Can the IRS Garnish Your Social Security?

Many taxpayers rely on Social Security to get by after retiring. Unfortunately, taxpayers with outstanding tax liabilities may be at risk of a levy on their retirement funds. How much can the IRS take and what should you do? CEO David King and Lead Tax Attorney Phillip Hwang discuss everything you need to know about Social Security garnishments.

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

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Reporting Cryptocurrency to the IRS

cryptocurrency

The topic of crypto gains more mainstream attention as the IRS takes interest in digital assets. In early March, the IRS sent out about 10,000 letters to taxpayers with digital asset transactions, requiring them to report ownership.

What information is the IRS looking for?

The criminal investigation division of the IRS tracks the selling, holding, and purchasing of digital assets. This includes blockchain assets such as Bitcoin and other cryptocurrencies. While some exchanges voluntarily report transactions to the IRS, you should report your holdings and gains as accurately as possible.

The difficulty in getting thorough reports is that digital assets are divisible by an unlimited amount and can be held anonymously. Tracking digital wallets is extremely costly and near impossible. The 10,000 letters were sent to taxpayers that the IRS suspected had failed to report digital transactions.

Because crypto income is a large component of nearly $1 trillion in annual uncollected taxes, the IRS wants to crack down on reporting requirements. However, the definition of an exchange is still a blurred line as rules are still being written. Once representatives finalize these rules, which is expected to be very soon, systems will be refined for formal reporting. In the meantime, IRS representatives are advising taxpayers to continue to report all exchanges to avoid a liability.

What you should do if you received a letter from the IRS

As with any IRS notice, you should never ignore it. Carolyn Schneck of the national fraud counsel of the IRS Fraud Enforcement Program stated, “You are now on notice that the IRS knows about your digital assets.”

There is a phone number provided in IRS notices for you to speak with someone regarding your case. The sooner you address any issues with your taxes, the lighter the penalty will be.

Do you already have a liability? We’re here to help!

At Optima, we assist our clients with resolving their tax debt to regain financial freedom. Give us a call at (800) 536-0734 for a free consultation today.

Need more time to file? Download Optima® TAX APP to file an extension for free!

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Optima Newsletter – March: Can you use cryptocurrency to pay taxes?

Can You Use Cryptocurrency to Pay Taxes?
While cryptocurrency has left many people skeptical of its value, the American government is validating its use with some surprising changes in taxes. In the last few years, states have been racing to make cryptocurrency mainstream, in hopes that one day Americans can use it to pay their taxes.

Can the IRS Garnish Your Social Security?
Many taxpayers rely on Social Security to get by after retiring. Unfortunately, taxpayers with outstanding tax liabilities may be at risk of a levy on their retirement funds. How much can the IRS take and what should you do? CEO David King and Lead Tax Attorney Phillip Hwang discuss everything you need to know about Social Security garnishments.

2022 IRS Interest Rates Increase
Beginning April 1, 2022, the IRS will raise its interest rates for the quarter. These changes apply to quarterly taxpayers, such as corporations and self-employed filers.

Reporting Cryptocurrency to the IRS
The topic of crypto gains more mainstream attention as the IRS takes interest in digital assets. In early March, the IRS sent out about 10,000 letters to taxpayers with digital asset transactions, requiring them to report ownership.

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Tax Implications of Cryptocurrency

Cryptocurrency is becoming more common as a form of payment for products and services. As a small business owner, do you understand the tax implications? How does the IRS view crypto? Lead Tax Attorney Philip Hwang and CEO David King discuss the gray areas of cryptocurrency and tax obligations.

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

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2022 IRS Interest Rates Increase

irs interest rates

Beginning April 1, 2022, the IRS will raise its interest rates for the quarter. These changes apply to quarterly taxpayers, such as corporations and self-employed filers.

The IRS announced the new rates as follows:

  • 4% for overpayments (3% in the case of a corporation)
  • 1.5% for the portion of a corporate overpayment exceeding $10,000
  • 4% for underpayments; and
  • 6% for large corporate underpayments

How higher interest rates affect your liability

Liabilities accrue interest over time, so it’s likely that an outstanding balance will be affected if you are not in compliance with the IRS. The interest rate would be the short-term rate plus 3% on your liability.

For assistance with your tax liability, give us a call at (800) 536-0734 for a free consultation.

Download the Optima® TAX APP to file an extension for free and get more time to file your taxes this season.

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Can You Use Cryptocurrency to Pay Taxes?

cryptocurrency taxes

While cryptocurrency has left many people skeptical of its value, the American government is validating its use with some surprising changes in taxes. In the last few years, states have been racing to make cryptocurrency mainstream, in hopes that one day Americans can use it to pay their taxes.

Which states would allow tax payments in cryptocurrency?

So far, only two states have active proposals that are being negotiated: Arizona and Wyoming. Wyoming has surpassed other states in passing laws that favor of cryptocurrency. However, these aren’t the only states considering adopting digital currency as a form of tax payment.

33 states considered proposals last year, with Wyoming leading the way by establishing groundwork. Gov. Jared Polis of Colorado has expressed excitement around the state’s interest in being “the first state to let you pay your taxes in a variety of cryptos.”

Ohio was actually the first state to announce that businesses could pay taxes in Bitcoin back in 2018. Unfortunately, that service was shutdown and declared illegal within the same year.

How will cryptocurrency impact the economy?

State and local leaders are hoping that the broad acceptance of blockchain wallets will create jobs and finance various projects for the public. More people would be likely to pay their taxes with the extra income they receive in crypto.

The future of cryptocurrency in America

There is a partisan divide surrounding crypto regulations and taxes. Despite party representation, there appears to be examples of skepticism and support. The discussion is being compared to that of the cannabis market. Politicians are figuring out how to regulate crypto, and how much it should be regulated.

Wyoming’s proposal is backed by Merchant Advisory Group, which is a trade group that includes reputable companies such as Walmart and Amazon. This can sway the broad appeal and gain the support of more retailers.

More information

Whatever cryptocurrency’s role will be in mainstream society, it still affects your taxes. If you have a tax liability and require assistance, give us a call at (800) 536-0734 for a free consultation.

Need more time to file your taxes? Download Optima® TAX APP to file an extension for free!

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Optima Newsletter – February: Reduced Refunds

Reduced Refunds: Will Your Refund Be Garnished?
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.

Side Hustles and Taxes: What You Need to Know
Philip Hwang, Lead Tax Attorney, and Optima CEO, David King provide useful tips so that you can understand whether or not you owe, and when you should file your side-hustle income.

Pending Status on Previous Tax Returns Can Delay this Year’s Return
Millions of Americans have been waiting for tax returns and refunds from previous years, causing even more delay for 2022. If your returns from last year are still pending, then your return will be delayed this year as well.

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

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Pending Status on Previous Tax Returns Can Delay this Year’s Return

pending return delay

The COVID-19 pandemic has been the biggest setback for the IRS from the start. Millions of Americans have been waiting for tax returns and refunds from previous years, causing even more delay for 2022. If your returns from last year are still pending, then your return will be delayed this year as well.

How to avoid rejection for this year’s filing

Electronic filing is a great wait to lessen the likelihood of delays. You can also validate your return with last year’s adjusted gross income so that it doesn’t get rejected.

What to do if last year’s return is pending

National Taxpayer Advocate Erin Collins recommends entering $0 for your 2020 adjusted gross income when you file online.

If you collected the advanced child tax credit or your stimulus via the nonfiler tool in 2021, the IRS recommends entering $1 for last year’s adjusted gross income.

There’s a possibility of the IRS rejecting your electronic return if you do not follow these steps. A tax software would typically send you a rejection email if your return shows conflicts with your AGI.

Notice regarding missing return

Receiving a CP80, or notice of a missing return, could also leave your return in a pending status. If you received this notice and your return is still pending, you should also enter $0 for you 2020 adjusted gross income.

There is a chance that the IRS processed last year’s return after sending the notice. In which case, your AGI of $0 will be rejected. Should this happen, you can refile your 2021 return with the correct AGI.

How to check the status of your 2020 return

It helps to have a transcript to check the status of your 2020 return if you aren’t sure.

If you have a delinquent tax liability and need assistance with your 2020 return, call Optima for a free consultation at (800)536-0734.

You can download the Optima® TAX APP and file an extension for free if you need more time to file your taxes.

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Side Hustles and Taxes: What You Need to Know

Have you ever used PayPal or Venmo? These third-party payment apps have gained the attention of the IRS. Many Americans use these apps casually for group outings, while others have been using them for their side-hustle transactions. Filing requirements have drastically changed in 2021, now requiring taxpayers to report income of $600 or more using one of these apps. Philip Hwang, Lead Tax Attorney, and Optima CEO, David King provide useful tips so that you can understand whether or not you owe, and when you should file your side-hustle income.

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

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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 (childsupport.ca.gov 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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