Tax News

2021 Tax Filing starts on Feb. 12. Here’s what to do to get Your Tax Refund Quickly

The IRS recently announced that tax season will start on Friday, February 12, 2021, which is when the tax agency will begin accepting and processing taxpayers’ 2020 tax returns.

The new filing date allows the IRS an ample amount of time to do additional programming and testing of IRS systems following the December 27th tax law changes that allowed the distribution of Economic Impact Payments as well as other benefits.

The programming tests that the IRS will be running are to ensure that all their systems run smoothly. This testing period allows the tax agency to work out any delay in issuing refunds to tax filers. These changes will also ensure that eligible taxpayers will receive any remaining stimulus money as a Recovery Rebate Credit when they file their 2020 tax return.

In order to speed up the process of processing and sending refunds during the pandemic, the IRS strongly recommends taxpayers to file their taxes electronically with direct deposit. Individuals can start filing their taxes immediately with tax software companies. These groups are accepting tax returns now and returns will be transmitted to the IRS starting February 12th.

Taxpayers should be aware that under the PATH Act, the IRS is unable to issue out a refund involving the Earned Income Tax Credit or Additional Child Tax Credit before mid-February. This law provides additional time to help the IRS stop fraudulent refunds and claims from being issued to scammers.

The IRS estimates that nine out of ten taxpayers should receive their refund within 21 days from when they file electronically with direct deposit and there are no issues with their tax filing.

Here are some tips for taxpayers to make filing easier:

  • File your tax return electronically and use direct deposit in order to receive your refund quickly.
  • Check the IRS website for the latest tax information.
  • Those who didn’t receive a payment or only received a partial payment may be eligible to claim the Recovery Rebate Credit when they file their 2020 tax return. 
  • Stimulus payments received separately are not taxable, and they will not reduce a taxpayer’s refund when they file their 2021 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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If a $50,000 Student Loan Forgiveness is Adopted, it Could Impact Your Taxes. Here’s How.

Senate Minority Leader Chuck Schumer has requested that President-elect Joe Biden forgive up to $50,000 for student loan borrowers.

Debt cancellation is something that has been highly considered but often carries with it a tax bill for the borrower. Schumer believes that Biden can help avoid that entirely.

Many households that are currently suffering financially due to the ongoing pandemic would need the problem of student loan debt addressed, including the issue of monthly payments and balances that have continued to accrue interest.

There are several situations that could allow for tax-free debt forgiveness under the current law:

  • The first to consider is the Public Service Loan Forgiveness program. A borrower’s remaining federal loan balance will be wiped after 120 qualifying payments. Students must be working from a government organization or a 501(c)(3) not-for-profit.
  • Those who have student loans should be aware that nearly 180,000 unique borrowers have applied to have their debt wiped clean while only 3,469 have been forgiven from the U.S. Department of Education.
  • A taxpayer will be granted relief from their student debt due to death or total and permanent disability of the student is also considered tax-free.

Back in January, The IRS and Treasury Department gave tax relief to defrauded students who have had their balances wiped when their colleges closed. As of now, it still remains to be seen how Congress or how the new Biden administration will assist student loan borrowers with taxes that comes directly from debt forgiveness.

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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IRS Creates Taxpayer Relief Initiative that makes it Easier to Set Up Payment Agreements

The IRS just announced new changes to assist taxpayers who are financially struggling due to the ongoing pandemic in order to make it easier to settle any owed tax debts.

Taxpayer payment plans and alternative options have been expanded with the intention to provide relief for those who were impacted by COVID-19. The newly revised COVID collection procedures will take the stress off taxpayers so they can focus on getting compliant, specifically to those who have a history of filing their past tax returns and paying their taxes on time.

Additional changes made to the Taxpayer Relief Initiative:

  • If you qualify for a short-term payment plan, the IRS could allow you to have up to 180 days instead of 120 days to resolve your ongoing tax burden.
  • For those who are temporarily unable to make their payment terms for their accepted Offer in Compromise, the IRS is offering flexibility until they’re able to meet the terms of their agreement.
  • Individuals and business taxpayers who are in an agreement with the IRS will automatically have new tax balances added to their payment agreement. This new update will occur instead of the IRS automatically defaulting an agreement for any new tax liability that is accrued for current or future tax years. 
  • Qualifying taxpayers who owe less than $250,000 have the ability to set up an installment agreement without having to provide any financial substantiation to the IRS.
  • Taxpayers who only owe for the tax year 2019 or owe less than $250,000 could qualify to set up an Installment Agreement only if they have yet to have a federal tax lien filed by the IRS.
  • Taxpayers with existing Direct Debit Installment Agreements may not be able to use the Online Payment Agreement system to try to get a lower payment plan or change the payment due dates.

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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IRS Sets Guidelines Based off Trump’s New Payroll Tax

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.

The IRS has received guidance on President Trump’s payroll tax deferral that puts employers on the hook to collect any taxes that are due after the holiday ends. 

The executive order was signed by the president on August 8, 2020. President Trump called for a deferral of the employee’s portion of the payroll tax that was set from September 1st until the end of the 2020 year. 

As of right now, both employees and employers share the responsibility for a 12.4% levy that funds Social Security and a 2.9% tax support to Medicare. 

The executive order put into place by President Trump applies specifically to Social Security tax and would directly affect workers who receive a bi-weekly pay that is less than $4,000 on a pretax basis. 

The IRS released a three page notice that postpones the due date for these taxes until April 30, 2021. Once the deadline passes, penalties, interest and “additions to tax” will begin to accrue.

Since there is no guarantee that the employee’s share of deferred taxes will be forgiven, employers may not want that responsibility. 

Employers are typically responsible for withholding and depositing payroll tax. If an employer chooses to not withhold employees shared taxes, the IRS can’t collect and the worker is held responsible for the tax.

Before the release of President Trump’s order, industry groups were concerned that employees could possibly be left owing deferred taxes next year if they receive extra cash in their paycheck. 

With the new guidance put into place by the IRS, many questions are still left as to how the IRS will get its share of deferred payroll taxes and the steps employees will have to take in order to make arrangements with workers to collect the money. 

If you need tax help, contact us for a free consultation.

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IRS Declares Tax Deadline will Remain on July 15

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.

The IRS has recently announced that after careful consideration, and despite requests to extend the deadline, they will not be delaying the current tax filing deadline of July 15th. The IRS is encouraging taxpayers to file for a tax extension if they require more time to file their taxes. The tax extension will provide those who cannot meet the current tax deadline the ability to file up until October 15.

This is a change in direction from last week, when Treasury Secretary Steve Mnuchin announced that there was consideration to extend the tax deadline until September.  Several groups, including the National Taxpayer Union and the National Treasury Employees Union, were amongst the many to request an additional tax extension. 

The tax deadline, which had originally been scheduled for April 15, was initially extended by three months to allow taxpayers more time to file their taxes due to the coronavirus pandemic.   Many businesses have closed or have been operating under reduced hours due to the pandemic, and with many Americans using social distancing in order to protect themselves and others around them, these businesses and their employees might find themselves unprepared to pay off any tax liabilities in time.

Many small businesses and taxpayers who were hopeful that the tax deadline would be extended will be greatly impacted by this decision, as they will not be given any additional time to pay off their tax liabilities. Although there is still time to file taxes and request a tax extension, taxpayers will be required to pay any outstanding tax debt in full before the July 15 deadline in order to avoid any penalties.

If you need tax help, contact us for a free consultation.

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Tax Implications Baseball Players Could Face When Changing Teams

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.

Major League Baseball and the Major League Baseball Players Association (MLBPA) reached an agreement this week to resume the play of baseball, which was suspended before the 2020 season started due to the outbreak of Covid-19.  Regardless of whether or not they would have come to an agreement, players who were scheduled to become free agents this offseason would have still done so, even if no games were played.  

One of the most interesting players who is expected to become a free agent is Mookie Betts, an outfielder currently under contract for the Los Angeles Dodgers.  Betts, a former MVP and World Series Champion with the Boston Red Sox, is expected to receive multi-year contract offers from several different teams.  However, the states in which those teams play their home games can have an interesting effect on how much Betts will need to pay annually in income taxes.  Let’s take a look at what kind of tax implications Betts would be looking at if he received identical ten-year offers at $30 million a year from teams in California, Massachusetts, New York, and Texas.

1. Starting with California, the most logical suitor for Betts would be the team that just traded for him last off-season, the Dodgers. According to the 2019 tax rates compiled by the Federation of Tax Administrators, California is in the top ten highest income tax states coming in at a tax rate around 13.3%. This means that Betts can expect a large percentage of his paycheck to go towards state taxes.

2. Betts’s former team, the Red Sox, would offer some tax relief in comparison if he were to return to playing his home games in Massachusetts. There is a flat tax rate of 5.13% on most types of income. Seven states also participate in having a flat income tax, and of those seven, Massachusetts has the highest state income tax rate, as well as the highest maximum marginal tax bracket in the United States. Although this income tax is not as high as California’s state tax, Betts should expect his paycheck to be significantly impacted by the deducted state tax. The amount of money Betts receives each paycheck will also be affected by how much he withholds.  In order to receive the most when filing his taxes, Betts would need to withhold the maximum to avoid owing the state any money.

3. Some of the largest contracts in baseball history have been issued by the Red Sox’ biggest rival, the New York Yankees, so it stands to reason that they would be interested in procuring his services for their roster for the next decade. New York’s maximum marginal income tax rate is one of the highest tax rates in the United States, ranging from 4-8.82%. Like California, Betts can expect a big chunk of his income will be heavily taxed by the state.

4. In sharp contrast, there are certain states where players can sign where there is no income tax at all.  One of these states is Texas, which has two teams that may be interested in signing Betts: the Texas Rangers and the Houston Astros.  Texas relies heavily on income from sales and excise taxes and in some areas of Texas, state tax can be as high as 8.25%.Although Texas residents don’t have to worry about state income tax, they do still have to ensure that they are withholding enough income in order to avoid owing the IRS at the end of every tax year. Should Betts fail to pay taxes on any earned income he receives through baseball, he would owe a tax liability and receive a penalty for failing to make estimated tax payments during the year. Failure to pay off any owed tax debt would eventually result in the IRS taking collection actions against Betts by garnishing his paychecks, levying his bank account, or even possibly taking any assets he may own to relieve the unpaid tax debt.

The best players will receive offers from several different teams, and will therefore have the option to seek long term contracts to remain in one city for the rest of their careers.  This is a major decision for these players and their young families, and talking heads in the sports media will argue and speculate over where they will ultimately sign a deal to play.  There are many factors for them to consider, including climate, proximity to their hometowns, the quality of local schools for their children, and often most importantly, the amount of money or years offered by the team.  But one underrated factor that players are surely considering is the income tax implications for living in the states they choose.

If you need tax help, contact us for a free consultation.

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Is the IRS Really Calling Me?

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.

  • Taxpayers can expect to see an increase in identity and tax theft during tax season. 
  • Scammers most commonly reach out to taxpayers by calling them or leaving an automated message.
  • The IRS will never leave threatening voicemails about your tax account and will typically send notices via ground mail to notify you of any discrepancies they may have found. 

During tax season, tax filers can expect to see an increase in fraudulent activity from scammers looking to make money quick. As a taxpayer, you must be vigilant of any criminal activity that may be occurring and always be sure to protect your sensitive information.

The IRS will never email, call, or reach out to you via social media although, quite a few people have reported receiving supposed messages from someone claiming to be from the IRS via one of the platforms mentioned above every year. 

The most common way a scammer will attempt to reach out to a taxpayer is by phone call. Most people who see that an unknown caller is calling them will ignore the call and go about their daily routine only to check their phone later and see that they have received an automated message that is supposedly coming from the IRS. 

These messages will typically tell you that they’re from the IRS and that they’re calling you regarding a time sensitive and urgent matter regarding a large sum of money you owe. These messages may even sometimes claim that you will get sued or arrested if you don’t respond immediately.

Some people may even encounter speaking to someone that is impersonating an IRS agent. These scammers will threaten to take action against you if you do not send them the tax balance you supposedly owe right away and sometimes will ask that the payment be made using random forms of payments such as placing the money on gift cards. The impersonator may even ask for personal information like your social security number or banking information over the phone. 

The IRS will never leave you threatening voicemails about any possible tax balance or fraud regarding your account and will never ask for you to provide personal information or payments over the phone.  If the IRS is attempting to get in contact with you, they will send you a notice via ground mail letting you know if there are any discrepancies on your tax return and will allow you time to respond accordingly. 

Taxpayers should never return a phone call that they receive from someone claiming to be from the IRS and should instead contact the IRS directly to address any concerns they may have. Individuals can reach out to the IRS directly at 800-829-1040 and business owners can call them at 800-829-4933.

It is important to reiterate that the IRS will never discuss your personal tax issues through unsolicited emails, texts, or social media. Always be cautious of any phone calls you receive from someone claiming to be from the IRS who tells you that you owe money.

If you receive an unexpected and suspicious email from the IRS, forward it to phishing@irs.gov.

If you need tax help, contact us for a free consultation.

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Why You May Not be Receiving a Refund this Tax Season

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.

If you’ve filed your tax return and expected to receive a refund only to find out that you owe a tax balance, your return was rejected, or you received a notice from the IRS about your return, you may be wondering what you did wrong and how you can avoid any future tax time surprises.  

Here are a few reasons why you didn’t receive your refund:

  1. Your return contains inaccurate information. If your tax return contains numerical errors or other mistakes, this can slow down the processing time with the IRS. If an error is detected on your return, an IRS agent will have to manually review your return for any mistakes causing a delay in you receiving a refund until the mistake has been corrected.
  • Your tax return is incomplete. Failing to include information such as your social security number or misspelling your name could result in a delay when it comes to receiving your tax return. If you e-file your return and it’s missing a page, this will also stop you from getting a refund. Make sure to double-check all information placed on your return and that all pages are included before sending it off to the IRS.
  • You put the wrong banking information on your return. If you request to have your refund sent to your bank account, make sure the accounting and routing information you put down is accurate. If just one number is wrong on the banking information you provided, it could cause your refund to be sent to someone else’s account. 
  • You’re a victim of tax fraud. If your personal information has been stolen and someone has filed a fraudulent return on your behalf to claim your refund, you will need to contact the IRS and the Federal Trade Commission to file a fraud report and properly file your return.

If you need tax help, contact us for a free consultation.

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The IRS Urges Taxpayers to File Their Taxes in Order to Receive a Stimulus Check

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.

  • The IRS is urging taxpayers to file as soon as possible in order to reap the benefits of this package.
  • If you have yet to file for your 2018 tax year, this could potentially affect your ability to receive a stimulus check. 
  • The IRS recommends that taxpayers file their tax returns as quickly as possible and that non-filers consider contacting a tax professional to assist them with their unfiled tax years.

The new stimulus package is meant to assist both taxpayers and businesses that have been affected by the Coronavirus pandemic. The package is meant to provide relief and aid to those that have been left without a paycheck, become unemployed, or are a business that has experienced a loss of customers.

In order to qualify for any compensation received from the stimulus package, you must have filed your taxes within the last two years.

The IRS is urging taxpayers to file as soon as possible in order to reap the benefits of this package. The IRS has notified taxpayers that in order to receive any potential credits or rebates, your 2018 and/or 2019 tax returns will need to be filed. If you have yet to file for your 2018 tax year, this could potentially affect your ability to receive a stimulus check. 

Once delinquent returns have been filed and a taxpayer is fully compliant, they are able to resolve any outstanding tax liabilities by either negotiating an installment agreement or inquiring with a tax professional to see if they qualify for an Offer in Compromise with the IRS in order to obtain a “Fresh Start.”

The IRS recommends that taxpayers file their tax returns as quickly as possible and that non-filers consider contacting a tax professional to assist them with their unfiled tax years.

If you need tax help, contact us for a free consultation.

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Top 3 Apps that will Help You Stay on the Right Financial Path for 2020

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.

  • There are apps that will help support your financial goals and monitor both your spending and savings.
  • Mint is a budgeting tool that monitors and categorizes and updates any transactions that you may make.
  • Pocket Guard is another budgeting app that allows the user to connect to their bank accounts, which enables the app to track recurring expenses as well as everyday expenses.
  • YNAB teaches you how to manage your money and shows you where you are spending your money. 

For those that made the New Year’s resolution to create a financial goal and maintain it throughout the year, you may be starting to get to the point where it’s challenging to keep it up – especially if you find yourself falling back into old patterns.   You may start to be tempted to spend your money on frivolous items or to go out and splurge on drinks and restaurants. There is still time to correct these habits and get back on track. Luckily, there are apps that will help support your financial goals and monitor both your spending and savings.

Mint is a budgeting tool that monitors, categorizes and updates all your transactions. It also provides you information on how you’re spending your money. Users are able to create and set budgets and will be notified if they go over their budget. The app also provides free credit score updates and monitoring.

Pocket Guard is also a budgeting app. It allows the user to connect their bank accounts, which enables the app to track recurring expenses as well as everyday expenses. This app also tracks any deposits that are made into your account. Pocket Guard will analyze your recurring expenses and see if there is a better deal out there for you which could allow you to save money with each purchase.

YNAB teaches you how to manage your money and shows you how you spend your money. This app provides detailed reports that reflect your spending habits on a month-to-month basis, as well as how to correct the areas in which you’re spending too much. 

Whether you’re looking to create a budget or save more money in the long run, each of these apps will help you do so as well as maintain your new year’s goal. There are plenty of financial apps out there to help get you back on track and testing a few out would help you find what works best for you. 

If you need tax help, contact us for a free consultation.

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