Not all students are required to file taxes. However, there are instances where it may benefit you to report student loans.
Are students required to file taxes?
Your student loans do not count as income. Scholarships, fellowship money, and other resources given to you for school are not taxable. The taxable portion of the funds would be expenses such as travel, room and board, or optional expenses.
Tax Breaks for student loans
There are two types of credit that you may qualify for when you file: American Opportunity credit, or Lifetime Learning credit. Paying for education expenses is one of the qualifying factors in being eligible for education tax credit.
Qualifying costs include paying for books and tuition with a student loan. You can track your qualified expense payments through Form 1098-T, which is provided by your school. This form is simply a tuition statement.
Does filing jointly affect your student loans?
The short answer is, yes. Filing jointly can potentially increase or decrease your student loan payments. This is because repayment plans are income-driven, so they heavily rely on your filing status. The adjusted gross income in your tax return is used to calculate your payments.
Is there tax debt relief for students?
For complicated tax situations, it’s always best to work with a professional when you file. Selecting the wrong deductions or reporting your non-taxable income incorrectly can put you at risk for penalties. Over time, IRS penalties accrue interest, and a tax liability is the last thing you need to worry about on top of repaying education debt.
Optima assists clients with unmanageable tax debt find relief and remain compliant with the IRS. If you received a notice, give us a call for a free consultation at (800) 536-0734.
There were about 1.5 million taxpayers that didn’t file a return in 2018. The IRS announced that it has $1.5 billion in tax refunds from 2018 and gave taxpayers until the end of the season to claim their money. If you missed out on claiming your refund, there are steps you can take to make sure you claim other refunds from 2019 and on.
How to claim an old tax refund
Taxpayers have a three-year deadline to claim unpaid tax refunds for federal taxes. While there are instances where it may not be required for you to report your income, filing helps the IRS ensure that you receive any refunds you may be eligible for.
The first thing you should do is make sure that you filed for the year in question. If you missed the filing deadline, you should still file as soon as possible to avoid IRS enforcement. To file a return from 2018 and prior years, you’ll have to file by paper. The final page of your current Form 1040 will tell you which IRS center to send your return to, as it may differ based on your state.
Low and moderate-income families could be eligible for larger refunds by qualifying for Earned Income Tax Credit. This credit is based on the number of children in a household and filing status.
Returns for 2019 and on can be e-filed.
What happens to your refund if you owe back taxes?
The refund is generally applied to any amount that you owe to your state or the IRS. It can be used to offset other overdue balances such as child support and student loans as well.
Optima Tax Relief assists clients with large tax liabilities reach a resolution. Give us a call for a free consultation today at (800) 536-0734.
President Joe Biden has discussed a proposal that would target billionaires in his 2023 budget. The proposal calls for a new minimum tax, forwardly named the “Billionaire Minimum Income Tax.”
What exactly is the Billionaire Minimum Income Tax?
This tax would assess a 20% minimum tax rate on US households worth more than $100 million. However, over half the revenue would likely come from households bringing in more than $1 billion of income.
The proposal document states, “This minimum tax would make sure that the wealthiest Americans no longer pay a tax rate lower than teachers and firefighters.”
Wealthy households that already pay 20% on their full income won’t pay any additional tax under the Billionaire Income Tax proposal. However, if they pay less than 20%, they will be expected to meet the new minimum.
What will the Billionaire Minimum Income Tax accomplish?
The proposal was created as part of Biden’s new spending plan, which is expected to reduce the deficit by $1.3 trillion over the next ten years. About $360 billion of that would be due to this new levy proposal.
In 2021, the federal deficit totaled nearly $2.8 trillion. Should this proposal pass through Congress, we could see nearly half of the deficit decrease over the next ten years.
When would the Billionaire Minimum Income Tax be enacted?
There is still uncertainty surrounding Congress moving forward on Biden’s proposal. Last year, Senate Democrats proposed a billionaires’ tax that ultimately didn’t proceed.
As Congress continues to discuss and debate the new billionaire tax proposal, Optima will update our readers and clients accordingly.
For tax debt assistance, call Optima at (800) 536-0734 for a free consultation today.
Due to the COVID-19 pandemic, millions of US workers lost their jobs. While some were able to return to work in 2021, approximately 25 million people received unemployment benefits and didn’t withhold taxes. The IRS is now looking to collect back taxes for the $325 billion in total benefits and mailed millions of large tax bills this season.
Withholding Unemployment Tax
Most states and the federal government consider unemployment benefits taxable income. You should withhold federal taxes on your unemployment in order to avoid a bill the following tax season.
In 2020, there was a tax break that allowed millions of Americans to owe a lesser amount of tax, or not owe tax at all. However, as the IRS has steadily made efforts to return to normal enforcement activity since 2021, there was no such tax break this year.
What happens if you don’t pay taxes on unemployment benefits?
As with any tax liability, you will receive a tax bill from the IRS via mail. Should you not reach out to the IRS or pay the bill by the end of the tax season, you could face enforcement consequences such as a levy or lien, accrue interest, and lose eligibility for a refund after filing a return.
What to do if you owe taxes for unemployment benefits
If you owe taxes on your unemployment benefits and can’t afford to pay it back in full, you have a couple of options. The first option, if your tax bill isn’t too high by your means, you can contact the IRS to set up a payment plan. This option allows you to negotiate how much you will pay monthly until the bill is paid.
Should you find that your liability is too high for you to pay back or you’re facing hardship that doesn’t allow you to afford your payment options, consider seeking professional assistance such as Optima Tax Relief.
At Optima, we assist clients who owe state and federal taxes, including individual, joint filers, and business filers. Give us a call at (800) 536-0734 for a free consultation today.
The inflation is directly affecting drivers and daily commuters alike with skyrocketing gas prices. In California, the average cost for regular gas is now up to $5.82, or $6.21 for premium. Recently, the government has decided to step in on federal and state levels to alleviate costs and provide support to the public. This has led to the creation of a new gas stimulus, which would support households that own vehicles.
Gas Rebate Act of 2022
The Gas Rebate was introduced by Reps Mike Thompson (CA-05), John Larson (CT-01), and Lauren Underwood (IL-14). The bill calls for an energy rebate of $100 per month, plus another $100 for each dependent for the rest of 2022.
“The Putin Price Hike is putting a strain on our economy,” Thompson said, “and I am proud to be working with Reps. Larson and Underwood to introduce this legislation to provide middle-class Americans with monthly payments to ease the financial burden of this global crises.”
The stipulation is that the average gas prices must exceed $4.00 per gallon; meaning, if at any time during the year the gas prices drop to an affordable price, then the stimulus check would not be dispersed that month.
What are the requirements to be eligible for the gas stimulus check?
Single filers earning less than $75,000 and phases out to $80,000
Joint filers earning less than $150,000 and phases out at $160,000
If you earn more than $80,000, you could still be eligible for a smaller amount.
Gavin Newsom’s Gas Proposal
Governor Newsom proposed $400 per vehicle in direct payments for California taxpayers. The maximum is two cars per household. The proposal calls for the use of $9 billion of the state’s budget surplus to provide the $400 rebate.
Optima will continue to follow news on the Gas Rebate Act of 2022 and Governor Newsom’s proposal, and update our readers and client accordingly.
At Optima, we help clients that are facing tax debt in their journey to a resolution. Give us a call at (800)536-0734 for a free consultation today.
At the start of the COVID-19 pandemic, the IRS was forced to close its doors. Since reopening, there has been an extensive backlog of tax returns that the organization couldn’t seem to catch up on. Many American taxpayers have been waiting for refunds that are a year or more behind. In recent weeks, Commissioner Charles Rettig stated that the IRS backlog is due to clear up by the end of 2022.
What has changed for the IRS?
In addition to the complications of being a business in the midst of a pandemic, being understaffed has also immensely affected the turn-around for tax returns. This month, the IRS has accelerated their recruiting process in order to reach a goal of hiring 10,000 new employees. The hiring push is expected to cut tens of millions of tax returns in the backlog.
What does a clear backlog mean for 2023 filing season?
Commissioner Rettig said, “As of today, barring any unforeseen circumstances, if the world stays as it is today, we will be what we call ‘healthy’ by the end of the calendar year 2022, and enter the 2023 filing season with normal inventories.”
This means that next year, the IRS will likely resume usual enforcement and collection activity. With a lack of backlogged returns and a mostly healthy nation, in addition to thousands of new hires, the IRS can operate normally- if not better than the last two years.
What does IRS enforcement look like?
When you have a penalty or fall behind in paying your taxes, you should expect a notice from the IRS. The notice is the first step in communicating a liability. From there, your penalty can accrue interest daily until paid.
The IRS is also known for applying liens and levies, taking legal possession of your assets. Ideally, you want to contact them before this point to gain compliance and prevent worst-case scenarios.\
What if you owe back taxes currently?
At Optima, we help clients that are facing tax debt in their journey to a resolution. Give us a call at (800)536-0734 for a free consultation today.
