blind

Qualifying for a larger standard deduction allows you to have more income placed on your tax return and still not have to file a tax return.

Dependents may need to file a tax return. For taxpayers that are claimed as a dependent on someone’s tax return, it is important to be aware that they are subject to different IRS requirements. A tax return may be necessary if their earned income is more than their standard deduction. 

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

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Am I Required to Make Estimated Tax Payments?

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.

For most employees, their employer withholds taxes from their paychecks before sending the money directly to the IRS and state government. These employees don’t have to worry about having to calculate their taxes every paycheck, because it automatically comes out, which could lead to them receiving a nice refund come next tax season.

If you’re self-employed, then you know that your taxes are not automatically withheld from your paychecks. You need to calculate how much taxes need to be withheld by making estimated tax payments either monthly or quarterly. Here are a few tax tips the self-employed should follow in order to stay up to date with the IRS.

  1. Determine your business income. If you expect to be in a higher tax bracket this year, you’ll want to review what deductions you qualify for in order to reduce your income since you will most likely be subject to the highest tax rate. 
  2. Decide when you want to receive your income. Being self-employed usually means you can determine when you receive your payment for the service that you rendered. This can help you estimate how much income you will have and when you need to make your estimated tax payments in order to stay compliant. 
  3. Review what medical deductions you qualify for. Make the most out of your medical insurance deduction by deducting yourself, spouse, or any dependents you have. This will adjust your total income for the year which could help you owe less at the end of the year or even possibly receive a refund. 
  4. Understand itemized deductions vs. business deductions. It’s important to understand the difference because taking business deductions instead of itemized deductions will help you reduce your total adjusted gross income and self-employment tax for the year. 
  5. Track your business mileage. Make sure to keep all business expenses that you incur throughout the tax year such as gas, oil, vehicle maintenance as well as other expenses that may apply. Once you have kept a record of these business expenses, you can deduct it from your tax return. 

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

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Why You Might Owe After Filing Your 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.

There are many reasons why you might owe a tax balance when it comes time to file your taxes. You may wonder how this could have happened, and you may not even be sure of what you can do to avoid the same problem next year. There are solutions to ensure you don’t accrue a liability when you file in the future; here are the five most common reasons why you might owe a tax balance and how you can prevent owing the IRS again come next tax season.

  1. You didn’t withhold enough from your pay. Double check your federal and state withholdings on your paycheck to see how much is taken out every time you get paid. The IRS offers tools for taxpayers to use when they want to adjust their withholdings but don’t know how much to take out.  
  2. Income that is not subject to withholding. If you invest in stocks, sell stocks, or even if you receive unemployment benefits, this will make your income appear to be much bigger than it actually is. This could potentially lead to you owing a tax balance when you file your taxes.
  3. Failure to make estimated tax payments. If you are self-employed/1099 earner, you typically don’t have taxes withheld from your earnings. It is up to the taxpayer to determine how much taxes they should be withholding and making these estimated tax payments to the IRS either monthly or quarterly.
  4. Filing Changes. If you’ve had big life changes within the last year such as getting married, divorced or having a dependent, it can affect your filing status and what credits/write-offs you’re eligible for.
  5. You filled out your W-4 wrong. If you just got a job or are in the middle of a job change, it’s important to carefully fill out your W-4 information. A common mistake that a taxpayer makes when filling out this form is failing to put in their correct withholding, which could lead to owing a tax balance at tax time.

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

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Should I File an Amended Tax Return?

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.

If you’ve already filed your tax return only to realize that there’s an error or you omitted pertinent information, you may need to consider amending your tax return. Here are the dos and don’ts you should follow when it comes to determining whether or not you should amend your return.

  1. You received a CP2000 notice. If you received this notice, the IRS is notifying you that they determined there is underreported income on your tax return. Don’t immediately file an amended return when you receive this notice. Instead, review the information that the IRS has provided you and see if there is something in fact missing on your return.
  2. You received an audit notice. In the event you receive this type of notice, the IRS will request you provide further information that they feel you did not prove on your tax return(s). Keep in mind that you are unable to file an amended return when you are being audited by the IRS. 
  3. The IRS rejected your e-filed return. Don’t immediately jump to the conclusion that you need to amend your return if the IRS rejects it. Instead, review all the information to ensure it is accurate (name, birthdates, social security numbers) and attempt to e-file again. The IRS typically rejects returns if they believe identity theft is occurring or if two people have claimed the same dependent. 
  4. You forgot to include additional information on your tax return. If you already filed your return with the IRS and realized that you forgot to include additional income you earned throughout that tax year, you do have the option to amend your tax return to include this additional income. This ensures that the IRS won’t send you a notice later on inquiring about the additional income that you received.  
  5. You forgot to claim a credit of deduction. The IRS offers many credits and deductions for eligible taxpayers to place on their tax return that could potentially lead to them reducing a tax balance they may have or receiving a bigger refund. If you qualify for either a credit or deduction but failed to include it on your return, you can amend your tax return to include this in order to receive the most out of your tax filing.
  6. Your employer made a mistake on your W-2. If there were errors on your W-2 form that lead to your employer having to send you a corrected W-2 form after you filed your taxes, the IRS will allow you to amend your return to include the new information.

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

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How to Make a Payment to the IRS

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 offers payment options for those seeking to pay down their tax liability or make estimated tax payments.
  • Taxpayers paying off their tax balance can choose to have a monthly payment directly debited from their account or make payments manually.
  • For those making estimated tax payments, the IRS offers the option to mail in your payments or pay online. 

If you’re looking to avoid paying your back taxes at the end of the tax year or you want to start paying down your tax liability but have no idea where to make payments, it may be beneficial to look into what options the IRS can provide to you in order to stay compliant and out of collections.

If you owe a tax balance to the IRS and don’t have the ability to pay it back in full right away, the IRS does provide payment plan options for you to pay on a month to month basis. 

The IRS also offers the following options to help you make your monthly payments:

Direct Debit– For those who don’t want to deal with making manual payments to the IRS every month, you can request that your monthly payment is taken out from your bank account. Once you have established an agreement with the IRS, they will request that you fill out a direct debit form, also known as a 433-D form. The form requires that you input your accounting and routing information, the name of your bank, the tax balance amount, what tax years you owed for, and a signature to confirm you are requesting the tax payment be debited out of your account. 

Manual Payments – If you’re eligible, you can request to manually make your installment agreement payments. The IRS does require that you either mail in a check, money order or cashier’s check and to make it payable to the U.S. Treasury. In addition, the IRS also requires the following when you send in your payment:

  • Your name and address
  • Social security number 
  • Employee Identification number (if applicable)
  • Daytime phone number
  • Tax year
  • IRS notice or form related to the payment (if applicable)

Depending on the state you live in, the IRS will require that you mail your payment off to a specific processing center. You can click here to see where to send your payment.

Estimated Tax Payments

If you know that you’re going to owe a tax balance at the end of the tax year or are a 1099 earner looking to avoid owing money after filing your taxes, the IRS recommends that you make estimated tax payments either monthly or quarterly. 

The IRS provides several options for those looking to make their payments:

Pay online– Taxpayers can make their estimated tax payments online if they want to avoid the hassle of having to send in their payment. You can choose to: 1)  pay in full with a debit card or a credit or 2) make monthly installment agreement payments (subject to additional fees for each payment).

Manual payments– For those that choose to submit their payments by mail, the IRS requires the same information as mentioned above for the manual installment agreement payments. Taxpayers should also keep track of every payment they have made to the IRS throughout the tax year to ensure there are no discrepancies when they file their taxes. 

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


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Is the IRS Really Calling Me?

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.

  • Taxpayers can expect to see an increase in identity and tax theft during tax season. 
  • Scammers most commonly reach out to taxpayers by calling them or leaving an automated message.
  • The IRS will never leave threatening voicemails about your tax account and will typically send notices via ground mail to notify you of any discrepancies they may have found. 

During tax season, tax filers can expect to see an increase in fraudulent activity from scammers looking to make money quick. As a taxpayer, you must be vigilant of any criminal activity that may be occurring and always be sure to protect your sensitive information.

The IRS will never email, call, or reach out to you via social media although, quite a few people have reported receiving supposed messages from someone claiming to be from the IRS via one of the platforms mentioned above every year. 

The most common way a scammer will attempt to reach out to a taxpayer is by phone call. Most people who see that an unknown caller is calling them will ignore the call and go about their daily routine only to check their phone later and see that they have received an automated message that is supposedly coming from the IRS. 

These messages will typically tell you that they’re from the IRS and that they’re calling you regarding a time sensitive and urgent matter regarding a large sum of money you owe. These messages may even sometimes claim that you will get sued or arrested if you don’t respond immediately.

Some people may even encounter speaking to someone that is impersonating an IRS agent. These scammers will threaten to take action against you if you do not send them the tax balance you supposedly owe right away and sometimes will ask that the payment be made using random forms of payments such as placing the money on gift cards. The impersonator may even ask for personal information like your social security number or banking information over the phone. 

The IRS will never leave you threatening voicemails about any possible tax balance or fraud regarding your account and will never ask for you to provide personal information or payments over the phone.  If the IRS is attempting to get in contact with you, they will send you a notice via ground mail letting you know if there are any discrepancies on your tax return and will allow you time to respond accordingly. 

Taxpayers should never return a phone call that they receive from someone claiming to be from the IRS and should instead contact the IRS directly to address any concerns they may have. Individuals can reach out to the IRS directly at 800-829-1040 and business owners can call them at 800-829-4933.

It is important to reiterate that the IRS will never discuss your personal tax issues through unsolicited emails, texts, or social media. Always be cautious of any phone calls you receive from someone claiming to be from the IRS who tells you that you owe money.

If you receive an unexpected and suspicious email from the IRS, forward it to phishing@irs.gov.

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

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Is a Tax Relief Company Beneficial for You?

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.

If you’re unable to afford paying your taxes on time and fear that the IRS will penalize you because of it, hiring a tax relief company may be the best choice for you. So what should you look for when you are exploring which tax relief company may be the best fit for you?

Here are the tax relief options you should look out for before choosing a company:

Release of Liens and Levies: Typically a tax relief company will offer a service where they will either assist in releasing any liens or levies that have been placed against you or work towards avoiding having them ever be placed on you.  Typically they can do this in two ways, one by filing your taxes to ensure that you are fully compliant with the IRS and two, negotiating a payment plan to get you out of collections. 

Payment Plan: One of the main services you should also be on the lookout for is whether or not the tax relief service offers to negotiate a payment plan with the IRS on your behalf. Typically, they will attempt to get you the best resolution possible by providing a compilation of all necessary expenses to the IRS in order to prove you are unable to pay your tax balance in full.

You can expect a payment plan to be a monthly expense that you will take on until your liability has been paid in full. 

Offer in Compromise: If you are facing true financial hardship and don’t have the means to pay back your IRS debt, then an Offer in Compromise (OIC) might be something you could possibly qualify for. If you do qualify, you could settle with the IRS for a lot less than what you owed – or the IRS might wipe all your debt away altogether. When searching for a tax relief company, inquire if they review their clients for OIC and if they do this at an additional charge.

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

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