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How Much Do I Owe the IRS? 

How Much Do I Owe the IRS? 

Discovering that you owe back taxes to the IRS can be a stressful and overwhelming experience. Whether due to oversight, financial hardship, or other circumstances, it’s essential to address this issue promptly and accurately. However, determining the exact amount of back taxes owed can be complex. In this article, we’ll outline steps and resources to help you navigate the process of finding out how much you owe the IRS in back taxes. 

View Your IRS Online Account 

The IRS offers taxpayers access to their own IRS online account where they can view information related to their tax obligations. One of the key things you can access here is your tax balance. If you haven’t already done so, you can visit the IRS website and create an account. You’ll need to provide personal information to verify your identity and create login credentials. While the actual process of creating an IRS online account might seem tedious, the IRS takes extra precautions to safeguard your identity.  

Upon logging in, you’ll see the total amount owed and balance details. Here, you should be able to see the total amount you owe the IRS, including any penalties and interest that may have accrued. Your balance is broken down by tax year for added convenience.  Depending on your tax situation and the amount owed, the IRS online account portal may also provide information about payment options. This could include setting up a payment plan, making a one-time payment, or exploring other payment arrangements. 

Call the IRS 

The IRS has dedicated phone lines and representatives available to assist taxpayers with inquiries about their tax accounts, including outstanding tax liabilities. Before calling the IRS, gather any relevant documents, such as tax returns, notices, or correspondence from the IRS. Having this information on hand will help the representative accurately assess your tax situation. If you’re calling on behalf of someone else, you’ll need authorization to discuss their account plus their personal information.  

IRS phone wait times can be long, especially during tax time. It’s recommended to contact the IRS via your online account if possible. The IRS can be reached via telephone Monday through Friday from 7am to 7pm local time. Residents of Alaska and Hawaii should follow Pacific time. Residents of Puerto Rico may call from 8am to 8pm local time. Here are the phone numbers: 

  • Individuals: 800-829-1040 
  • Businesses: 800-829-4933  

There are also a few phone lines with their own specific hours. 

  • Non-Profits: 877-829-5500 from 8am to 5pm local time 
  • Estates and Gift Taxes: 866-699-4083 from 10am to 2pm Eastern time 
  • Excise Taxes: 866-699-4096 from 8am to 6pm Eastern time 
  • Hearing Impaired: TTY/TDD 800-829-4059 

Tax Help for Those Who Owe 

Once you’ve determined the amount of back taxes owed, it’s crucial to develop a plan to address your tax debt and prevent further penalties and interest accrual. Depending on your financial situation, you may consider setting up an installment agreement, making an offer in compromise, or exploring other options available through the IRS. For individuals with complex tax situations or those who need assistance navigating the process of resolving back taxes, hiring a tax professional may be beneficial. Tax professionals, such as enrolled agents or tax attorneys, can provide personalized guidance, negotiate with the IRS on your behalf, and help develop a plan to address your tax debt effectively. Optima Tax Relief is the nation’s leading tax resolution firm with over $1 billion in resolved tax liabilities.  

If You Need Tax Help, Contact Us Today for a Free Consultation 

What To Do If You Receive IRS Notice CP75 or CP75A

What To Do If You Receive IRS Notice CP75 or CP75A

Receiving correspondence from the IRS can be an intimidating experience for many taxpayers. Notices like CP75 or CP75A often raise concerns and questions about one’s tax situation. However, understanding what these notices entail and how to respond to them can alleviate anxiety and ensure a smoother resolution. In this guide, we’ll explore what Notice CP75 and CP75A mean, why they are issued, and steps you can take if you receive one. 

Understanding Notice CP75 and CP75A 

Notice CP75 and CP75A are both sent by the IRS to request verification items from taxpayers who have claimed a certain tax credit, dependents, or filing status. It will often involve the Earned Income Credit (EIC), the Additional Child Tax Credit (ACTC), and/or the Premium Tax Credit. These credits are refundable tax credits designed to assist low to moderate-income families. However, the IRS may need additional information to verify eligibility for these credits. 

A CP75A Notice is similar to CP75 but is specifically for taxpayers who claimed a credit, dependent, or filing status for the first time on their tax return. Like CP75, it requests additional information to verify eligibility for these credits. 

Reasons for Issuance 

There are several reasons why the IRS might issue Notice CP75 or CP75A: 

  • Incomplete Information: Your tax return may lack sufficient information or contain discrepancies that need clarification. 
  • Verification of Eligibility: The IRS may need to verify your eligibility for the EIC and/or ACTC, especially if it’s the first time you’re claiming these credits. 
  • Prevent Fraud: These notices help the IRS prevent fraudulent claims for refundable tax credits. 

What to Do If You Receive Notice CP75 or CP75A 

Receiving IRS Notice CP75 or CP75A doesn’t necessarily mean there’s a problem with your tax return. However, it’s essential to respond promptly and provide the requested information to avoid delays in processing your return and potential issues with your refund. Here’s what you should do: 

Read the Notice Carefully 

Take the time to carefully read through the notice to understand why it was sent and what information the IRS is requesting from you. 

Gather Documentation 

Collect the documentation requested in the notice, such as proof of income, residency, and dependent eligibility. Ensure that the documents are accurate and up-to-date. Depending on the credit, the notice may also be grouped with a form to fill out. Here are a few examples: 

  • To qualify for the EIC, you’ll likely need to send back an enclosed Form 886-H-EIC. 
  • To qualify for the Premium Tax Credit, you’ll need to send back an enclosed Form 14950. 
  • To claim a dependent, you’ll need to submit Form 886-H-DEP. 
  • To confirm your eligibility for a certain filing status, refer to IRS Form 14824.  

Respond Promptly 

The notice will provide a deadline for responding, typically 30 days. It’s crucial to adhere to this deadline to prevent further delays or complications. If you don’t respond, the IRS will likely assume you don’t want to claim the credit and then adjust your tax return accordingly.  

Follow Instructions 

Follow the instructions provided in the notice for submitting the requested documentation. This may involve mailing the documents to a specific address or uploading them through the IRS’s online portal.  

Seek Assistance if Needed 

If you’re unsure about how to respond to the notice or need assistance gathering the required documentation, don’t hesitate to seek help. You can contact the IRS directly or consult a tax professional for guidance. 

Keep Records 

Make copies of all documents you submit to the IRS and keep them for your records. This will help you track your communication with the IRS and provide proof of compliance if needed. 

Monitor Your Mail and Online Account 

Keep an eye on your mail and online IRS account for any updates or further communication regarding your case. The IRS will typically respond in 30 days with further details or next steps.  

Did you Receive IRS Notice CP75 or CP75A? Call Optima 

Receiving IRS Notice CP75 or CP75A can be unsettling, but it’s essential to address it promptly and provide the requested information to ensure a smooth resolution. By understanding what these notices mean and following the steps outlined in this guide, you can effectively respond to the IRS’s inquiries and safeguard your tax refund and financial interests. Remember, assistance is available if you need it, so don’t hesitate to reach out for help if you’re unsure about how to proceed. Optima Tax Relief has a team of dedicated and experienced tax professionals with proven track records of success.  

If You Need Tax Help, Contact Us Today for a Free Consultation 

What is the Bad Debt Deduction?

What is the Bad Debt Deduction?

In the realm of business finance, debt is often seen as a double-edged sword. While it can provide necessary capital for growth and expansion, it also comes with the risk of non-payment, leading to bad debts. However, there is a silver lining for businesses facing bad debts in the form of the bad debt deduction. This article aims to shed light on what the bad debt deduction entails and how businesses can navigate this aspect of their financial landscape. 

What is the Bad Debt Deduction? 

The bad debt deduction is a tax deduction for businesses that allows them to deduct certain uncollectible debts from their taxable income. In simpler terms, if a business has provided goods or services on credit and cannot collect payment for them, they may be eligible to claim a deduction for the unpaid debt. 

Types of Bad Debts 

Not all unpaid debts qualify for the bad debt deduction. The IRS has specific criteria that must be met for a debt to be considered bad and eligible for deduction. Generally, there are two types of bad debts: 

Business Bad Debts 

These are debts arising from the sale of goods or services in ordinary business. To qualify as a business bad debt, the debt must be directly related to the taxpayer’s trade or business. For example, if a company sells products on credit to customers and some of those customers fail to pay, resulting in a loss for the company, those unpaid debts may be considered business bad debts. Sole proprietors can deduct business bad debts on Schedule C, Profit or Loss from Business. Partnerships would use Form 1065, U.S. Return of Partnership Income. S Corps would use Form 1120-S, U.S. Income Tax Return for an S Corporation while C Corps would use Form 1120, U.S. Corporation Income Tax Return. This deduction can be in full or just partially. 

Non-Business Bad Debts 

These are debts that are not related to the taxpayer’s trade or business. Examples of non-business bad debts include personal loans made by individuals or investments in non-business ventures. While non-business bad debts may also be deductible, they are subject to different rules and limitations than business bad debts. If you can deduct a non-business bad debt, it must be in full. You can deduct non-business bad debts on Form 8949, Sales and Other Dispositions of Capital Assets.  

Non-business debts only qualify for capital loss treatment. This means you can deduct up to $3,000 of ordinary income per year. However, you can carry forward the debt into future years. It could take years to deduct the full non-business bad debt, but it is possible. 

Requirements for Deductibility 

To claim a deduction for bad debts, businesses must meet certain requirements set forth by the IRS. Some key requirements include: 

  • The amount must have been included in your income. To claim a deduction for a bad debt, the amount of the debt must have previously been included in the taxpayer’s gross income.  
  • The debt must be bona fide. This means that the debt must be a legitimate obligation owed to the taxpayer. It cannot be a gift or contribution to a charity, for example. 
  • There must be an intention to collect. The taxpayer must have made reasonable efforts to collect the debt before it can be considered uncollectible. This typically involves sending invoices, reminders, and making collection calls. 
  • The debt must be deemed worthless. The taxpayer must be able to demonstrate that the debt has become worthless and is unlikely to be collected in the future.  

Limitations and Considerations 

While the bad debt deduction can provide relief for businesses facing losses due to unpaid debts, there are certain limitations and considerations to keep in mind: 

  • Timing of deduction: The deduction for bad debts can only be claimed in the year in which the debt becomes worthless. Businesses cannot simply write off unpaid debts at their discretion. They must be able to demonstrate that the debt has become uncollectible during the tax year for which the deduction is claimed. 
  • Documentation requirements: Proper documentation is essential when claiming a deduction for bad debts. Businesses should maintain records of invoices, collection efforts, and any other relevant correspondence to support their claim in case of an IRS audit. 
  • Recovery of bad debts: If a business can recover all or part of a previously deducted bad debt in a subsequent year, the recovered amount must be included as income in the recovery year. This ensures that businesses do not receive a double tax benefit for the same debt. 

Tax Help for Businesses  

The bad debt deduction can be a valuable tool for businesses facing losses due to unpaid debts. By understanding the requirements and limitations associated with this deduction, businesses can effectively navigate the complexities of bad debt management and mitigate the impact of non-payment on their bottom line. Proper documentation and compliance with IRS regulations are key to maximizing the benefits of the bad debt deduction while avoiding potential pitfalls. Optima Tax Relief is the nation’s leading tax resolution firm with over $1 billion in resolved tax liabilities.  

If You Need Tax Help, Contact Us Today for a Free Consultation 

What Happens If You Don’t File Your Taxes?

what happens if you dont file your taxes

The April 18th tax deadline passed, and you did not file your tax return. Now what? First, don’t panic. Not everyone needs to file a tax return. Typically, if you earn less than the standard deduction associated with your filing status, you do not need to file a return. However, if you did not file a tax return when you were required to, you might have an issue. Here’s what happens if you don’t file your taxes. 

You will be charged a Failure to File penalty. 

If you did not file a tax return when you were required to, the IRS will charge you a Failure to File penalty. This penalty is currently 5% of the unpaid taxes for each month or partial month that a tax return is late, up to 25% of your total unpaid tax bill. If you are due to receive a tax refund, then you will not receive a penalty for failing to file. However, not filing may result in losing that refund. Keep in mind, a tax refund can be only claimed within 3 years of its due date.  

You will be charged a Failure to Pay penalty. 

If you owe taxes and don’t file your return, you will be penalized for failing to pay. In 2024, the Failure to Pay penalty is 0.5% for each month or partial month your tax balance goes unpaid, up to 25% of your total tax bill. If both a Failure to Pay and a Failure to File penalty are applied in the same month, the Failure to File penalty will be reduced by the amount of the Failure to Pay penalty applied in that month. For example, instead of a 5% Failure to File penalty for the month, the IRS would apply a 4.5% Failure to File penalty and a 0.5% Failure to Pay penalty.  

Your tax bill will accrue interest. 

If you do not file your taxes, the IRS will assess interest on your unpaid taxes. This is even if you do not receive a Failure to File penalty. Even worse, the IRS begins accruing this interest beginning on the date your taxes are due, which is April 15th in 2024. If you receive the Failure to File penalty, you will also incur interest on your unpaid taxes. Underpayment interest rates can change each quarter. The interest rate through June 2023 is 7% per year, the highest it has ever been. This essentially means that having a tax balance is more expensive than ever. 

The IRS may file a return on your behalf. 

In some cases, the IRS will file a substitute tax return on your behalf. They do this using tax documents that were sent to them from your employers and financial institutions. What they will not do, however, is try to reduce your tax liability with credits and deductions. If you still take no action, the IRS will continue processing the return and charge you any taxes owed.  

The IRS statute of limitations is delayed. 

Some may think that they can avoid filing a tax return for many years and the IRS will lose its power to enforce after the 10-year statute of limitations ends. However, the statute of limitations does not begin until a tax return is actually filed. This means that the unfiled tax return will essentially follow you until you file it. If you wait too long though, you risk losing out on refunds and tax credits. 

What Should I Do If I Didn’t File My Taxes? 

The simple answer to this question is to file immediately. The tax deadline has passed, and so has the deadline to request a tax extension. However, penalties and interest will be minimized if you file a tax return now. Some taxpayers do not file because they know they cannot afford to pay taxes they owe, but not filing and not paying only escalates the issue at hand. If you need help with your tax debt, tax relief is always an option. Optima Tax Relief is the nation’s leading tax resolution firm with over a decade of experience helping taxpayers with tough tax situations.  

Contact Us Today for a No-Obligation Free Consultation 

What is Schedule R, Tax Credit for Elderly or Disabled?

what is schedule r, tax credit for elderly or disabled

Tax season can be a daunting time for many, with the intricacies of various forms and schedules often causing confusion. Among these, Schedule R is a form that remains relatively unknown to many taxpayers. However, for those who qualify, Schedule R can be a valuable resource. It allows eligible individuals to claim the Credit for the Elderly or the Disabled. In this article, we will explore the ins and outs of Schedule R, helping you better understand its significance and how it can potentially benefit you or your loved ones. 

What is Schedule R? 

Schedule R is an attachment to Form 1040 or 1040-SR that specifically pertains to the “Credit for the Elderly or the Disabled.” This tax credit is designed to provide financial relief to elderly individuals or those with disabilities who meet certain criteria. The credit is nonrefundable, which means it can reduce your tax liability but will not result in a tax refund. 

Who qualifies for the Credit for the Elderly or Disabled? 

To be eligible for the Credit for the Elderly or the Disabled, taxpayers must meet the following criteria: 

Age Requirement

You must be at least 65 years old by the end of the tax year. Alternatively, if you are younger than 65, you can still qualify if you have retired on permanent and total disability. 

Disability Requirement

If you are under 65, you must have retired on permanent and total disability to qualify. The IRS defines this as being unable to engage in any substantial gainful activity due to your physical or mental condition. The condition must have lasted or be expected to last for at least a year or result in death. You must receive taxable disability income. Finally, you must be younger than your employer’s mandatory retirement age before the beginning of the tax year. 

Income Limit

There are income limitations to qualify for this credit based on your adjusted gross income (AGI). Alternatively, the IRS may use your nontaxable Social Security benefits and other nontaxable income. For the 2023 tax year, you are ineligible for the credit if: 

  • You file single, head of household, or are a qualifying surviving spouse with an AGI of $17,500 or more 
  • You are married filing jointly and only one spouse qualifies with an AGI of $20,000 or more
  • You are married filing jointly and both spouses qualify with an AGI of $25,000 or more
  • You are married filing separately with an AGI of $12,500 or more, or total nontaxable income (social security, nontaxable pensions, annuities, or disability income) of $3,750 or more 
  • You file as single, head of household, qualifying surviving spouse, or married filing jointly with both spouses eligible for the credit and have taxable income (social security, nontaxable pensions, annuities, or disability income) of $5,000 or more 
  • You are married filing separately with total nontaxable income (social security, nontaxable pensions, annuities, or disability income) of $3,750 or more

Filing Status

You must file as single, head of household, qualifying widow or widower, or married filing jointly. Married individuals who file separately are not eligible for this credit. If you are filing a joint return with your spouse, your spouse must also meet these conditions.  

Calculating the Credit 

The credit amount itself ranges from $3,750 to $7,500 and is calculated based on a formula. It takes into account both your income and the number of eligible individuals in your household. The higher your income, the lower the credit amount, and vice versa. The IRS provides a worksheet in the Schedule R instructions to help you calculate the exact amount of your credit.  

Claiming the Credit 

After filling out Schedule R, you can transfer your calculated credit to Schedule 3 with Form 1040. You’ll also need to note that the credit was calculated via Schedule R. The credit amount will then be subtracted from your tax liability. Tax credits like Schedule R can help ease the financial burden for eligible elderly or disabled individuals. If you or a loved one meet the criteria outlined in this article, consider exploring Schedule R further to determine if you qualify for the Credit for the Elderly or the Disabled. As always, consult with a tax professional or utilize reliable tax software to ensure accurate filing. Optima Tax Relief is the nation’s leading tax resolution firm with over a decade of experience helping taxpayers with tough tax situations. 

If You Need Tax Help, Contact Us Today for a Free Consultation 

Optima Newsletter – February 2024

optima newsletter header

Can the IRS Take My Pension?

The IRS is responsible for collecting taxes to fund government operations. While the IRS has various tools at its disposal to ensure tax compliance, there are limitations on what assets it can seize. One question that often arises is whether the IRS has the authority to take pensions. In this article, we will explore the complexities surrounding this issue and understand the safeguards in place to protect retirement savings. 

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8 Pieces of Advice from a Tax Professional

Navigating the complex tax landscape can be overwhelming. Fortunately, tax professionals, like those at Optima Tax Relief, are here to provide expert guidance and assistance. We spoke to three of our long-standing tax professionals about actions taxpayers can take (or avoid) to improve their tax situations. Vice President of Resolution and Lead Tax Attorney, Philip Hwang, Director of Resolution, Carlos Maggi, and Audit Tax Professional, Rafael Garcia, draw on their wealth of experience and offer eight invaluable pieces of advice to help you navigate the intricacies of tax season.

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Which TCJA Provisions are Expiring Soon?

Since its enactment in 2017, the Tax Cuts and Jobs Act (TCJA) has significantly impacted the American tax landscape, introducing a slew of changes aimed at reducing tax burdens for individuals. However, many of these provisions were designed to sunset after a set period. Most are slated to expire in 2025. As this deadline approaches, it’s essential to examine the implications of these expiring provisions and how they might affect taxpayers across the nation. 

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What Happens to Tax Debt When You Die?

Death is an inevitable part of life, but what happens to our financial obligations when we pass away? Among the many considerations that arise after someone dies, tax liabilities can be a complex issue that requires careful attention and understanding. While tax liabilities don’t simply vanish upon death, the way they’re handled can vary depending on several factors. These include the type of liability, the estate’s assets, and applicable laws. Let’s delve into what happens to tax debt after death and explore the implications for their estate and heirs. 

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A Newlywed’s Guide to Taxes

a newlywed's guide to taxes

If you recently got married, you might have spent a lot of time planning a ceremony, reception, or honeymoon. As a newlywed, have you considered how your new life change will affect your taxes this year? Here is a newlywed’s guide to taxes

Name and Address Change 

Before we get to the obvious changes like filing status, one of your first actions should be to report your name change to the Social Security Administration (SSA) if necessary. The name on your tax return must match the one on file with the SSA. If it doesn’t, it can cause delays in processing your return or refund. You’ll also want to make sure you update the IRS and USPS of a change in address if paper mail is your preference for correspondence or refund payment.  

Withholding 

Adjusting your tax withholding with your employer is not necessary. However, it can help avoid any overpayment or underpayment in taxes throughout the year. You can use the IRS Online Withholding Calculator to find out how much you should withhold. Once you determine the best option for you and your spouse, you should submit a new FormW-4 to your employer. 

Tax Bracket

Getting married could change your tax bracket if you file together since your income is combined with your new spouse’s. Here are the tax brackets for 2024.

Married Filing Jointly

Rate Taxable Income Tax 
10% Income up to $23,200 10% of the taxable income 
12% Income between $23,201 and $94,300 $2,320 plus 12% of the excess over $23,200 
22% Income between $94,301 and $201,050 $10,852 plus 22% of the excess over $94,300 
24% Income between $201,051 and $383,900 $34,337 plus 24% of the excess over $201,050 
32% Income between $383,901 and $487,450 $78,221 plus 32% of the excess over $383,900 
35% Income between $487,451 and $731,200 $111,357 plus 35% of the excess over $487,450 
37% Income over $731,200 $196,670 plus 37% of the excess over $731,200 

Married Filing Separately

Rate Taxable Income Tax 
10% Income up to $11,600 10% of the taxable income 
12% Income between $11,601 and $47,150 $1,160 plus 12% of the excess over $11,600 
22% Income between $47,151 and $100,525 $5,426 plus 22% of the excess over $47,150 
24% Income between $100,526 and $191,950 $17,169 plus 24% of the excess over $100,525 
32% Income between $191,951 and $243,725 $39,1101 plus 32% of the excess over $191,150 
35% Income between $243,726 and $365,600 $55,679 plus 35% of the excess over $243,725 
37% Income over $365,600 $98,335 plus 37% of the excess over $365,600 

Filing Status 

You might be used to filing single each tax season. However, as a newlywed that will no longer be an option. You’ll either file married filing jointly or married filing separately. Most couples will opt for a joint return as it opens access to more tax breaks and sometimes a better tax rate. Every situation is different. Your best bet is to prepare your tax return both ways to see which has a better outcome.  

Standard Deduction 

Married couples filing jointly can claim one of the largest standard deductions in 2024 at $29,200 if you are both 65 and under. If you file separately, you can only claim the $14,600 standard deduction in 2024. You should note that if one spouse opts to itemize, both of you must itemize, so you should determine which method would result in a lower taxable income. 

Tax Credits and Deductions 

As mentioned, filing separately eliminates eligibility for some tax credits. For example, couples married filing separately may not claim the Earned Income Tax Credit (EITC) or education credits like the American Opportunity Credit or Lifetime Learning Credit. They might be able to claim the Child and Dependent Care Credit if they meet certain requirements. They also cannot deduct student loan interest. On the other hand, married couples filing jointly have extra tax perks to look forward to. For example, if you are not working you cannot contribute to an IRA account if you are single, but you can if you are married and use your spouse’s income. You can also take advantage of flexible spending accounts (FSAs) and lower health care expenses. You can consult with a tax preparer for more tax breaks. 

Tax Help for Newlyweds 

Taxes are sure to be the furthest thing from your mind after getting married. However, it’s critical to remember that as long as you are legally married by December 31st, the IRS considers you to be married for the full tax year. The sudden change in rules may be intimidating and brand new to you, but there are always experts who are ready to help. We hope this newlywed’s guide to taxes gave some clarity. Optima Tax Relief is the nation’s leading tax resolution firm with over a decade of experience helping taxpayers with tough tax situations.  

If You Need Tax Help, Contact Us Today for a Free Consultation 

How Tax Relief Works

how tax relief works

Owing the IRS can be one of the most stressful situations a taxpayer can face. Recent data shows that American taxpayers owed over $316 billion in back taxes, penalties, and interest as of the end of 2022. Much of this debt can be attributed to late filing, mathematical errors, and underreported income. Whatever the reason for owing taxes, many taxpayers may find themselves considering tax relief when their tax bills get too large to pay. Here’s an overview of what tax relief is and how it works.  

What Is Tax Relief? 

The phrase “tax relief” can mean many things. When speaking of tax debt, tax relief is when your tax debt is managed, settled through negotiations, or paid down with payment plans. Tax relief programs were created for taxpayers who cannot afford to pay their tax bills, as well as those who have overwhelming and overdue tax bills.  

How Does Tax Relief Work? 

Tax relief is not a “one-size-fits-all” program. Every tax relief program works differently, and the process will also differ depending on the individual taxpayer’s situation. Here we will review the most common tax relief policies and programs.  

Offer in Compromise (OIC) 

An OIC is the most popular form of tax relief as well as the least likely option for taxpayers since most OICs are denied by the IRS. An OIC allows you to settle your tax debt for less than what you owe. When selecting OIC candidates, the IRS will examine your ability to pay your tax bill, your income and expenses, and the value of your assets. 

Applying for an Offer in Compromise involves a detailed process, beginning with completing IRS Form 656, “Offer in Compromise.” Alongside this form, taxpayers must submit a comprehensive financial statement detailing income, expenses, assets, and liabilities. There are some basic requirements for an offer in compromise including:  

  • Must pay a $205 nonrefundable application fee  
  • Must make a nonrefundable initial payment  
  • Must be current on all tax returns  
  • Must not be in an open bankruptcy proceeding  

If the IRS deems that you cannot afford to pay your tax debt, or that paying your tax debt will result in financial hardship, then it may accept your offer in compromise. If this happens, they will cease collections.  

Currently-Not-Collectible (CNC) Status  

In some cases, you cannot afford both your tax bill and your expenses. If this happens, you can request a Currently Not Collectible status on your account, which delays collections. The IRS will request information regarding your income and expenses to determine your eligibility. If approved, the CNC status will temporarily cease collections on your account. However, they will continue to assess interest and penalties to your account. They will continue to review your income each year to determine if you are still eligible for CNC status. They can also still file a tax lien against you during this time and keep your tax refunds to apply them to your tax bill.  

IRS Installment Agreement 

An IRS installment agreement lets you pay your tax bill, plus accrued interest and penalties, over a set period. There are two types of IRS installment agreements: short-term and long-term. A short-term payment plan must be paid in 180 days or less. To qualify for a short-term installment agreement, you cannot owe more than $100,000 in combined tax, penalties and interest. A long-term payment plan can be paid over 180+ days. To qualify for a long-term installment agreement, you must not owe more than $50,000 in combined tax, penalties and interest. While an IRS installment agreement does not reduce your tax bill, or exclude you from penalties and interest, it might be your next best option to pay off your tax debt.   

Penalty Abatement 

Sometimes life gets in the way of responsibility. Maybe you didn’t file your taxes for one year, or you forgot to pay your tax bill. If you have an otherwise clean record with the IRS, you can request a first-time penalty abatement, which waives a tax penalty or refunds you for one already paid for. Typically, if you meet three requirements, you should qualify for this tax relief option. 

  1. You are current on your tax return filing. Tax extensions are fine.  
  2. You are current on your tax bill or have a payment plan in place. 
  3. You have a clean record with the IRS. This means no penalties during the three tax years before the year you received a penalty.  

If interest accrued from a failure-to-pay or a failure-to-file penalty, and you receive penalty abatement, then the interest associated with the penalty abatement will also be forgiven.   

How Do I Proceed with Tax Relief? 

If one of these tax relief options sounds like they can be of help to your tax situation, you should consider pursuing it. Most of these options require nothing to lose, financially speaking. Dealing with the IRS on your own can be intimidating, time-consuming, and stressful. Working with a tax professional offers several advantages over handling IRS matters independently. For one, tax professionals have expertise that goes beyond basic tax knowledge. This can help you minimize errors, save time and money, and optimize your tax planning. Perhaps the greatest benefit is knowing that a professional is handling the IRS on your behalf. Optima Tax Relief has a team of dedicated and experienced tax professionals with proven track records of success.  

If You Need Tax Help, Contact Us Today for a Free Consultation 

Hoping for the Child Tax Credit? Don’t Wait to File

Hoping for the Child Tax Credit? Don’t Wait to File

In a recent update, the U.S. House of Representatives has approved a bill that has the potential to grant families significant tax benefits. The aim is to strengthen tax breaks, offering substantial financial support to American households and leading to significant savings. Among the many items addressed in the bill is the expansion of the Child Tax Credit (CTC), a tax benefit designed to assist families with the cost of raising children. In this article, we’ll review the details of the CTC expansion and the next steps needed to pass the bill. 

What is the Child Tax Credit? 

The Child Tax Credit is a tax benefit provided to eligible families for each qualifying child under 17. It’s designed to help families with the cost of raising children by reducing their federal income tax liability. Eligible families can receive a credit of up to a certain amount per child. The amount may vary depending on factors such as income level and number of children. In some cases, the credit is partially refundable, meaning that families may receive a refund even if they owe no taxes. 

Eligibility Criteria  

The eligibility requirements for the Child Tax Credit (CTC) typically include the following criteria: 

  1. Age of Child: The child must be under the age of 17 at the end of the tax year for which the credit is being claimed. 
  1. Relationship: The child must be the taxpayer’s son, daughter, stepchild, foster child, brother, sister, stepbrother, stepsister, or a descendant of any of them (such as a grandchild, niece, or nephew). 
  1. Dependent Status: The child must qualify as a dependent on the taxpayer’s federal income tax return. 
  1. Residency: The child must have lived with the taxpayer for more than half of the tax year. Certain exceptions apply for temporary absences, such as for school, vacation, medical care, or military service. 
  1. Citizenship: The child must be a U.S. citizen, U.S. national, or resident alien. 
  1. Support: The child must not provide more than half of their own support during the tax year. 
  1. Filing Status: The taxpayer must file as Single, Head of Household, Married Filing Jointly, or Qualifying Widow(er) with Dependent Child. 
  1. Income Limits: The taxpayer must have earned at least $2,500 but not more than $200,000 ($400,000 if filing jointly) to claim the full tax credit. Income over this amount will result in a partial credit. 

Proposed Expansion 

Under the proposed changes, the tax credit would remain fixed at $2,000 per child. However, the portion of the credit that is refundable would see an increase, potentially benefiting numerous families nationwide. The maximum refundable portion per child would rise from $1,600 to $1,800 in 2023, then to $1,900 in 2024, ultimately becoming fully refundable by 2025. Furthermore, the credit would be adjusted annually to account for inflation. When the House of Representatives voted on the bill in January 2023, it passed with overwhelming support from both Democrats and Republicans. The bill is waiting to see a vote from the Senate, which has yet to be scheduled.  

Don’t Wait to File Your 2024 Taxes 

The 2024 tax season is underway. However, the IRS has reported reduced tax filing activity compared to this time last year. That said, there are suspicions that this is because taxpayers are waiting to see what happens with the Child Tax Credit. Taxpayers are urged to file anyway. The IRS has publicly stated that if the Senate does pass the bipartisan bill, it could take anywhere from six to 12 weeks to implement the changes for the 2023 tax year. This means waiting could result in a late tax return, which means penalties and possible interest. Taxpayers can find relief in knowing that the IRS plans to issue additional refunds later for those who have filed if the bill is passed. No additional actions will be needed on the taxpayer’s end.  

Tax Help with the Child Tax Credit 

Taxpayers should not delay filing their taxes while waiting for the Child Tax Credit bill to be passed. It’s crucial to file taxes in a timely manner to avoid potential penalties or late fees. Additionally, the tax filing process can take time. Waiting until the last minute could lead to rushed or incomplete submissions. Furthermore, if the CTC bill is passed, the IRS will make sure eligible taxpayers receive their due refunds. Therefore, taxpayers should proceed with filing their taxes promptly, ensuring accuracy and compliance with current tax regulations, while remaining vigilant for any updates or changes in tax laws that may affect their eligibility for credits or deductions. Optima Tax Relief is the nation’s leading tax resolution firm with over a decade of experience helping taxpayers with tough tax situations.  

If You Need Tax Help, Contact Us Today for a Free Consultation 

Tax Tips and Updates for the 2024 Filing Season

Tax season is in full swing. With several filing options and a potentially larger Child Tax Credit to claim, there’s a lot to know before you file. Optima CEO David King and Lead Tax Attorney Philip Hwang provide a comprehensive guide for the 2024 tax filing season and show you how you can get the most when filing your tax return. 

If You Need Tax Help in 2024, Contact Us Today for a Free Consultation