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Tax Relief Extended for Hurricane Ida Victims

hurricane ida relief

Hurricane Ida affected a great number of New York residents in 2021, leading the IRS to extend the October 15 deadline to January 3, 2022. Since then, the IRS has reevaluated the circumstances and updated the terms of relief and the extension. The victims now have until February 15, 2022 to catch up on their 2020 tax returns. This new extension applies to both businesses and individuals.

What else has changed for Hurricane Ida Victims?

The updated relief now covers more regions. Louisiana, Mississippi, parts of New York, New Jersey, Connecticut, and Pennsylvania all qualify for relief. The IRS provided a list of current eligible areas on its disaster relief page in the Around the Nation section.

The postponement to February applies to the following payment deadlines:

  • August 26, 2021 for Louisiana,
  • August 28, 2021 for Mississippi,
  • August 31, 2021 for Pennsylvania and
  • September 1, 2021 for New York, New Jersey, and Connecticut.

This only applies to individuals and businesses who had a valid extension to file their 2020 tax return by October 15, 2021. Tax exempt organizations, partnerships and S corporations are included in the deadline as well.

The Disaster Assistance and Emergency Relief for Individuals and Businesses page on the IRS website provides more specific details for returns, payments and other actions that qualify for the amended deadline.

Disaster areas are automatically provided filing and penalty relief. Your address must be within the disaster area for the relief to apply to you. If you receive a letter from the IRS regarding a late filing or late payment penalty, or stating that you have a due payment before the new deadline, you can call the number provided to have the penalty abated.

Are your records located in a disaster area?

Even though you don’t reside in a disaster area, you may still be eligible for relief. Your workplace, for instance, might be located within a disaster area and that could make you eligible. You should contact the IRS at  866-562-5227 to abate penalties if you are unable to access necessary records to file. The postponement also applies to workers assisting with relief activities through philanthropic and government organizations.

Additional tax relief assistance

Do you owe back taxes from previous years that accrued penalties? While this new deadline and relief only applies to those affected by Hurricane Ida, you can still receive assistance with your case. At Optima, we help our clients with their liability case and compliance with the IRS. Give us a call at 800-536-0734 for a free consultation.

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Quarterly Tax Deadline Reminder

tax deadline

For business owners and self-employed taxpayers that are required to pay quarterly taxes, the deadline is approaching. The tax season is upon us and it’s important to pay as promptly as you can to avoid penalties. The deadline for the last 2021 quarter is January 18, 2022. If possible, the IRS recommends making an estimated tax payment to ensure a hassle-free process without delays.

How to avoid penalties

Income taxes should be paid throughout the year as income is earned. This helps taxpayers make smaller payments, rather than owing a large sum in the last quarter. This is done by either withholding from paychecks or other compensation, or by making quarterly estimated tax payments. These options help taxpayers avoid surprise tax bills, which are often accompanied by a penalty.

If you did not make payments throughout the year, you can still make a payment to cover the missed quarters. By making a payment before the April filing deadline, a penalty will usually lessen and may even be eliminated altogether. This is because the penalty calculation considers the date on which your payment was made.

Who should make a payment?

  • Most people who owed taxes after filing their 2020 return may owe again when they file for 2021. This is due to a lack of withholding, or not withholding enough throughout the year.
  • You may also be in this situation if you itemized in the past, but now take the standard deduction, have a complicated tax situation, have a two-wage household, or you’re an employee with non-wage sources of income.
  • If you did not withhold taxes from unemployment, you should also consider an estimated tax payment.
  • Families who received advance payments of the Child Tax Credit during 2021 but don’t expect to qualify when filing their 2021 return, may also need to make an estimated tax payment.

Keep in mind that most income is taxable. Wages, interest, investment income (including virtual currencies), refund interest and gig economy income are all taxable.

Making an estimated tax payment

The IRS provides a Tax Withholding Estimator to help you determine if you need to make a payment. You can fulfill your payment electronically using IRS Direct Pay, or through your IRS Online Account.

Do you owe for previous tax years?

Owing back taxes that accrued penalties is a stressful time and can be very confusing if you don’t understand the tax code. To ensure that you get caught up on missed years and are in compliance with the IRS, we recommend the assistance of our tax professionals at Optima. Give us a call at 800-536-0734 for a free consultation.

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What To Do in Case of Tax Identity Theft

tax identity theft

As taxpayers recoup from the holidays, another important season rises – tax season. Unfortunately, it’s during this time that taxpayers discover alarming issues regarding their account. Issues such as tax identity theft leave many Americans with unexpected penalties and fees. While filing this year, be sure to look out for signs of tax identity theft to prevent worst case scenarios and to handle the matter sooner rather than later.

What are the signs of tax identity theft?

On average, most people don’t know they’re victims of tax identity theft until they receive a notice from the IRS. The notice will outline an issue with your tax return, but it’s important to recognize whether it’s a mistake, or possible identity theft. Some signs of identity theft are:

  • Receiving a letter from the IRS regarding a suspicious return that you didn’t file.
  • A duplicate Social Security number won’t allow you to file.
  • You received a transcript that wasn’t requested by you.
  • You receive notice that an online account was created in your name; or your existing account has been accessed or disabled without your knowledge.
  • You receive an IRS notice of owing additional tax or refund offset, or collection actions are being taken against you for a year you didn’t file.
  • IRS records indicate you were paid by an employer you didn’t work for.
  • You have been assigned an Employer Identification Number, but you didn’t request one.

What to do if you’re a victim of tax identity theft?

Should you find that any of the signs apply to you, there is immediate action that you can take:

  • Respond as soon as possible to IRS notices by calling the provided number.
  • If your e-filed return is rejected due to duplicate filing under your SS number, complete IRS Form 14039, which is the Identity Theft Affidavit. Attach this form to your return and mail it in.
  • IdentityTheft.gov provides immediate steps for protecting yourself and your financial accounts.

The IRS has a line you can call for specialized assistance if you did not receive a resolution for your case. That number is  800-908-4490.

The IRS provides Instructions for Requesting a Copy of Fraudulent Returns if you believe someone filed in your name.

Tax Debt Penalties and Relief

If you’re still unsure about why you have tax penalties and you’re seeking relief, Optima may be able to assist you. We conduct a thorough investigation of your tax history to find any anomalies that could be the catalyst for your liability. Give us a call at 800-536-0734 for a free consultation today!

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Rules for Claiming a Dependent

dependent

Dependents are usually children or relatives in your household that require your care. These characteristics allow you to be eligible for some tax deductions and credits. Child tax credit, earned income tax credit and child and dependent care credit are just a few that you may be eligible for. Knowing when to claim a dependent and how will be vital to preparing your tax return this season.

What are dependent qualifications?

Your dependent will be one of the following: a qualifying child or a qualifying relative.

Qualifying Child

To claim a qualifying child, the child must be part of your family. Some qualifying relationships include:

  • Your biological child
  • Your stepchild
  • Your foster child
  • Your sibling or half sibling
  • Step sibling
  • A descendent of either of the above (which includes grandchildren, nieces, and nephews)

The child must also be of a certain age. The IRS states that one of the following must be true of the child’s age:

  • They’re 18 or younger at the end of the year and younger than you or your spouse.
  • They’re 23 or younger at the end of the year, was a student and younger than you or your spouse. To qualify as a student, the child must be full-time for at least five months of the year in question.
  • The child can be over the age limit if they are diagnosed by a doctor as permanently disabled.

Another important key factor to claiming a dependent is that the child must live with you for more than half of the tax year. The IRS provides particular exceptions for temporary absences (such as extended hospital stay, college, or juvenile detention). Other exceptions include children of divorced or separated parents and children that were kidnapped.

Should the child in question get a job and provide at least half of their own financial support, you cannot claim them as a dependent.

The child can’t file a joint tax return with someone and be claimed as a dependent. The exception to this rule is if the child and their spouse file a joint return only to claim an income tax or estimated tax refund.

Last, but not least, the child must be a U.S. citizen, resident alien, U.S. national or a resident of Canada or Mexico.

Qualifying relative

Qualifying relatives do not have an age limit, however other conditions must be met.

  • They can’t be someone else’s qualifying child
  • They must be related to you or live with you
  • Their gross income for the year can’t be more than $4,300 in the 2021 tax year
  • You have to provide more than half of the person’s total financial support for the year

Additional assistance and tax prep services

Claiming a dependent and remaining compliant with the tax code can be very confusing. If you realize you may have made a mistake that triggered penalties and now owe a liability, you may be eligible for tax relief services. Give us a call at 800-536-0734 for a free consultation today.

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Retirement Distribution Tips

retirement

There are many benefits to contributing to a retirement account. Although saving money has never been a bad idea, retirement accounts can help reduce your taxable income and possibly increase your tax refund. Some accounts may have a year-end deadline for your contribution and required distributions, while others allow additional time.

401(k) Contributions

Tax-deferred retirement accounts can grow to a substantial sum, tax-free. This is due to the interest compounding over time. By maxing out your 401(k) contributions, you will be able to lower your taxable income. The maximum contribution amount allowed for 2021 is $19,500, but if you’re 50 or over, there is an additional catch-up limit is $6,500.

IRA Contributions

An IRA is an Individual Retirement Account. By contributing to an IRA, you can also reduce your taxable income for 2021. If you want the impact to show on your 2021 taxes, the deadline for IRA contributions is April 18, 2022. Of course, you should start contributions before then to see faster results in your account growth. Your tax-deductible contributions have a maximum limit of $6,000 for an IRA. If you’re 50 or older, you can add an extra $1,000.

Saver’s Credit

Some retirement contributors are automatically eligible for the Saver’s Credit. This credit can be worth up to $1,000 if filing single, or $2,000 if filing jointly. You can claim Saver’s Credit for your contributions to an IRA, SEP (Simplified Employee Pension), 401(k), 403(b), or 457 plan. Traditional IRA or Roth IRA contributions are also eligible. You’re eligible for the credit if you’re age 18 or older, not claimed as a dependent on another person’s tax return, and not a student.

Need help with filing?

Programs such as VITA, or Volunteer Income Tax Assistance, and Tax Counseling for the Elderly (TCE) were created to help seniors with basic tax return preparation. Optima Tax Relief has partnered with VITA in the past and continues to do so this tax season.

Should you find yourself in a situation where you owe the IRS a large sum of back taxes, you may be eligible for Optima’s relief services. Give us a call at 800-536-0734 for a free consultation today!

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What are Gift Taxes?

What are Gift Taxes?

The holiday season is upon us, and so is the season for giving. Gifts are wonderful ways to show your appreciation to those around you, but are you aware of gift taxes? By federal definition, a gift is something of value transferred to another individual. Gift taxes are federal taxes paid by the individual that gives the gift.

Read More

7 Year-End Tax Tips

As we approach 2022, Optima wants to wish you a happy holiday season and remind you to take advantage of this special time of year. The end of the year is the perfect time to organize your tax records and prepare to file! Optima CEO David King prompts thought-provoking topics as Lead Tax Attorney Philip Hwang provides comprehensive tips for year-end tax filing. Ensure your tax return is as accurate as possible and cement a successful tax season with this video guide from Optima Tax Relief!
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Claiming Charitable Donations on Your Tax Return

The holidays often inspire more taxpayers to donate than any other time of year. Charitable donations are often deductible when filing returns and can provide you with more money back for your refund. However, if you are expecting an itemized deduction, you should know that there are limitations for qualified contributions.

Read More

IRS Changes Offer in Compromise Policy

Tax debt relief may have gotten a little easier. The IRS has just announced a major adjustment to the offer in compromise policy that will remove some obstacles for potentially eligible taxpayers. 

Read More

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2022 Filing Reminders

2022 filing

It’s the start of a new year, which means that tax season is right around the corner. A few things have changed in the last couple of years, so it’s important to make sure you’re up to date on current tax news before you file.

When is the tax deadline?

Although 2021 was another difficult year for many Americans, the tax deadline was not pushed back for this season. The deadline is Tax Day, which falls on Friday, April 15. It’s best to complete your return as soon as possible, but an extension is available if needed.

Filing for an extension

Extensions are accessible to all taxpayers, however, the deadline to prepare and e-file extension Form 4868 is April 18, 2022. A tax extension gives you an additional six months to file your tax return, making the new deadline October 15, 2022. Please note that filing an extension is not an extension of time to pay your tax bill.

If you miss the October 15 deadline then you would need to file a paper return as the IRS stops accepting e-file returns after that date.

Recovery Rebate Credit

The Recovery Rebate Credit is helpful if you did not receive the full amount of an Economic Impact Payment, or stimulus. This credit is based on your 2021 tax information, so you’ll have to file a tax return even if you don’t usually do so. When you file, you will need to know the amount that you should have received. This amount can be found in a letter that the IRS will send (Letter 6475). You can avoid delays by ensuring that the amounts are correct.

The IRS will send Letter 6475 at the start of the year so that you can claim the amount of the third Economic Impact Payment and any Plus-Up Payments.

Do you owe back taxes?

If you find that you owe the IRS a large sum, it could be due to not filing previous years. Taxpayers who don’t meet their tax obligations may owe a penalty, and the IRS may charge interest on a penalty if you don’t pay it in full. Optima Tax Relief assists businesses and individuals with their tax case, starting with a free consultation. You can call us at 800-536-0734 to begin your journey to relief.

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7 Year-End Tax Tips

As we approach 2022, Optima wants to wish you a happy holiday season and remind you to take advantage of this special time of year. The end of the year is the perfect time to organize your tax records and prepare to file! Optima CEO David King prompts thought-provoking topics as Lead Tax Attorney Philip Hwang provides comprehensive tips for year-end tax filing. Ensure your tax return is as accurate as possible and cement a successful tax season with this video guide from Optima Tax Relief!

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

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Setting Financial Goals for the New Year

Women writing in her journal

The new year is the one time of year when everyone reevaluates their life goals and vow to make big changes in their lives. Typically, you’ll see people going back to the gym to reach their goal weight or decide that this is going to be the year that they’re going to travel the world. While any aspiration you set for yourself is a great start, some of the best resolutions are the ones with objectives that will help you move up into the dream position that you’ve always wanted or even buy that house you’ve had your eye on for a while. Here are a few simple tips to get you on the right track for both advancing your career opportunities and saving more money in the bank.

Look for growth opportunities

More and more companies are looking to create growth for employees internally. If you’re looking for a way to earn more money and gain a new set of skills, you may not have to look too far. You can start by looking at job listings that your company is hiring for, if you see something that interests you and you feel you’re more than capable of handling the position, talk to your recruiting team or even the manager of the department that you are interested in. Alternatively, you can also look at positions at other companies and apply.

Create a budget

With the new year comes new ambitions, which means it may be time to economize your budget for the year. Creating a budget means that you set limits on how much you are spending every month to ensure that you don’t overspend and cut into your savings goals. Typically, a budget requires you limit what your spending on necessary items you need throughout the month. For example, if you are going grocery shopping, stick to the basics that you will need; don’t spend frivolously on snacks and sweets just because you’re craving them at that moment. Avoid eating out consistently throughout the month and save it more for a special occasion. If you are looking to splurge, you can always allot a certain amount of money to spending on personal items throughout the month.

Build your savings

Having a cushion to land on if you fall onto hard times, or if you need cash right away in order to respond to an unexpected emergency, is exactly the reason millions of Americans open up a saving’s account.  If you don’t have one yet, then the new year is the perfect time to start. Whether you’re building your savings to invest in a house, vehicle, school, etc., it’s vital to have a savings account as a backup to ensure that you’re able to get out of a financial bind quickly.

Cancel old subscriptions

Make sure to review your monthly bank statements; you may be surprised to find you are paying for services that you no longer use or thought you had canceled long ago. Be on the lookout for subscriptions or gym services that are automatically being deducted from your bank account. You could potentially save yourself some money.

Look into paying down your debt

 If you receive a tax refund of about $3,000, that means that you are missing out on pocketing an extra $250 a month. This money could be used to pay down any loans or negative balances you have to ensure that you remain in good standing on all your debts. 

You don’t have to get a financial rut in the new year, with just a few simple changes you can get off to the right start and reach your financial goals. Looking for career opportunities, starting a budget, opening up a savings account or getting rid of old subscriptions could help you move in the right direction and provide you with a better outlook on your financial future.

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 Gift Taxes?

gift taxes

The holiday season is upon us, and so is the season for giving. Gifts are wonderful ways to show your appreciation to those around you, but are you aware of gift taxes? By federal definition, a gift is something of value transferred to another individual. Gift taxes are federal taxes paid by the individual that gives the gift.

Gifts that are taxed usually have a significantly high value. Money, cars, or homes are considered to be taxed gifts. The recipient of the gift can be subjected to paying taxes if the person donating didn’t intend for it to be a gift. Of course, not every gift qualifies as one that must be taxed. The IRS sets limits on how much you’re able to give another person before paying federal taxes.

What you should know about gift taxes

Some highlights that you should remember when giving a high value gift are:

  • Anything above IRS limits is taxed (annual and lifetime exclusions are implied).
  • Gift tax ranges from 18% to 40%.
  • Gift tax is a federal tax.
  • Gifts given to spouses, political organizations, charity, or used for medical and educational expenses are excluded if the gift is valued at less than the annual exclusion amount.
  • To avoid the gift tax, gifts must be split or given in trust.

Why do gift taxes exist?

To prevent taxpayers from giving items to others as a means to avoid paying taxes, the federal gift tax was created. It also aides in preventing undue hardship, as it obliges the donor and recipients to honor their tax liability. Form 709 is the federal gift tax return that donors must complete and submit with their annual returns.

How do gift taxes work?

Rates for gift taxes are based on the size of the gift. You only have to worry about paying the tax if the amount of the gift exceeds $15,000 for 2021, or $16,000 for 2022. If you plan on giving a gift that exceeds $15,000 this year, then you must file Form 709 during the 2022 tax season.

The limit is per person, rather than per gift. You are able to give gifts up to $15,000 to multiple people without incurring a gift tax.

Charitable gifts

While you don’t have to pay gift tax on charitable donations, you may qualify for a deduction when you file. This can put money back in your pocket when you receive a refund. Read more about charitable donation deductions here.

If you find yourself in debt due to gift tax, or other tax penalties, call Optima at (800) 536-0734 for a free consultation!

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