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Tips for Hiring a Tax Resolution Firm

IRS issues can be complicated to solve on your own. Understandably, many people look to find a professional tax firm for help.  But some tax companies are better qualified than others. Optima CEO David King and Lead Tax Attorney Philip Hwang provide helpful tips on how to find a truly qualified tax firm and some red flags taxpayers should look out for.

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

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Taxpayers could Receive a Tax Break on Unemployment Benefits

The recently passed $1.9 trillion American Rescue Plan allows qualifying taxpayers who received unemployment during the 2020 tax year to have the first $10,200 of those benefits exempt from their federal income taxes. 

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The IRS has Resumed its U.S. Passport Revocation Program

The IRS recently announced that they are resuming their Passport Revocation Program. Optima CEO David King and Lead Tax Attorney Philip Hwang discuss how this program can cause delinquent taxpayers to lose their passport until they become compliant with the IRS. 

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Unemployment Fraud could affect Individuals this Tax Season

Due to the ongoing pandemic, millions of Americans lost their jobs, many of whom received unemployment benefits from their state agency. As taxpayers start to file their taxes, they need to be aware of scammers looking to file fraudulent unemployment benefits and steal their personal information.

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Filing your Taxes may be much harder this year

The IRS granted taxpayers additional time to file their federal tax returns due to COVID-19 and new stimulus provisions that made the current tax filing season much more complex compared to prior years. With so many new tax law changes, taxpayers should be more cautious when filing their taxes.

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The IRS has Received More Tax Returns compared to last year. Here’s why.

Many taxpayers have been filing their taxes at a faster rate compared to last year. This could be because people are looking to receive their tax refund in addition to their stimulus check.

The IRS began accepting and processing tax returns on February 12th this year, slightly later compared to last year. The IRS did this on purpose in order to have more time to accept and process tax returns and distribute out stimulus checks to qualifying taxpayers.

On February 12, the agency received 55 million returns in the first weekend alone. The returns were comprised of not just individual tax returns but also business returns and a variety of other types of returns.

In the first eight days of tax return intake, the IRS received 34.69 million individual returns, according to the agencies statistics. Last year on February 21, the IRS received 49.8 million returns, which is 30.5% fewer compared to this year. It is important to note that these numbers reflect before it was announced we were in a global pandemic.

The IRS extended their April 15 deadline to May 17 in order to allow individuals more time to file due to COVID-19. Taxpayers still have the option to file a tax extension for October 15 if they need additional time to file their taxes.

Texans, however, now have until June 15 to file their taxes due to the winter storms that affected them.

It is also important to note that although the federal deadline has been extended, individuals should check in with their state to see if their state tax deadline has also changed or if it has remained the same.

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 Taxpayers can end up in the 0% Tax Bracket

A majority of individuals have a portion of their income go to taxes when they file. Those who are looking for a way to legally decrease or eliminate their tax bill altogether, should take advantage of certain tax perks when filing their tax return.

Look into deductions

Tax deductions are a great way for taxpayers to have more money in their pocket and reduce their total tax bill. Individuals who qualify for tax deductions, should take advantage by including them on their tax return. Utilizing tax deductions will reduce the total amount of income that was earned throughout the year which could reduce your tax bill or even get you a refund.

Hold onto winning investments

If you invest in stocks, it is important to understand how it can affect you when you file your taxes. If you are looking to reduce the total amount of taxes you may have to pay when filing your taxes, you my want to consider holding your stocks even if the price shoots up. If you hold your investments for over a year, you will be eligible for the long-term capital gains tax rates of 0%, 15%, or 20%.

Earn more qualified dividends

For those who are not ready to sell their stocks, there is another way to get the same rates you would get for long-term capital gains.

Qualified dividends allow individuals to bypass the higher tax rates that are associated with ordinary dividends. Qualified dividends also give individuals exclusive access to the 0%, 15%, and 20% tax brackets if they qualify for the following:

  1. The dividend must have been paid by a U.S. corporation or a qualifying foreign company.
  2. The dividends must be deemed as qualified in the eyes of the IRS and cannot be listed as a non-qualified dividend.
  3. You have held the stock paying the dividend for more than 60 days during the 121-day period that begins 60 days before the ex-dividend date.

Look into credits

Taxpayers who know they will owe a tax liability should look into tax credits they may qualify for. The Earned Income Tax Credit could help individuals receive a tax refund after filing their return. For those who contribute to a qualified retirement savings account, you may also be eligible for a tax credit that could potentially wipe out your entire tax bill.

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 could Receive a Tax Break on Unemployment Benefits

Although jobless benefits are considered taxable income, the recently enacted $1.9 trillion American Rescue Plan allows individuals receiving unemployment to have the first $10,200 of those benefits exempt from federal income taxes.

 Taxpayers with a modified adjust gross income of $150,000 or more are not eligible for the tax break. The income threshold is the same for both single and married tax filers.

According to some tax experts, taxpayers who suffered job loss during the pandemic could see $1,000 to $2,000 reduced off their total tax bill.

The law to have the first $10,200 unemployment exempt from their federal taxes took effect after the Internal Revenue Service (IRS) had already received at least 55 million individual tax returns. The good news is that the IRS may be able to adjust the already submitted and amended tax returns with no additional paperwork required.

The IRS will issue out refunds in two phases. The first phase will start for taxpayers who qualify to exclude up to $10,200 of unemployment benefits from their federal tax income.

The second phase will include married couples who file a joint tax return. Couples who file jointly, can waive tax on up to $20,400 of benefits.

It is still unknown as to whether the first phase of payments will also include married couples in which just one spouse received unemployment benefits, or if they will fall in the second round. It is also still unknown as to whether or not taxpayers with much more complex tax returns will be issued out a refund in phase one or if they will have to wait for phase two.

We will continue to update you with new information as this story develops.

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 has Resumed its U.S. Passport Revocation Program

Optima CEO David King and Lead Tax Attorney Philip Hwang answer questions on how taxpayers can avoid getting their passport seized by the IRS.

As of March 14, 2021, the IRS resumed their Passport Certification program, and in doing so has notified the Department of State about taxpayers that are certified as owing a seriously delinquent tax debt. The IRS previously suspended certain collection activities, including passport certification, under the People First Initiative, which was created in response to the Coronavirus pandemic.

Taxpayers who are delinquent with their tax debt should expect to receive a notice informing them of their balance due. It is recommended that individuals pay off their tax liability or enter into a payment agreement with the IRS to avoid any collection action and having their passports revoked. The level of action the IRS takes against an individual is typically based on the amount owed and how long the taxpayer has been delinquent without contacting the IRS to resolve their tax balance.

The IRS is typically required by law to certify individuals to the Department of State when an individual has unpaid, legally enforceable federal tax debt over the amount of $54,000 (including interest and penalties), of which a federal lien has be filed against and all administrative remedies under Internal Revenue Code Section 6320 have lapsed or been exhausted. The IRS is also required to certify any individuals who have had a levy issued against a tax debt of that size.

If a taxpayer has a large tax debt amount, the State Department typically will not renew or issue out a new, passport after receiving certification from the IRS, and in some extreme cases, they may even revoke someone’s current passport. Taxpayers living and working overseas will have a limited validity passport issued out by the State Department that is only valid for a direct return to the United States. Before a passport renewal or new passport application is denied, the State Department will typically hold a taxpayer’s application for 90 days to allow a taxpayer to:

  • Pay any owed tax debt in full.
  • Enter into a payment arrangement with the IRS.
  • Resolve any erroneous certification issues.

Once a taxpayer has resolved their tax issue, the IRS will generally reverse the certification within 30 days of the date of resolution and provide notification to the State Department.

Resolve your tax situation

The IRS provides a variety of programs that assist taxpayers in resolving their tax obligations including payment agreements and Offers in Compromise. In some cases, if the IRS determines a taxpayer is in a financial hardship and cannot pay any of their tax debt, a temporary delay will be made to the collection process.

Taxpayers who recently filed their tax return for the current year and expect a refund should be aware that their refund amount will be applied to the total debt owed until it has been paid in full. If the refund is enough to satisfy a delinquent tax debt, the IRS will consider the account paid in full. Taxpayers are warned to not solely rely on this option and resolve their tax issues as soon as possible in order to avoid collections with the IRS.

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Unemployment Fraud could affect Individuals this Tax Season

With millions of Americans out of a job due to the ongoing pandemic throughout 2020, many received unemployment benefits issued out by state agencies.

 As taxpayers begin to file their taxes, they need to be aware of scammers who are seeking to exploit people out their money by filing for fraudulent unemployment benefits by using stolen identities.

Taxpayers should also be aware that the benefits they do receive from their state agency will be viewed as taxable income and will also be issued a 1099-G that should be kept with other important tax documents and used when filing your taxes.

If you feel you are a victim of fraud because you received a Form 1099-G for 2020 unemployment compensation that you did not get, you should take the following steps:

  • Contact issuing state agency to report fraud. The U.S. Department of Labor maintains a list of state contact information to report unemployment compensation fraud.
  • Ask state agency to issue a corrected 1099-G. The state will need time to investigate the fraud complaint and make any correction.
  • File an accurate federal tax return reporting only income received, even if a corrected 1099-G has not yet been received.
  • Follow Federal Trade Commission recommendations for identity theft:
    • Review free credit reports for signs of additional fraud from the credit bureaus.
    • Consider a credit freeze or credit fraud alert through the credit bureaus.
  • File an identity theft complaint with the U.S. Department of Justice’s National Center for Disaster Fraud (NCDF) by completing an NCDF Complaint Form online, or by calling 866-720-5721.

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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Filing your Taxes may be much harder this year

Taxpayers have received an additional month to file their federal tax returns due to COVID-19 along with new stimulus provisions that made the current filing season even more complicated. With so many changes that happened to individuals throughout the ongoing pandemic, taxpayers should be cautious how they file their taxes. Here is everything you need to know before submitting your tax return to the IRS.

Unemployment benefits

Millions of Americans received 2020 unemployment benefits meaning that their taxes will be much more complex compared to their prior returns. Unemployment benefits are subject to federal income taxes and in some cases, state income taxes. Individuals who did not have their taxes withheld from their jobless benefits may end up having a tax bill after filing their taxes.

Under the new $1.9 trillion stimulus deal, the first $10,200 in unemployment benefits are not taxed on the federal level for eligible filers. The newly added tax exemption applies to the 2020 tax year and for households earning up to $150,000.

Taxpayers who have filed their federal tax returns and did not take the $10,200 tax exemption on unemployment benefits do not need to amend their return. If the IRS owes you a refund, then they will send you a second refund for the difference.

Working from home

Individuals who made the transition from working in the office to working from home during 2020 may be wondering what they can deduct from their tax return.

For regular employees of companies, they are unable to deduct any expenses incurred from their work-from-home office. This is due to the Tax Cut and Jobs Act which eliminated the unreimbursed business expenses deduction. There are several states that do offer a deduction for unreimbursed employee business expenses on their state returns:

  • Alabama
  • Arkansas
  • California
  • Hawaii
  • Minnesota
  • New York
  • Pennsylvania

Self-employed workers have the option to deduct expenses that are related to their business from self-employment income on Schedule C or Schedule F. Self-employed workers have the ability to take a home office dedication for a space that is used exclusively for business.

Optima Tax Relief provides assistance to individuals struggling with unmanageable IRS tax burdens. To assess your tax situation and determine if you qualify for tax relief, contact us for a free consultation.

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What happens if I miss the Tax Deadline

Failing to file your tax return before the tax deadline could result in the IRS filing on your behalf, and more often than not, the IRS will file a return that is unfavorable to you. Optima CEO David King and Lead Tax Attorney Philip Hwang provide helpful tips on what to do if you receive a balance due notice and how to file your own return to replace the one that was filed by the IRS.

Need more time to file your taxes? Download the Optima® TAX APP to file a free tax extension today.

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Did your State Tax Filing Deadline Change? Here’s what You need to Know.

The IRS recently announced that the federal tax deadline has moved from April 15 to May 17. Taxpayers need to be aware that although the IRS is allowing them additional time to file federal tax returns, their state tax extensions may differ. Read more to see when your state tax filing deadline is.

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Taxpayers in Texas have until June 15th to File their Taxes

Taxpayers who reside in an area that was severely impacted by winter storms and declared a disaster area by the Federal Emergency Management Agency automatically qualify to file their taxes up until June 15th. The new extension will also extend the 2020 contribution deadline for those affected into individual retirement accounts (IRAs) until June 15.

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Working from Home could mean You will face a Double Tax Hit this Tax Season

Millions of Americans have gone from working in an office to working from home. Those who worked their office job in one state but resided in another, may need to file their taxes differently this year and could face certain tax implications.

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How the IRS Taxes Cryptocurrency

Individuals who invest in cryptocurrencies need to be aware that they could face tax implications when they file their taxes. Read more to find out what you need to know before you invest in crypto and how to ensure you avoid any tax time surprises.

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