Planning Thanksgiving on a Budget

With the holiday season around the corner, things can start to get expensive. It can be overwhelming shelling out a bunch of cash on presents and food every year, especially if you don’t have a set spending limit. So, what can you do to cut costs but still make the most of your time with friends and family? Setting a budget for yourself is one of the best ways you can have an amazing holiday that won’t hurt your wallet. Below are a few tips and tricks to make sure you get to overeat without overspending this Thanksgiving.

Create a budget

Making an honest budget that sets parameters for how much you can comfortably spend will give you a better idea of how much wiggle room you actually have when buying food and presents for your friends and loved ones. Recycling decor from previous holidays and searching for the best sales going on at your local grocery store can help save you money but will still give you the Thanksgiving that everyone will be raving about for years to come.  

Create a shopping list and stick to it

When we think about the holidays, many of us picture ourselves eating an exorbitant amount of food. If you’re hosting a holiday dinner, or even just attending one, don’t go overboard while shopping for groceries. Create a shopping list of what you want to purchase and then make sure you stick to it. Try looking for sales a store is having, specifically on non-perishable items and bread. Typically, items that are in season will either be on sale or cheaper, so try picking up these types of items so you won’t have to pay for food items that may currently be valued at a higher, out-of-season price.

Prioritize what’s important

Making your menu from scratch may end up saving you more money than buying something that was pre-made. You can even check to see what’s in your kitchen cabinets, as most recipes call for ingredients that you already have. There seems to be a stigma about cooking a meal where people feel that it will take them hours.  If you’re not a fan of cooking or don’t feel very experienced at it, then you can stick to cooking easy side dishes that will complement the main courses. If you’re on a really tight budget, you may want to consider cutting out the cost of alcohol since it is on the pricier side. If you would like to have wine with your meal, you can always ask friends and family to bring a bottle or two. You can also alleviate some of the costs by hosting a potluck-style Thanksgiving and asking your friends and family to bring their favorite dish.

Thanksgiving can still be fun even if you have a budget in place. While it can be expensive trying to buy food for the whole family during the holidays, being mindful of how much money you will be spending this November is essential to avoiding a different kind of holiday hangover – a financial one.  And don’t forget that the most important part of Thanksgiving isn’t about all the food you eat, it’s about spending time with loved ones.

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 to Prepare for a Recession

A thriving economy is something all taxpayers rely on in order to purchase goods and provide for their families. That is, until the economy takes a turn and it slides into a recession.  When a recession hits, it can leave taxpayers scrambling as they try to pick up the pieces of their lives and figure out what options they have for their next move.  For many, a recession is the worst thing that could happen to them, as it could put your job is at risk, lower your wages and bring your employment growth to an abrupt stop. With current talks of a possible recession, it is a scary time for many Americans who do not know what the future holds. Here are a few tips to help prepare for a recession in order to protect yourself.

Make sure you have emergency savings

We can’t emphasize this enough! Having emergency savings can give you the cushion you need if the economy takes a downturn or if you lose your job. However, we all know accruing a large sum of money in a savings account is easier said than done. If you want to beef up your savings, there are options available to you, and getting a side gig such as driving for companies like Uber or Lyft can also help boost your savings. 

Pay down your debt

If you have credit card debt, vehicle loans, student loans, or other kinds of debt, it is important that you focus on paying this down. The faster you pay it off, the less you will have to pay in additional interest, which could prolong the amount of time you are holding onto your debt obligation. Lowering your total debt will allow you to have much more disposable income which could be placed in your savings that can be used in times of emergency or hardship.

Live within your means

The holiday season is in our midst, which means family gatherings and plenty of food. Everyone also looks forward to the holidays because of all the shopping that gets done! With Black Friday and Cyber Monday just around the corner, everyone is getting ready to spend big on presents for both themselves and their family. It is important to remind yourself that you don’t want to bleed your wallet dry.  Instead, try to be cautious of the frivolous spending that is often done during this time. Regardless if you are celebrating a holiday or not, it is recommended that you set up a budget for yourself to ensure that you’re not overspending. Just doing this can help save people money – and prevent them from going further in debt.

With just a few simple adjustments to your spending habits, you can have more money in your pocket in case the economy turns south. It is important to have a savings plan in mind to prepare for worst-case scenario situations. Whether you are worried about a recession or not, you should always put money aside and these several tips will help you build a solid financial foundation regardless of how the economy is doing.

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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Has the Tax Cuts and Jobs Act Benefited You?

On December 15, 2017, the Tax Cuts and Jobs Act (TCJA) was filed. The act promised to reduce taxes on average for all income groups in 2018 and 2025, specifically the middle class. According to the Tax Policy Center, those who lived in higher-income households would receive a higher average tax cut, with the biggest portion of tax cuts going to taxpayers in the 95th and 99th percentile of the income distribution. In comparison to our current law, taxes would fall for all income groups in 2018, which would increase the overall average after-tax income by 2.2 percent. Just recently, President Trump has announced that he will further assist taxpayers by cutting taxes for the middle class as a bid for his reelection. With TCJA in place and a promise of further tax cuts, it brings up the question of whether or not the TCJA is effective, and if the passing of a new tax law that allows even more tax cuts would be effective for a higher percentage of American taxpayers.

The TCJA was meant to reduce taxes on average for all income groups in both 2018 and 2025. For most, the tax cuts are hardly even noticeable. It is estimated that the federal tax savings for the extremely wealthy are seeing savings of around $51,000 versus the rest of taxpayers that are seeing less than $1,000. 

One of the reasons why most taxpayers are not seeing as big of a refund is because they did not change their withholdings. If you did change your withholdings when the TCJA was implemented, you would see that the tax changes increased your standard deduction; specifically, the limit on the deductibility of state and local taxes. If you chose not to withhold the proper amount, your tax refund would appear to be smaller than what you probably expected.

Another reason why most taxpayers did not feel the effects of the TCJA is because it benefitted those in a higher income bracket. The decrease in corporate taxes increased corporations’ profits which caused a higher earned income for wealthy households. Those who benefitted from the TCJA have been corporations and taxpayer’s income that is a result of corporate profits. With Trump’s tax cuts largely benefitting the wealthiest class in America, it has not caused an imbalance between average households and those earning a corporate profit.

For most, it can be difficult to understand this 200-page act as it does extensively change the previous tax code. There are some important key takeaways that taxpayers should know before filing again:

  • The TCJA will impact tax filing up to 2025.
  • It changes the tax code for institutions and taxpayers. The new act focuses on cutting individual, corporate and estate tax rates.
  • Nearly everyone has been affected by the TCJA.

If you are a taxpayer that has not felt the benefits of the TCJA, it is important to understand the new tax laws and how it may affect your personal circumstances and help mitigate uncertainty in future tax planning and filing. If you are having difficulty understanding the current tax changes, you can always consult with a tax professional to assist you with your tax filings.

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 Should You do if You Owe the IRS Money?

Having a tax liability with the IRS can be stressful to deal with.  It may even sound easier to avoid your debt altogether. For some taxpayers, paying back your balance to the IRS can prove to be difficult, especially if you don’t have the means to do so. You may feel as though you are backed up against a wall and that there is no hope to help resolve your current situation.  However, there are solutions to keep yourself compliant and out of collections with the IRS so you don’t have to live in constant fear that the IRS is coming after you. The IRS offers solutions for those having difficulty paying their balances in full.

Setting up a Payment Plan

It is important to first understand how much you owe. You can verify the amount owed by referring to your tax returns or by directly contacting the IRS to discuss your balance, including any tacked-on penalties and fees.  The IRS will provide you with a 433F form to fill out your income and expenses. When completing the form, be sure to exclude non-allowable expenses, such as credit card payments, pet-related expenses, or magazine subscriptions.  The IRS typically accepts payment agreements if your balance is under $10,000 and the proposed payment will pay the balance in full.  Your agreement is also required to include any accrued interest and/or penalties.

The IRS Offers Hardship Options

For those who are either unable to pay back their tax liability in full with the IRS or don’t have the ability to be on a monthly payment plan due to financial difficulty, the IRS offers hardship options. The IRS has two options available to those who need temporary relief. The first is a Currently Non Collectable agreement. The IRS will review your income, expenses, and assets to see if you are earning very little to no income. Another hardship option the IRS provides is the Partial Pay agreement. This agreement is similar to a regular installment agreement where you would make monthly payments to the IRS. However, with this agreement, you are only paying back part of the taxes you owe over time. The IRS will review this agreement approximately every two years to see if your financial income has changed. If your income has changed or you have started a new job, the IRS will send you a notice informing you that your income reflects that you have the ability to pay and request that you set up a payment plan with them. If you are attempting to request a hardship agreement with the IRS, they will request the following:

  • Last three months’ worth of bank statements 
  • Proof of income for the last three months
  • The market value for all assets
  • A list of everything that a taxpayer may own (Retirement savings, bank accounts, all sources of income, real estate property, vehicle statements, life insurance policies, etc.)

Request for an Extension 

If you do have the ability to pay your balance in full but need some time to get the money together, the IRS will allow you to request a one-time extension. You can request up to 120 days to pay your tax balance in full. It is important to keep in mind that the IRS will apply a 0.5% penalty per month for the unpaid balance and will only allow you to make this extension once. If you do miss the extension date, you will fall back into collections.

The IRS offers an array of options to ensure that you stay compliant and out of collections. If you are having difficulty paying your full tax balance to the IRS right away, it is important to know your options and what you can do to protect yourself. If you are unsure of what to do, you can always speak to a tax relief company such as Optima Tax Relief or the IRS to get a better understanding of what works best for you. 

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 Difference Between a Lien, Levy, and Garnishment

The IRS can be problematic to deal with – especially if you don’t have a clue about anything tax-related. For those who owe a liability to the IRS, it is important to understand how the IRS works in addition to any potential action the IRS can take against you. If a tax balance is owed, they can place you into collections, garnish your paychecks, place a lien on your physical assets, or even levy your bank account(s). Here is what you need to know about the IRS taking action against you, and how to prevent yourself from falling into collections.

Liens

A lien is something that the IRS can place against you if you owe a tax liability. The IRS has the ability to place liens on physical assets such as a home or vehicle in order to ensure they receive the maximum amount of money if a taxpayer intends on selling their assets; they will take a portion of the profit of the sold asset and apply it to the balance owed to them. You can avoid having a lien placed against you by paying your balance owed in full and on time or, if you cannot afford to pay your balance off, you can contact the IRS to see what type of payment plan options you can be placed on. 

Levies

The IRS will send several collection notices warning a taxpayer of their intent to levy if the balance owed has yet to be paid in full. A levy occurs once the IRS considers you a delinquent taxpayer and they will go after your bank accounts, wages, or property in order to settle the debt that is owed. In some cases, the IRS will only seize a small sum of money from a taxpayer.  Other times, they will take a taxpayer’s entire savings and apply it to their tax balance. To stop an IRS levy, you can contact them directly and request they release the levy if you can prove that you are currently in a hardship. They will also release their levy if you can pay the amount owed in full, the collection period to collect the liability on your balance has ended, or the value of your property is more compared to the amount owed to the IRS. 

Garnishments

The IRS can also garnish your wages if you have an unpaid balance. The IRS can legally seize your income and apply it to the balance owed to them and garnish your paychecks, commissions, or any bonuses. There are a couple of ways to stop the IRS from garnishing you, you can either pay your balance in full or contact the IRS to set up a payment plan or hardship agreement if you qualify. 

The IRS will act against those who fail to pay their tax balance and they can and potentially will attempt to garnish, levy, or place a lien against you should you ever owe a tax liability. It is expected that all taxpayers remain compliant with the IRS and adhere to the most current tax laws in order to stay out of collections. 

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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Criteria for Qualifying for a First-Time Abatement

The IRS’s first-time abatement penalty waiver was created as a way to combat penalties that accrued on a specified tax year due to either a failure-to-file, failure-to-pay, or failure-to-deposit penalty. Although this waiver was introduced over a decade ago, most taxpayers don’t realize that this form is accessible for them to remove any penalties that were tacked on to one of their tax years. If you meet one of the following criteria, this form may be able to help you reverse any penalties that were applied to your balance.

Failure to file your tax return or filing it late

Tax season can be one of the most stressful times of the year. Not knowing whether you’re going to receive a refund or owe the IRS can cause some taxpayers to avoid filing their tax returns altogether. For every tax year that is not filed or is filed late, the IRS will automatically tack on penalties for a failure to file. According to the IRS, the penalty for filing late or not filing at all is 5% on your balance every month. 

Failing to pay on time or make estimated tax payments

If you owe a balance after filing your tax return, the IRS will expect that you pay it off by the tax deadline. For those who are 1099 earners, it is strongly suggested that you make estimated tax payments throughout the year to ensure that you do not owe after you file your taxes. In the event that you fail to pay your balance in full, make estimated tax payments or negotiate an agreement with the IRS by the requested date, the IRS will begin to place penalties and interest against you until your balance has been paid in full. 

Failure to deposit certain taxes as required

Employers are responsible for withholding taxes from their employee’s paychecks. If they fail to periodically remit these amounts to the United States Treasury, the IRS will assess a failure to deposit penalty. The IRS sends a letter to every business that has employees that explains its federal tax deposit schedule, ensuring the business is aware of how frequently it is required to make its federal tax deposits. If a business fails to make them as scheduled in the correct amount or by the requested timeline, the IRS will charge a federal tax deposit penalty. 

It is safe to assume that most taxpayers don’t want to pay their taxes in addition to any penalties and interest that may have accrued, which is why the IRS created the First Time Penalty Abatement. To qualify, the IRS usually requires you to not have incurred any penalties for the past three years, have filed all your tax returns or an extension, and have made payment arrangements for any outstanding debt with the IRS. Taxpayers can request this form from the IRS or visit the IRS website to download the form.

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 Could Happen If You Don’t File Your Tax Return?

It is not hard to fall behind on your taxes. This can happen for a number of different reasons, such as you were unable to afford any tax services, you simply forgot about the tax deadline, or you suffered a serious illness which left you unable to file your tax return. It can be easy to avoid filing your tax return and ignore any serious repercussions – until the IRS starts sending you notices informing you of your unfiled tax years or a delinquent debt you have failed to pay. The IRS has the ability to take action against you for failure to file so it is important to know what the possible consequences could be for not filing your tax returns. 

The IRS can file a substitute return for you

The IRS can file a Substitute for Return, or SFR, on your behalf if they notice a failure to file for any tax year or years. The IRS does not file an SFR as a courtesy for those who fail to file their tax return and will not include any exemptions or deductions. Because of this, filed SFRs can reflect that a taxpayer owes a tax liability. The IRS will also send out an informative collection notice stating that a substitute return was filed or if there is a tax balance associated with the SFR.

The IRS has no time limit to collect from you

When it comes to the IRS taking collection action, the IRS has no timeline as to when they can stop. Once the IRS assesses a balance against you, they can garnish your wages, levy your bank accounts, and place liens on your physical assets. Just because you have past tax years that are unfiled, it does not mean the IRS has forgotten. It could even mean that the IRS will have the ability to hold you liable for your tax balance for up to 10 years from the date that your balance was assessed. 

Failure to file your tax return could be considered a crime

For some taxpayers, failing to file your tax return could mean getting in serious trouble. The IRS could consider this a crime and assume that you are evading the liability that they have assessed on your behalf. Consequences for not filing your tax return could mean jail time or fines as high as $250,000. 

Why it is beneficial to file your missing tax return

Filing all outstanding tax returns is important in order to avoid having the IRS take collection action against you. Although there is not a time limit for you to file any past tax years, the IRS does put a limit on receiving a refund for a previous tax return. The IRS also allows you to collect on a tax refund for up to three years from the due date of your return.

Filing your tax returns may not be the most exciting thing to do and some may even dread the filing season as it comes every year. Regardless of how you feel about having to file, it is a requirement in order to stay compliant and out of collections with the IRS. If you do have unfiled tax years, it can be beneficial to speak with a tax attorney or a tax resolution company in order to resolve any outstanding debt you have for the unfiled years or any tax debt that was assessed against you when the IRS filed an SFR for you. 

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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Common Mistakes Taxpayers Make when Filing their Tax Return

Tax season can be stressful, especially when you’re unsure if the information you provided on your tax return was accurate. The IRS encounters errors on a regular basis, often causing delays when processing your tax return or sending your tax refund on time. There are many of these common mistakes taxpayers make when filing their tax returns that lead to these delays.  Here are some ways you can avoid those mistakes and ensure that when you file, you file properly.

Make sure to include all income on your tax return

Many taxpayers underreport their income. This is usually an innocent oversight, such as forgetting to include income from rental property, retirement income, 1099 income, stocks, or other supplementary incomes. It’s important to remember that your income is directly reported to the IRS, so accidentally leaving out any source of income could leave you at risk to be audited. Reporting all income when filing your taxes is necessary for your tax return to properly process and be accepted with the IRS.

Choosing the right filing status

Failing to select the correct filing status on your tax return could potentially cause future tax problems. For example, some married taxpayers will choose to file single when they should have chosen between Married Filing Separate or Married Filing Joint. This could raise a red flag with the IRS if a person repeatedly selects the wrong filing status. Don’t forget – if you are married but living separately, you can still claim single on your tax return. 

Know who you can claim on your tax return

Claiming ineligible dependents on a tax return could also signal a red flag with the IRS. The IRS will only allow you to claim dependents if you are supporting the person that is being claimed and may even ask you to provide substantiation to prove it. Make sure to keep any receipts as proof, because if you are audited and you cannot provide supporting documentation, penalties and interest will be added to whatever balance may be owed – or even be deducted from your refund.

Double-check your tax return

Make sure to never use anything but your full name when filing your taxes. Using a nickname could cause your tax return to be rejected or in a worst-case scenario; the IRS could consider it identity theft if you file your return with your full name the following year. Some other common mistakes that could be avoided by simply double-checking the information provided include, failing to sign your tax return when mailing it off to the IRS or placing incorrect bank account numbers on your return. While these mistakes may seem minor and relatively insignificant, they can cause major problems for your tax returns for years to come.

Always be mindful of how you are filing your taxes and make sure to check your tax return for accuracy before sending it to the IRS. Taking just a few minutes to verify your work can prevent these simple mistakes, and help you get the most out of your tax return.

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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Medical Identity Fraud – A Risk to Your Health and Wealth

Imagine this scenario: you’re sitting in a doctor’s office with a long-lasting fever after your camping trip. Because it may be an infection from a tick bite, the doctor decides to give you an antibiotic shot. She glances at your records, swabs your arm with alcohol, picks up the syringe and says “this little dose of penicillin should help…” and you interrupt: “wait, I’m allergic to penicillin.” “But, that’s not what your records say… we gave you penicillin last time you were here.”

Frightening? Yes. Impossible? Not at all.

Medical identity theft is on the rise and it can not only have crippling effects on your finances but can seriously put your health in jeopardy.

The Medical Identity Fraud Alliance, a group of concerned corporate and non-profit partners,  speculate that over 2 million Americans were put at risk of medical identity theft in 2014, a figure that leaped 22% from previous research. This doesn’t even take into account the nearly 80 million individuals affected by the Anthem data breach in 2015 – the country’s largest healthcare breach.

Identity thieves steal personal health information (PHI) such as social security numbers and medical insurance identification numbers for two main reasons:

  • For financial gain by filing fraudulent claims to your health insurer (including Medicaid/Medicare) in order to receive a reimbursement check
  • Free medical care of high cost or elective procedures or to secure prescription medication – specifically narcotics that can be abused or sold on the black market

Financial fraud such as a stolen credit card can be frustrating, but can be quickly resolved since it’s easier to detect, and often doesn’t have significant long-term financial impacts. Medical identity fraud, on the other hand can cost a victim $13,500 on average and be notoriously difficult to resolve.

Because of advancement in electronic communication and collaboration in the healthcare industry, PHI is more exposed and accessible. At the same time, this doesn’t always mean that your health provider is on the same page with your insurer. PHI is rarely tracked across multiple networks and this gap can make stealing and using it feasible.

Here are a few things you can do to minimize your risk of medical identity fraud:

  • Carefully read all correspondence from your medical provider and Health Insurance Company. Treat each line item like you might for a bank statement and ensure that each charge or claim is valid.
  • Safeguard your Social Security number and healthcare data. Make sure that when you provide it, it’s absolutely necessary. It’s always okay to ask.
  • Avoid putting medical procedures and hospital stays on social media. You never know who’s looking and this piece of data could be the last one that the thief needs to commit their crime.

Our identity protection program provides comprehensive, proactive monitoring for several data points, including your medical information. To learn more about how we can help you minimize your risk of medical identity theft, visit https://optimatax.idprotectiononline.com/enrollment/.

 

Deducting Your Gambling Income & Losses

We all know the thrill of winning from gambling whether you’re an avid gambler or the occasional one. But did you know that all winnings are fully taxable? No matter how small your winnings, they must be reported on your tax return. Gambling income includes but not limited to winnings from lotteries, keno, slot machines, table games (i.e. poker, craps, roulette, blackjack, etc.), racing or sports betting, and bingo.

Here’s where the deductions on your gambling losses come in – you may be entitled to a deduction if you had any gambling losses come tax filing season, but only up to the extent of your winnings for the year. For example, if you won $3,000 from gambling for 2016, the most you can deduct on your 2016 tax return is $3,000, no matter how much you lost. Losses must be reported on Schedule A as an Itemized Deduction, which are separate from winnings. Continue reading for important facts about claiming your gambling losses on your tax return.

Here are 5 important facts about deducting gambling income and losses:

  • You must report the full amount or your winnings as income and claim your losses (up to the amount of your winnings) as an itemized deduction.
  • You cannot reduce your gambling winnings by your gambling losses and then report the difference.
  • Claim your gambling losses on Schedule A, Itemized Deductions, under ‘Other Miscellaneous Deductions’.
  • The IRS recommends that you keep a written documentation, like a notebook or a diary, for proof in case of an audit and to keep winnings and losses separate and organized. According to the IRS Publication 529 Miscellaneous Deductions, your notebook should contain at least the following:
    • The date and type of your specific wager or wagering activity.
    • The name and address or location of the gambling establishment.
    • The names of other persons present with you at the gambling establishment.
    • The amount(s) you won or lost.
  • According to the IRS, you should also have other documentation for additional proof through the following:
    • Form W-2G (if given), certain winnings; Form 5754, statement by person(s) receiving gambling winnings; wagering tickets; cancelled checks; substitute checks; credit records; bank withdrawals; and statements of actual winnings or payment slips provided to you by the gambling establishment.

To keep up to date with gambling tax laws and your responsibilities as a taxpayer, please refer to the IRS Help & Resource page or consult your local CPA or tax attorney.