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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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Taxpayers can opt out of Child Tax Credit monthly payments

The expanded child tax credit will be issued out to qualifying families in monthly installments starting in July. Families that qualify for the full amount will receive $300 per month for children under the age of 6 and $250 for those between the ages of 6 and 17.

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How long does the IRS have to collect on your unpaid tax debt?

Optima CEO David King and Lead Tax Attorney Philip Hwang provide helpful tax tips and answer questions Americans may have about outstanding tax liabilities and how long the IRS can collect on them before their tax balance expires.

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What to expect when dealing with the IRS

Those who fail to pay their tax liability in full will receive a letter from the IRS stating the amount that they owe. Once a notice is sent out, the collection process will continue until the balance has been paid in full or when the IRS can no longer legally collect on it. Individuals who owe the IRS should try to resolve the matter as soon as possible in order to prevent the IRS from coming after them.

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The IRS issues a temporary increase in meal deductions for businesses

the IRS and the U.S. Treasury Department issued guidance related to the Taxpayer Certainty and Disaster Relief Act of 2020. The act provides a temporary exception to the 50% limit on the amount that businesses are able to deduct for food and beverages.

Read more

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How long do you have to Claim your Tax Refund?

The IRS reported more than a billion dollars’ worth of unclaimed tax refunds last tax season. Optima CEO David King and Lead Tax Attorney Philip Hwang remind taxpayers that they have up to three years to claim their tax refunds with the IRS and review how they can receive the assets that are owed to them.

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

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Taxpayers can opt out of Child Tax Credit monthly payments

The expanded child tax credit was established in the American Rescue Plan which was signed into law in March. The maximum enhanced child credit is $3,600 for children younger than the age of 6 and $3,000 for those between the ages of 6 and 17.

The credit will be issued out as an advance on 2021 taxes in monthly installments. Households that receive the full amount of these payments should expect to get $300 per month for children under the age of 6 and $250 for those between the ages of 6 and 17.

Who qualifies for the full credit?

The full credit is available for married couples who filed their taxes jointly, have children and an adjusted gross income of less than $150,000, or $75,000 for individuals. The credit is set to phase out for taxpayers who make a higher income. Individuals who earn $95,000 and married couples earning $170,000 filing jointly will be disqualified from receiving the credit.

Taxpayers that make too high of an income to receive the expanded child tax credit may still be eligible for the regular child tax credit, which is $2,000 per child under the age of 17 for families making less than $200,00 annually, or $400,000 for married couples.

How to qualify for the new child tax credit

For the most part, eligible families will not have to do anything at the moment. The IRS will utilize 2020 tax returns to determine eligibility or 2019 returns for those who have yet to file their taxes. The IRS began sending out 36 million letters to families that may be eligible to receive both the credit and the monthly payments.

Families that typically do not file their taxes because their income does not meet the income threshold standards in order to file a return but have children in their household who are eligible, can now sign up for the benefit.

How will payments be sent?

Taxpayers who opted for direct deposit and placed their banking information on their tax return in order to receive their tax refund can expect to also receive the monthly child tax credit via direct deposit. For those who do not have direct deposit, the IRS will send out paper checks and debit cards to some families.

Can I opt out? What will happen?

Families that do not want to receive the monthly payments for the credit, can opt out through the IRS portal. Once a person opts out of the payments, they will no longer get the monthly amounts but will still receive the full credit they are eligible for when they file their 2021 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.

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The IRS issues a temporary increase in Meal Deductions for Businesses

The IRS recently announced that they will allow a temporary increase in the allowable percentage that a business is able to deduct for both food and drink expenses at restaurants. This could be beneficial for some truckers that take these deductions out on their yearly return.

The temporary increase began on April 8, and both the IRS and the U.S. Treasury Department issued guidance related to the Taxpayer Certainty and Disaster Relief Act of 2020. The Act provides a temporary exception to the 50% limit on the amount that businesses are able to deduct for food and beverages.

This new temporary exception now allows a 100% deduction for food and beverages from restaurants. Beginning January 1, 2020, through December 31, 2022, businesses will have the option to claim 100% of their food or beverage expenses paid to restaurants as long as the business owner or the employee of the business is present when food or beverages are provided, and the expenses are not extravagant. This new guidance has modified Section 274 (n)(2) for meal and entertainment expenses.

Although this new guidance changes one section of the rules, it does not address the section that covers travel expenses. Currently, a large number of requests have been made to both the IRS and the Small Business Administration to provide further clarification on what additional expenses may be deductible for businesses.

For the time being, businesses or individuals that are planning on taking the deduction should save all their meal receipts and speak with a tax professional to discuss if claiming 100% of their meal receipts or claiming the standard per diem deduction would get them the best return when filing. It is important to note that owners and operators are not eligible to claim 100% of their meals and the per diem.

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 Adds New Guidance about Form 1040 Cryptocurrency

The IRS released updated guidance for their Frequently Asked Questions section on their website which states, “If your only transactions involving virtual currency during 2020 were purchases of virtual currency with real currency, you are not required to answer yes to the Form 1040 question.”

Taxpayers who are unsure on how they should report their cryptocurrency on their taxes should seek assistance from tax professionals in order to ensure that they are filing their tax return correctly. Here is everything taxpayers need to know before completing their taxes.

Payment for Services – Taxpayers who receive cryptocurrency as a form of payment for providing services is considered a type of self-employment. Income from self-employment is usually reported on an individual’s 1040 using a Schedule C which often results in self-employment tax in addition to income tax.

Gifts –Gifted cryptocurrency is not considered taxable for the recipient. The giver of a gift may need to complete a gift tax return and possibly pay a gift tax. The IRS will also monitor for gifts that are disguised as taxable compensation or payment for other property or assets.

Airdrops – Airdrops are viewed by the IRS as found money and is considered reportable and taxable as income. Drops of cryptocurrency that appear in your account or wallet are also taxable events and will need to be reported on your tax return.

Cryptocurrency trades are reported the same way stocks are—by using Form 8949 and Schedule D with a Form 1040. Short-term gains are taxed as ordinary income. Long-term gains get the more favorable capital gains tax rates. The IRS does not expect taxpayers to report every single stock purchase they make at the time if they do not sell or otherwise dispose of it.

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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How long does the IRS have to collect on your unpaid tax debt?

The IRS can collect on any outstanding tax liabilities for up to ten years from the filing date – and in some cases even longer. Join Optima CEO David King and Lead Tax Attorney Philip Hwang as they review what you can expect if you find yourself with aging unpaid IRS tax debt and offer tips on what you should do next.

Received an IRS notice? Download our free Optima® TAX APP to get your IRS notice analyzed today.

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What to expect when dealing with the IRS

Individuals who do not pay their tax bill after filing their tax return will receive a bill for the amount they owe. Once the IRS sends a bill to a taxpayer, the collection process will begin and will continue until the account has been paid in full or the IRS is no longer able to legally collect on the tax debt; for example, the time or period for collections expires.

Taxpayers will receive a letter from the IRS that will explain the balance due and details on how to pay their balance in full to remain compliant with the IRS. The letter will also include the amount of tax, plus any penalties and interest accrued on an unpaid balance from the date the tax was due.

Any unpaid balance is subject to interest that compounds daily in addition to a monthly late payment penalty. The IRS recommends taxpayers pay their tax liability in full as soon as they can in order to minimize both the penalties and interest. Taxpayers also have the option to consider other financial avenues with the IRS such as obtaining a cash advance on their credit card or getting a bank loan. The rate and any applicable fees your credit card company or bank charges may be lower than the combination of interest and penalties imposed by the Internal Revenue Code. If you cannot pay in full, you should send in as much as you can with the notice and explore other payment arrangements.

Individuals who are unable to pay their tax balance in full right away, may qualify for a payment plan with the IRS. One option is a short-term payment plan of up to 180 days, available to individuals who owe up to $100,000. Taxpayers who cannot pay their tax liability in full within the 180 days, may qualify to pay monthly through an installment agreement.

When setting up an installment agreement, taxpayers should be aware that there is a user fee that they will need to pay before the agreement is actually set up. For low-income taxpayers, the user fee could potentially be reduced or waived altogether if certain conditions apply. Taxpayers should be aware that interest and late payment penalties will continue to accrue while they make installment payments.

Taxpayers who cannot afford to make monthly installment agreement payments can apply for an Offer in Compromise (OIC). An OIC is an agreement between a taxpayer and the IRS that resolves a taxpayer’s tax liability by payment of an agreed upon reduced amount. Before an offer can be considered, you must have filed all tax returns, made all required estimated tax payments for the current year, and made all required federal tax deposits for the current quarter if the taxpayer is a business owner with employees.

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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Optima Tax Relief Partners with VITA to Provide Free Tax Filing Assistance

Optima Tax Relief recently announced that they are teaming up with the IRS to provide assistance to low-income residents and other members of their surrounding community with free tax preparation services. Fifty members of Optima’s staff registered with the United Way of Orange County, California and Mesa, Arizona to participate in the Volunteer Income Tax Assistance (VITA) program, which was launched by the IRS to provide free tax preparation services to those such as:

·        Persons with disabilities

·        Limited English-speaking taxpayers

·        Individuals who generally make $57,000 or less per year

Christian Giandomenico, Optima’s Director of Tax Preparation and one of the staff members who volunteered for the program, said that it is the inclusiveness of the program that led her to sign up. “Quality tax preparation should be available to everyone, regardless of income or background,” she said. “Taxes can be complicated, and I couldn’t stand the thought that some people are left trying to navigate through complex situations without any assistance, all because they feel like they can’t afford it. I was inspired to know that the program serves over 3 million taxpayers annually, putting over $4 billion back into low-income communities. The first day I showed up and saw the various demographics; from students, the elderly, ESL individuals…I realized the level of impact this translated into. It was such an incredible feeling of fulfillment.”

The free tax help offered by the VITA program is particularly beneficial for those who are 60 years of age and older, as it specializes in questions about pensions and other retirement-related issues that are unique to seniors. Many of the community members who would qualify for the program are retired individuals associated with non-profit organizations that receive grants from the IRS.

Giandomenico found the specialized support for seniors to be the most rewarding part of the program. “I had never realized how many seniors try to do their taxes on their own. They’ve been filing their taxes the same way for decades, and now that they’ve retired, they aren’t always aware of what has changed or what new write-offs they qualify for,” she said. “The experience was very heartwarming; we were told ‘Thank You’ countless times from individuals coming in to pick up their returns or needed assistance filling out tax forms. Some indicated, ‘you don’t know how much this helps me year over year’. Without this program, they would have never had their taxes professionally prepared.”

Optima CEO David King wasn’t surprised when he was informed of how many members of his staff volunteered for the program. “We hire for character in all facets of the company, and then reinforce that regularly with all of our employees. Seeing all those members of our staff volunteering for this program really underscores the kind of quality people we have in the Optima family.”

By partnering with the IRS, the VITA program is able to offer reliable, trustworthy tax filing services for free. Optima’s volunteers are all licensed tax preparers that are up to date with both federal tax laws and any new IRS updates making them ideal candidates for the VITA program. The volunteers have also gone through extensive IRS training to maintain the privacy and confidentiality of all taxpayer information.

“Every year, low-income residents miss out on millions of dollars in federal and California tax refunds and credits that they are entitled to and deserve. Our OC Free Tax Prep program helps these hard-working people keep more of their earnings,” said Susan B. Parks, President and CEO of Orange County United Way. “Many of these families already face financial struggles and the pandemic has caused even greater strain. These tax refunds and credits will provide a much-needed boost to help pay for rent, food or medical expenses.”

Optima Tax Preparer Manager and VITA program participant Anne Tran said she would do the program again in the future if given the opportunity.  “I’d do it every year if I could,” she said.  “I love helping people and volunteering. That’s why I joined the VITA team. Most of the people I worked with were getting a professional tax return done for the first time.  It was wonderful getting to know them and to help them get the biggest return possible. I met an elderly lady whose family dropped her off at the VITA office with the intention to pick her up in a couple of hours. After her family left, she found out she forgot to bring a critical document. I offered to drive her home to get it so we could complete her tax filing. She was so happy and kept saying ‘thank you’ the whole time.  It was such a rewarding experience.”

Optima’s top priority is to continue working alongside the IRS to assist both their community and individuals across the U.S. by resolving unmanageable tax burdens and helping their clients achieve a better financial future.

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