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How to Renew Your ITIN

Taxpayers need to act quickly to renew their Individual Taxpayer Identification Number (ITIN). An ITIN is a tax ID number used by those who aren’t able to obtain a Social Security number. Individuals can get their ITIN renewed quickly in order to avoid any processing issues by submitting their application as soon as possible.

ITINs with the middle digits 88 expired at the end of 2020 including any ITIN that was not used on a tax return within the past three years. ITINS assigned in 2013 with the middle digits 90, 91, 92, 94, 95, 96, 97, 98 or 99 that have yet to be renewed will also expire at the end of the 2021 year.

Renewing your ITIN

Taxpayers can submit Form W-7 along with all required forms of ID and residency documents to the IRS. If you’re submitting a Form W-7 to renew your ITIN, you’re not required to attach a federal tax return. For spouses and dependents, they will only need to renew their ITIN if they are filing an individual tax return or if they qualify for an allowable tax benefit.

Families have the ability to renew their ITINS together

If you have other family members that need to renew their ITIN too, the IRS will accept W-7 forms from everyone in the family if a minimum of one family member listed on a tax return has an ITIN that is expiring.

Alternative ways to submit an ITIN Application Form

Some taxpayers may be eligible to use an IRS authorized Certifying Acceptance Agent to make an appointment at a designated IRS Taxpayer Assistance Center. This allows you to hand-deliver your documents 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.

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Here’s what Taxpayers need to know about Biden’s $1.9 Trillion Economic Rescue Package

Taxpayers can expect to receive a third stimulus check in addition to aid for individuals who are unemployed and facing eviction from their homes. The new Economic Rescue Package would also provide assistance to small businesses, states and local governments and will increase funding for vaccinations and testing.

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First-Time Homebuyers may receive up to $15,000

Individuals may be able to receive up to $15,000 when buying their first property thanks to President Biden’s proposal. Although the details of the credit are still being worked out, if passed, taxpayers can expect to receive up to $15,000 in advance when purchasing their first home.

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3 Tax Mistakes to Avoid making this Year

Taxpayers should start collecting all their important tax documents ahead of tax season in order to get the most out of their tax return and to ensure that avoidable errors are not made that could potentially delay their refund. Here are some tax filing tips taxpayers need to review before filing their taxes.

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Working from Home? Here’s what You need to know about the Home Office Deduction.

A large number of Americans have made the transition from working in the office to working at home. With so many people starting to file their tax return, they may have questions about if they qualify for any working from home tax breaks. Here’s everything you need to know about claiming a home office tax deduction.

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3 Tax Mistakes to Avoid making this Year

Tax season is here again and that means it’s time to collect all tax filing documents and contact your CPA or use a tax software in order to prepare and file your taxes on time. Taxpayers also need to prepare to pay off any tax bill they may receive after filing their taxes if they want to stay in good standing with the IRS.

In order to get the most out of this tax season, here are some tax filing tips taxpayers should follow before filing in their tax return.

Avoid filing your taxes late

This year’s tax filing deadline is currently April 15th. Last year the IRS extended the deadline by three months in order to allow taxpayers additional time to cope with the ongoing pandemic. As we’re entering another year into the pandemic, the IRS seems to not be as lenient and expects taxpayers to go back to abiding by the previous tax filing deadlines.

Being late on filing your taxes could be costly in penalties. If you expect to receive a refund this tax year, it will be delayed until your taxes are filed.

Failing to include unemployment income on your return

Millions of Americans have lost their job due to the COVID-19 pandemic and if you were one of them, you may have received unemployment benefits. If you didn’t have any taxes withheld from the benefits you received, be prepared to pay up when you file your taxes. Also, failing to report any type of income you received could result in serious consequences with the IRS and cause you to deal with expensive penalties and a tax bill.

Selling investments too soon

If you have benefited from the stock market and have investments in your portfolio that you are able to sell at a gain, be careful! If you take capital gains before holding your investments for at least a year, you’ll be taxed at the short-term rate. This means that you will end up paying a lot more in 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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Working from Home? Here’s what You need to know about the Home Office Deduction.

With so many Americans having to make the transition from working in the office to working remotely, one question individuals may have before filing their taxes is if working from home could yield any tax breaks. Certain small businesses may qualify for a home office tax deduction, but they need to be cautious of triggering an audit with the IRS if they are unsure of what they should be placing on their tax return.

Does working from home qualify you for a home office tax deduction?

Employees who are currently working remotely for an employer unfortunately do not qualify for the home office tax deduction. Employees should note that this deduction may be available to them as a state deduction depending on where they live. Prior to the Tax Cuts and Job Acts (TCJA) tax reform that was passed in 2017, employees did have the ability to deduct unreimbursed employee business expenses, which also included the home office deduction. For tax years 2018 through 2025, the itemized deduction for employee business expenses has been eliminated.

Should self-employed individuals take the home office deduction?

Those who are self-employed and are working out of their home do qualify for these write-offs and should take advantage of them when filing their tax return.

How do you know if you qualify for the home office deduction?

In order to qualify for the home office deduction, you must meet the following criteria:

  • Exclusive and regular use: A portion of your house, apartment, condominium, mobile home, boat, or similar structure must be used for your business on a regular basis. This also applies to structures on your property such as an unattached studio, barn, greenhouse, or garage. This deduction does not apply to any part of a taxpayer’s property used exclusively as a hotel, motel, inn, or similar business.
  • Principal place of business: A home office is required to be either the principal location of your business or a place where you regularly meet with customers or clients.

What is exclusive use?

One problem individuals may have when attempting to qualify for these deductions is that a portion of a home must be exclusively and regularly used for business.

The IRS is very strict about the exclusive-use requirement. If a taxpayer violates the exclusive-use requirement then they forfeit their chance for a home office deduction.

What to do if you have a home office for your business but do your work elsewhere

It is important for taxpayers to know that their home office needs to be their principal place of business, not their principal workplace. A home office should be used to conduct administrative or management tasks and if you don’t make substantial use of any other location to conduct those tasks, then you qualify.

Those who are employees for another company but also have their own part-time business based out of their home, also qualify.

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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Haven’t received the latest stimulus check? Your questions answered.

Many taxpayers have questions surrounding their Economic Impact Payments (EIP). What to do if they haven’t received their latest stimulus check? Do they qualify to receive the full amount? How can they check the status of their payment? Optima CEO David King and Lead Tax Attorney Phillip Hwang provide answers to some of the most important questions Americans have regarding Economic Impact Payments.

Confused or scared by an IRS notice? Download the Optima™ TAX APP and easily understand the severity of your tax situation.

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First-Time Homebuyers may receive up to $15,000

President Biden has proposed a $15,000 tax credit for first-time homebuyers to help offset the costs of buying a home. The details of the proposal from either party have yet to been made official and would most likely be worked out in a bill passed by congress.

The proposal would help millions of families buy their first home by creating a new refundable and advanceable tax credit of up to $15,000. The new First Down Payment Tax Credit would assist families offset the costs of home buying and help millions of families buy property for the first time.

This credit is very similar to the $7,500 tax credit that was created by the Housing and Economic Recovery Act signed by President George W. Bush back in July of 2008. The credit was previously increased to $8,000 the following year in a bill that was signed by President Barak Obama. The program expired back in 2010.

The current proposed plan differs from the prior tax credits in the way that it could be redeemed. Previous credits were claimed when buyers filed their income taxes the following year. Biden’s proposal would create a tax credit that could be used during the time of a home purchase.

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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Here’s what Taxpayers need to know about President Biden’s $1.9 Trillion Economic Rescue Package

Taxpayers can expect a bigger stimulus check in addition to more aid for the unemployed, the financially struggling and those who are currently facing eviction. Additionally, the Economic Rescue Package will also provide assistance to small businesses, states and local governments and will increase funding for vaccinations and testing.

Here’s what American’s need to know about the new rescue plan and how it can affect them.

Larger stimulus payments

Eligible recipients can expect to receive $1,400 per person. This would be in addition to the $600 individuals previously received that was approved by Congress in December and was distributed to qualifying individuals earlier at the beginning of the year.

These new stimulus payments will also go out to adult dependents who were not included in the previous rounds. The impact payment will also include households with mixed immigration status, since the first round of $1,200 checks did not include spouses of undocumented immigrants who did not have Social Security Numbers.

Unemployment assistance

President Joe Biden wants to increase jobless benefits from the $300 weekly increase in unemployment from the Congress’ relief package back in December to $400 a week. Biden would also like to extend additional pandemic unemployment programs through September. This will apply to Pandemic Emergency Unemployment Compensation program and the Pandemic Unemployment Assistance program.

Rental assistance and eviction moratorium

The rescue package would provide more than $25 billion in rental assistance for low to moderate income households who have lost their jobs or are financially struggling to stay afloat during the ongoing pandemic. This would be in addition to the $25 billion lawmakers provided in December.

An additional $5 billion would be set aside to assist renters struggling to pay their utility bills. Biden is also calling for $5 billion to assist states and localities help individuals who are currently experiencing homelessness.

Additional assistance for child care and child tax credits

Congress would be called on to create a $25 billion emergency fund and also add an additional $15 billion to an existing grant program that will assist child care providers pay for rent, utilities and payroll, and increased costs associated with the personal protective equipment.

Small business assistance

The plan would call for providing $15 billion to create a new grant program for small business owners that would be separate from the existing paycheck protection program.

$15 hourly minimum wage

Biden is asking Congress to increase the current minimum wage to $15 an hour and to end the tipped minimum wage and the sub-minimum wage for people with disabilities.

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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What are Tax Cuts and Can they Affect You?

A Tax cut is considered a very broad term but is typically defined as when the government reduces the amount of taxes that they are collecting. In most cases, tax cuts alter or completely change the preexisting tax laws that are in place. Here are several ways tax cuts can directly affect you.

Reducing income tax rates

The U.S. Congress and a variety of states offer a periodic reduction in the income tax rate as a way of reducing the total income taxes which allow taxpayers to benefit from it. As of 2020, the lowest rate of tax the U.S. government can charge a taxpayer is 10 percent. If the government decides to change it to 8 percent, then this would be considered a tax cut.

Temporary tax cut

Should it be deemed necessary, the government has the ability to cut taxes to a specific amount in order to stimulate the economy. The tax cut would be corrected once the government believes that it’s no longer necessary. One way a tax reduction can be done is through the social security tax rate or if Congress allows those who receive unemployment compensation to exclude a certain amount

Increasing deduction limits

Most deductions that are claimed have limitations in the amount that can be deducted or the maximum income earned that is eligible to be claimed.

Expanding tax brackets

A progressive system of taxation usually involves expanding tax brackets, which is a practice typically used by most governments. A variety of income tax rates are applied to specific ranges or brackets of income. Rather than creating a tax cut with a reduction in tax rates, it would be based off the range of income that is earned in a household to determine the amount an individual will be taxed.

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 Releases 2021 Tax Rates, Standard Deduction Amounts and More. Here’s what You need to Know.

The IRS has recently announced their annual inflation adjustments for the tax year 2021 which will include tax rate schedules, tax tables and cost of living adjustments.

These new numbers that the IRS released are to assist taxpayers in preparation for their 2021 tax returns in 2022. Taxpayers can view the list by going directly to the IRS website.

Here are a few tax items for the 2021 tax year that are important for taxpayers to know:

  • For married couples filing jointly for the 2021 tax year, the standard deduction will rise to $25,100 which has increased to $300 compared to the prior year.
  •  Single and married individuals who file separately will see their standard deduction increased to $12,550 for 2021 which is a $150 boost compared to last year.
  • For head of households, the standard deduction will be $18,800 for the 2021 tax year which is an increase of $150 compared to last year.
  • Personal exemptions for the 2021 tax year will remain at 0; this was an elimination of the personal exemption which was a provision in the Tax Cuts and Jobs Act.
  • For the 2021 tax year, the top tax rate will remain at 37% for individual single taxpayers with incomes greater than $523,600 and $628,300 for married couples filing jointly. Other rates to consider are:
  • 35%, for incomes over $209,425 ($418,850 for married couples filing jointly).
    • 32% for incomes over $164,925 ($329,850 for married couples filing jointly).
    • 24% for incomes over $86,375 ($172,750 for married couples filing jointly).
    • 22% for incomes over $40,525 ($81,050 for married couples filing jointly).
    • 12% for incomes over $9,950 ($19,900 for married couples filing jointly).
    • The lowest rate is 10% for single individuals with incomes of $9,950 or less ($19,900 for married couples filing jointly).

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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Small Businesses that Took out PPP Loans may face Tax Implications

The federal COVID Relief bill provided small businesses with forgivable loans to assist them throughout the ongoing pandemic. Although this bill has provided considerable assistance, small businesses may still have to deal with a tax hit when it comes to filing their state tax returns.

Some borrowers may be eligible for PPP loan forgiveness if at least 60% of their proceeds go towards payroll expenses. Partial loan forgiveness may also be available to those who fall sort of the threshold. PPP borrowers are also able to claim tax deductions for expenses that were covered with forgiven loan proceeds. PPP loans that aren’t forgiven, must be repaid and are subject to an interest rate of 1%.

Taxpayers need to be aware that some states may block PPP borrowers from claiming deductions on state tax returns or from having their balances zeroed out without paying any taxes on it.

Every state will vary in their approach to the Internal Revenue Code and can decide whether or not they will adopt changes to the federal law. Some states may follow their own rules when determining each individual’s income while others will choose to follow the federal code.

States have the ability to take different approaches when interpreting the COVID relief measures which includes the possibility of disallowing tax-free PPP forgiveness or blocking deductions associated to PPP.

Another factor that may determine whether or not states will consider the PPP loan as income is the state sales and income tax revenues. Due to COVID-19, many states have seen a decline in state income amid layoffs and businesses having to close down.

Taxpayers should review their state’s tax filing guidelines to determine how they should file and if they should prepare to owe a state balance.

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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