Trading Stocks and What it Means for Your Taxes

stocks taxes

While stocks may seem like an effortless path toward financial stability, they do affect your taxes. Understanding what’s expected when you file can keep you out of trouble with the IRS.

Brokerage Accounts and Taxes

When you sell the stock shares in a brokerage account, you may be responsible for capital gains taxes. Capital gains tax can affect you in two ways, depending on your circumstance:

Short-term Capital Gains Tax

This tax applies to profits from sold assets that were held for a year or less. The rates for short-term capital gains tax match your income tax bracket.

Long-term Capital Gains Tax

The long-term variant of this tax applies to sold assets held for longer than a year. The rates are 0%, 15%, or 20% depending on your filing status and taxable income. It’s important to note that long-term capital gains tax rates are usually lower, so it may work in your best interest to hold that stock for a little longer.

How Dividends Affect Taxes

There are two types of dividends and they’re usually considered taxable income, qualified and nonqualified. Qualified dividend rates range from 0%, 15%, or 20% (the same rule for long-term capital gains tax). Nonqualified dividends are ordinary dividends that have the same tax rate as your income bracket.

Taxpayers in higher brackets typically pay more taxes on dividends. Overall, dividend investments can drastically alter your tax bill.

How to Reduce Taxes on Stocks

Holding onto shares long enough for them to become qualified dividends can result in reducing taxes.

If possible, you should hold onto your assets for a little longer than a year. Long-term capital gains tax rates are often lower when you sell your stocks. Making a profit from stocks is all about strategy and figuring out what falls in line with your financial goals.

Tax Debt Assistance

If you find yourself in debt with the IRS due to stock investments, you may qualify for relief. Give us a call for a free consultation at (800) 536-0734.

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May 16 Filing Deadline for Tax-Exempt Organizations

tax-exempt organizations

The IRS shared a reminder for tax-exempt organizations that have a filing deadline of May 16, 2022. Filing is mandatory, so if you need more time, you should request an extension as soon as possible.

Which Form should tax-exempt organizations file?

Tax-exempt organizations would file one of four tax forms for a return:

  1. Form 990-series annual information returns (Forms 990, 990-EZ, 990-PF)
  2. Form 990-N, Electronic Notice for Tax-Exempt Organizations Not Required to File Form 990 or Form 990-EZ
  3. Form 990-T, Exempt Organization Business Income Tax Return (other than certain trusts)
  4. Form 4720 Return of Certain Excise axes Under Chapters 41 and 42 of the Internal Revenue Code

Electronic filing for tax-exempt organizations

You should e-file to save time on processing and to avoid inevitable delays that occur when filing by paper. E-filing also reports your compliance with the IRS.

However, for tax-exempt organizations filing a Form 990, 990-EZ, 990-PF or 990-T for 2021, it’s mandatory to file electronically.

For organizations filing Form 990-N, the IRS website states, “organizations eligible to submit Form 990-N must do so electronically and can submit it through Form 990-N (e-Postcard) on”

Requesting an extension for tax-exempt organizations

Should you need additional time to file, you can request a 6 month extension by filing  Form 8868, Application for Extension of Time To File an Exempt Organization Return. While this form allows you to file later, it does not push payment due dates if you owe the IRS.

Owing the IRS as a tax-exempt organization

Optima Tax Relief takes on clients with both individual and business tax debt. Give us a call for a free consultation today at (800) 536-0734.

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Optima Provides Free Tax Assistance to Local Community Through Partnership with VITA Program

optima vita

Optima Tax Relief has once again teamed up with the IRS to provide assistance to low-income residents and other members of their surrounding community with free tax preparation services. Over 100 members of Optima’s staff registered with the United Way of Orange County, California 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
  • Elderly taxpayers
  • Low to moderate-income taxpayers

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. This year, however, we saw a wide range of ages attend for assistance. We were happy to help anyone that we could!

“It gave me the opportunity to offer assistance, to the people of our community, who may not have had the fortune to go elsewhere for tax assistance and walk away with a smile on their face for the help and guidance they received,” said Associate Director of Payments Steve Stoffel.

SVP of Accounting, Richard Hamiprodjo called volunteering for the VITA program “a rewarding experience getting involved with the community and helping those who are in need.”

By partnering with the IRS, the VITA program is able to offer reliable, trustworthy tax filing services for free. Optima’s volunteers for the VITA program helped with tax preparation, greeting guests, and some gathered the appropriate tax documents from taxpayers.

Associate VP of Human Resources Kimberly Carson was also a volunteer this year. She shared her thoughts and experience, saying, “It was great to have the opportunity to give back to our community and help people with getting their taxes completed. Not everyone has extra money to get their taxes done by professionals to ensure it is done correctly, so to be able to provide this service to the community is not only needed but fulfilling. Thank you for the opportunity!”

Our volunteers exclaimed how exciting and fulfilling it was to be part of this event. The culture within Optima is very community oriented, and it shows through the tenacity Optimians have for helping others and connecting. Martha Casillas, a Payments Coordinator at Optima said, “My participation as a VITA volunteer gave me a boost of self-confidence, and self-esteem within the company. Being new to the OTR family, it also allowed me to connect with other Optimians, as well as see some of the involvements OTR has within the surrounding communities.”

Case Manager Kateri Drewes added, “For me, being a VITA volunteer means taking the time to give back to my local community. I cherish the opportunity to help folks get the care and quality service they deserve!”

Optima looks forward to working with United Way to host our very own VITA site at our California office next year. Our goal is to serve more taxpayers with a bigger outreach in the Santa Ana community.

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How to Choose a Qualified Tax Preparer

Working with a qualified tax preparer can lessen the likelihood of delays and mistakes when you file. What makes a tax preparer qualified? Lead Tax Attorney Philip Hwang and CEO David King discuss tips for choosing your tax preparer. The Tax Show hosts cover types of tax professionals, credentials, minimum requirements, and red flags to look out for. Tune in to learn how to choose the best tax preparer for your tax situation.

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

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Court Upholds Rulings on Passport Denial for those with Major Tax Debt

passport denial tax debt

As the COVID restrictions lighten, with mask mandates ending in various regions, a lot of families are planning to travel. Trips that require a passport, however, may be postponed for Americans with tax debt. The IRS previously authorized State Departments to revoke or deny your passport if you have delinquent tax debt. Courts over the past year have uniformly rejected challenges which effectively allows the Internal Revenue Service to deny citizens the right to travel outside the country. This includes new passport applications as well as your current passport. Should you find yourself reading this while overseas, you may be issued a limited validity passport to allow direct return to the US.

Does your tax debt qualify for passport denial?

Accruing interest and penalties can drastically increase your tax debt. The IRS is looking for cases owing $55,000 or more with a federal tax lien or levy issued.

What kind of tax debt does not certify?

Not all tax debt certifies for passport revocation and denial. Liabilities due to Report of Foreign Bank Account (FBAR) penalty and child support are two examples of debt that wouldn’t certify to State Departments. The IRS also mentions the following cases will not certify:

  • Timely payments with an IRS-approved installment agreement
  • Timely payment of an accepted Offer in Compromise
  • A collection due process hearing is requested in a timely manner regarding a levy
  • Collection has been suspended due to a request for innocent spouse relief
  • If you’re in bankruptcy status
  • If you’re a victim of tax-related identity theft
  • Currently not collectible due to hardship
  • Located within a federally declared disaster area
  • Your request is pending for an IRS installment agreement
  • Your Offer in Compromise is pending with the IRS
  • You have an IRS accepted adjustment that will satisfy the debt in full
  • You’re serving in a combat zone or participating in a contingency operation (the IRS will postpone certification)

How does certification to the State work?

You can expect to receive NoticeCP508C when the IRS certifies your tax debt to the State Department. This notice will be delivered by mail to your more recent known address.

Please note that your power of attorney will not receive a copy of this letter.

You will have 90 days before your passport application is denied to resolve your certification issues. You can also make a full payment, or enter a payment agreement with the IRS.

How to reverse certification

You can reverse your certified tax debt situation under one of the following conditions:

  • Fully satisfy the tax debt or it becomes legally unenforceable
  • The tax debt is no longer seriously delinquent
  • The certification is incorrect

When the IRS reverses certification, you will receive NoticeCP508R.

How long will it take the IRS to reverse tax debt certification?

The reversal will be completed within 30 days.

Additional help and resources for passport denial due to tax debt

At Optima, we assist clients who have seriously delinquent tax debt with their relief process. Resources such as The Fresh Start Program are available to help you get the best solution possible for your case.

Give us a call for a free consultation at (800)536-0734.

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What Does the IRS Do with Form 8300?

The main purpose of the IRS is to collect funds that are due and payable to the US government’s Treasury Department. To that end, taxpayers are required to report their taxable income and pay taxes on that income. This  system is known as voluntary compliance.

Voluntary Compliance: Trust, but Verify

But as we all know, Uncle Sam doesn’t just take taxpayers’ word on the reporting of taxable income. Every year at tax time, we are required to file our income from work via forms known as W-2s or 1099s. The W-2 Form  records income earned as wages while various versions of Form 1099 provide the IRS with records of non-wage income. Information from these forms ensures that the Treasury Department has an accurate record of payments and revenues received by taxpayers.

But many businesses deal in transactions involving large sums of cash. Car and boat dealerships, art galleries, antique and collectibles merchants are just a few examples. Nonprofit institutions such as hospitals and colleges also deal with large cash transactions such as endowments for new equipment or buildings, or scholarship funds, respectively.

The Full Rundown on Form 8300

Form 8300 is designed to provide the Treasury Department with information pertaining to these large cash transactions. In 2011, nearly 200,000 paper submissions of Form 8300 were filed with the Treasury department. Since 2012, the IRS has made e-filing available for Form 8300 free of charge.

Federal law requires individuals or businesses receiving more than $10,000 in a single cash transaction or in two or more related transactions within a 12-month period to file Form 8300 within 15 days of receipt. Transactions must be received in the course of business from a single payer or agent. Businesses and individuals may also voluntarily file Form 8300 concerning suspicious transactions of any amount. (

Information from Form 8300 is added to the Financial Crimes Enforcement Network (FinCEN) database. The information is then cross-referenced with other FinCEN information such as Suspicious Activity Reports and Currency Transaction. The Treasury Department uses information from these cross-reference reports to create traceable money trails that expose criminal activities. (FinCEN)

Form 8300 provides the IRS and FinCEN with a tangible record of large cash transactions. FinCEN has its own ideas about what constitutes cash and what does not – and how individual or related transactions are determined.

Cash Transactions

On its face, the definition of a cash transaction is obvious: it involves currency, either domestic or foreign. But wire transfers, which are readily accessed as cash don’t count, and don’t need to be reported on Form 8300. But, for the purposes of Form 8300 any of the following DO count as cash and transactions for more than $10,000 in any of these forms must be reported:

  • Travelers’ Checks
  • Cashier’s Checks
  • Bank Drafts
  • Money Orders

Types of Transactions That Do Count

Some exchanges, such as sale or rental of tangible goods or intangible property exceeding $10,000, are obvious forms of transactions. Cash exchanges, contributions to trust or escrow funds, loan repayments and conversions from cash to checks or bonds that exceed $10,000 also count. The IRS also considers transactions that take place within a single 24-hour period to be related transactions for the purposes of filing Form 8300.

Tax-exempt charitable organizations need not report cash donations or sales proceeds that are related to their tax-exempt status of more than $10,000, but cash in excess of $10,000 received from business transactions does. An example would be a college receiving a large donation to its endowment. But the same college would have to report receiving more than $10,000 in cash for tuition. 

Penalties for Failure to File Form 8300

The penalty for failure to file Form 8300 in a timely fashion is $100 per occurrence. For businesses with annual gross receipts of $5 million or less, the annual aggregate limitation is $500,000. If the deficiency is corrected within 30 days, the annual aggregate limitation for businesses with annual gross receipts of $5 million or less is reduced to $75,000. The total annual limit for businesses with annual gross receipts of more than $5 million is $1.5 million.

Deliberately failing to file the form carries a much higher financial cost. The IRS imposes a penalty of $25,000 or the actual amount of the transaction up to $100,000 for each occurrence, whichever is greater. There is no annual limit for intentionally failing to file form 8300.

Failure to Furnish Full Information

The IRS requires taxpayers to include the names and Taxpayer Identification Numbers (TIN) for each person involved in cash transactions over $10,000 on Form 8300. If individuals refuse to provide their TIN, taxpayers should file Form 8300, along with a statement detailing attempts to obtain the required information. Taxpayers should also retain records that verify when and how attempts to get the required information were made, and be prepared to provide copies of those records to the IRS.

Failure to furnish the names of individuals who are required to be included on Form 8300 carries penalties of $100 per violation.  The annual aggregate limit for penalties is $500,000 for businesses with annual gross receipts of $5 million or less. Penalties for businesses with more than $5 million in annual gross receipts have an aggregate annual limit of $1.5 million.

If the deficiency is corrected within 40 days, the penalty is decreased to $30 per incident. Annual aggregate limits for penalties imposed on businesses with $5 million or less in annual gross receipts that correct deficiencies within 30 days is reduced to $200,000. The annual aggregate limit for penalties imposed on larger businesses that correct deficiencies within 30 days is $250,000.

As with deliberate failure to file Form 8300, the IRS imposes harsher penalties on taxpayers who deliberately omit information. The penalty for intentional failure to furnish required information is $250 per incident or 10 percent of the aggregate annual limit of items that should have been reported, whichever is greater. There is no annual aggregate limitation on penalties.

Reduced Refunds: Will Your Refund Be Garnished?

reduced refund garnished refund

You may have already received your tax documents for the 2022 season and it’s time to file. Many taxpayers experience some anxiety around filing season because of uncertainty. Will you owe the IRS? Will your refund be garnished? There are a few instances where you can expect the IRS to reduce your refund, or garnish the whole thing.

Unemployment Taxes

Since the start of the pandemic, more Americans have relied on unemployment than ever before. Being aware of unemployment taxes and withholding taxes from each check is extremely detrimental to your following tax season.

If you received Unemployment benefits during 2021 and you didn’t withhold taxes, you can expect to owe the IRS this year.

Tax Withholding Estimator

You don’t have to wait until you file to figure out what you owe. Taking advantage of tools like the IRS Tax Withholding Estimator can help you understand what you will owe and why. Doing this in advance can allow you to start saving, or prepare to make a payment plan with the IRS.

If you’re a business owner, or 1099 filer, you should expect to withhold taxes quarterly. Failing to pay throughout the year leaves you with a large sum during tax season. You can also use the Tax Withholding Estimator to learn more about what you owe.

Child Support

Owing court ordered payments such as child support can also garnish your refund. Child support agencies collected over $30 billion in back child support through the federal tax refund offset program since 2010.

To learn how much you owe in child support, you can visit your state’s child support website ( for Californians) and use the guideline calculator. If you have any bills, letters, or contact information regarding your case, you can utilize that information as well.

How to stop the IRS from taking your refund?

Given the state of the economy, a lot of people are experiencing hardship right now. The IRS is not oblivious to the possibility that you can’t afford to pay them right away. You can see if you qualify for Currently Non-Collectible (CNC) status, which will temporarily stop the IRS from collecting payments from you. Letters, calls and other means of collection activity must desist once your status changes to CNC.

You must be able to prove hardship and that you need the money for your livelihood. Livelihood can be travel expenses for work, buying food for your family, continuing an education, etc.

Do you owe a large sum in back taxes that you can’t pay back?

Give Optima a call for a free consultation at (800) 536-0734 to learn what your options are for tax debt relief. You may qualify for the IRS Fresh Start Program, which can get you on an affordable payment plan, or even reduce your liability balance.

Need more time to file your taxes? Download the Optima® TAX APP and file your extension for free.

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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.
  • 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


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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