Tax Relief Solutions

Don’t get Taxed twice when making Non-Deductible IRA Contributions

Individuals that earned income throughout the tax year have the option to make non-deductible (after-tax) contributions to an IRA and benefit from tax-deferred growth. One of the most common risks that taxpayers take is paying additional taxes when withdrawing their money from their retirement accounts. Before making after-tax contributions to a traditional IRA, it is important for taxpayers to have an understanding of the rules and how to avoid the double tax trap on withdrawals.

There are certain contribution rules and limits that most taxpayers are not aware of with the IRA withdrawal process. Here are the rules taxpayers need to know about when making non-Roth after-tax IRA contributions:

  • Individuals are required to have earned an income.
  • The deductibility phase-out is determined on the filing status, income, and whether or not an individual is eligible to participate in a retirement plan at work.
  • Contribution limits are the lesser of: $6,000 (plus $1,000 if age 50+) or earned income and apply to aggregate additions to IRAs.

Certain financial institutions where an IRA is kept could cause certain issues such as the institution restricting an individual to add more than $6,000 per tax year. Banks also do not track, report, or verify if an individual made a pre-tax or non-deductible IRA contribution. The responsibility is left up to the taxpayer.

For those who choose to make after-tax contributions to an IRA, are required to give the IRS a heads up that they have already paid taxes on those dollars by using Form 8606. Individuals who fail to report, track, and file the form will most likely lose the ability to shield part of their IRA withdrawal from a tax penalty when the money is withdrawn.

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 Complete Guide to Tax Relief for Small Businesses

If you own a small business, you are entitled to claim tax credits that will help reduce the total amount of taxes you may owe to the government.

Tax season for small businesses can be a confusing time for many business owners, especially if they do not know what they qualify for. Optima Tax Relief helps break down everything small businesses need to know when it comes to filing their taxes or seeking tax relief.

How much Tax does a Small Business pay?

Taxes can be complicated, which is why many small businesses struggle come tax time to understand why they have a tax liability. Some business owners may not even know the corporate income tax rate or what tax cuts they may be eligible for. In addition to income taxes, businesses are also responsible for paying their payroll taxes, unemployment taxes and many others.

According to the Small Business Administration, small businesses are expected to pay an average of 19.8% in taxes based on the type of small business they have. Small businesses with one owner can expect to pay a 13.3% tax rate on average while small businesses with more than one owner will pay an average of 23.6%. Small business corporations, such as small S corporations, will pay an average of 26.9%.

Small Business or Self Employed?

The terms “small business” and “independent contractor” are both commonly used to define a self-employed individual. These two terms are often confused with each other; here is how to tell the differences.

A small business ownership is defined by having others who work for you either as independent contractors or employees. If your business does have employees, you oversee their taxes and are responsible for obtaining Workers’ Compensation Insurance in order to meet your state’s requirements.

Self-employed individuals are responsible for filing a self-employed tax return and paying quarterly estimated taxes if they are expected to owe at the end of the tax year. Self-employment taxes are made up of Social Security and Medicare taxes that are typically withheld from a full-time employee’s paycheck.

Savvy self-employed workers might file their taxes quarterly to avoid penalties and a larger tax bill at the end of the year. For those who are in a self-employed partnership, taxes are typically paid by each member of the partnership based on their income or losses.

If you own a business or are self-employed, you can reach out to a licensed bookkeeper or accountant for guidance to get the most out of filing your taxes and to avoid ending up with a potentially avoidable large tax bill.

Top Small Business Tax Deductions

  • Advertising and promotion costs are considered miscellaneous expenses and if they are ordinary and reasonable, they can be deducted on a small business tax return.
  • Business meals can be deducted both individually and in groups with some limitations.
  • Business insurance expenses can generally be deducted for the ordinary and necessary cost of insurance if it is for your trade, business, or profession.
  • Business interest and bank fees can be deducted based on the interest charged both on business loans and business credit cards. Deductions can also be used to write off any fees and additional charges for a business bank account and credit card.
  • Car or Truck Expenses can be deducted if you own a business or are self-employed and use your vehicle for business-related purposes.
  • Depreciation can be deducted in order to reduce the value of an asset over time due to its age, wear and tear, or decay.
  • Education can be deducted if it maintains or improves skills required for your current job. Tuitions, books, supplies, lab fees, and similar items can also be deducted.
  • Employee Benefit Programs and Qualified Retirement Plans can mostly be deducted but are subject to limits on contributions that are to a retirement plan.
  • Home office expenses can be deducted if you use your residence regularly and exclusively as a principal place of business or a place to meet customer or clients.
  • Interest can be deducted on a business loan as long as you are using your loaned funds for business purposes.
  • Legal and professional fees that are related to running your business are considered deductible. This includes fees charged by lawyers, accountants, bookkeepers, tax preparers and online bookkeeping services.
  • Moving expenses directly related to the moving of business equipment, supplies, and inventory from one business location to another can be deductible.
  • Rent expenses can be deducted if the rent expense is for property solely used for business.
  • Salaries and benefits paid to an employee are tax-deductible expenses if they are deemed to be ordinary and necessary.
  • Supplies for the offices such as printers, paper, pens, computers, and work-related software can be deducted.
  • Travel expenses such as the standard mileage rate, as well as business-related tolls and parking fees can be deducted for your vehicle. Lodging and non-entertainment-related meals can also be considered deductible.
  • Utilities such as real estate taxes, repairs, maintenance, and other related business expenses can be deducted. 

How do LLCs Avoid Taxes?

Having a limited liability company, otherwise known as an LLC, is a legal entity that allows individuals to own and operate a business. LLCs are popular because they offer the same limited liability as a corporation but are much simpler and less expensive to run.

An LLC provides income tax flexibility compared to a sole proprietorship, partnership, and many other popular forms of business organizations. The taxation of an LLC is defined as a pass-through. This means that LLC’s earnings can be passed straight through to the owner or owners without having to pay corporate federal income taxes first.

The IRS also allows an LLC to determine which way their business will be taxes. Owners can choose to be taxed as a sole proprietor, a partnership, an S corporation, or a C corporation.

How can a Small Business Avoid Paying Taxes?

Here are five ways to reduce your taxable income on your small business:

  1. Employ a family member. The IRS allows a variety of options when deciding whether or not you want to employ a family member, all with the potential benefit of sheltering income from taxes. For example, if you have a sole proprietorship, you do not need to pay social security, Medicare and Federal Unemployment Tax if you are employing your children.
  2. Start a retirement plan. If you own your business, then you give up the 401(k) match that is matched by an employer. However, as a small business owner there are multiple retirement account options that can maximize retirement saving and allow you an individual to rake in the benefits.
  3. Change your business structure. Small business owners should consider a Limited Liability Company (LLC). Small business owners may be able to eliminate or decrease the employer-half of taxes for Social Security and Medicare taxes.
  4. Deduct travel expenses. You may be able to reduce your taxes if your job requires that you travel a lot. Although business travel is deductible, it is important to keep in mind that personal travel cannot be added to your business tax return.
  5. Save money for healthcare. The best way to reduce small business taxes is to put aside money for healthcare needs. Small business owners can accomplish this by using a Health Savings Account (HSA) if you have an eligible high-deductible health plan.

Hire a Tax Professional from Optima Tax Relief

Optima Tax Relief is a tax resolution firm with more than 25 years of experience that specializes in providing tax relief to individuals and small business owners that are struggling with IRS or State tax issues. Small businesses that need assistance with filing their taxes or getting out of collections should consider using Optima’s services to get compliant with the IRS.

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The Complete Guide to Hiring a Tax Professional

Most people require assistance when it comes to preparing and filing a tax return. Some may even find themselves having to provide additional information to the IRS and do not know what it is or where to find it.

Hiring a tax professional could save individuals both time and money when dealing with the IRS. Tax professionals can also prepare tax returns, help file income taxes, and assist taxpayers when it comes to dealing with the IRS, tax notices, tax liabilities, audits, and more.

The Benefits of Hiring a Tax Professional

Types of Tax Professionals

There are various types of tax professionals who specialize in focused areas of tax relief or tax prep and carry specific professional licenses.

  • Certified public accountants or CPAs can provide a variety of services such as:
    • Maintaining financial records.
    • Examining financial statements.
    • Providing auditing services.
    • Preparing tax returns.
  • Some CPAs specialize in tax planning and preparation such as:
    • Tax audits.
    • Payment and collection issues.
    • Appeals.
  • Enrolled agents are trained to find federal tax matters and are licensed by the IRS. Enrolled agents can assist with the following:
    • The preparation of both individual and business tax returns.
    • The representation of clients.
    • Other aspects of being a tax professional.
  • A tax attorney is licensed by the state to practice law. Most states require an attorney to have a law degree and pass a test administered by the state (bar exam). Tax attorneys can assist taxpayer with:
    • The preparation of tax returns.
    • Tax planning.
    • Providing advice to clients on long-range strategies for reducing their taxes.
    • Like CPAs and EAs, tax attorneys have unlimited rights to represent a client before the IRS.

Areas of expertise

There are a range of services that tax professionals can provide to taxpayers that can help them understand their taxes better. Based on what service you need, choosing the right tax professional or tax preparer can help you get back on track with your taxes, small business, and much more.

  • Enrolled Agents are IRS-authorized tax professionals who work alongside the U.S. Department of the Treasury by providing representation to individuals who need tax assistance.
  • Certified Public Accountants (CPAs) have state certifications to practice accounting. These experts can help individuals navigate certain tax situations. CPAs are licensed to represent taxpayers before the IRS.
  • Retirement tax professionals can help individuals know how their retirement options will impact their taxes. These types of tax professionals have received advanced training in tax preparations specifically for retirement plan contributions, distributions, and rollovers.
  • Small Business/Sole Proprietor tax professionals specialize in working with small businesses’ tax returns and educate their clients on how to properly prepare both their personal and company returns. These types of tax professionals have specialized training in sole proprietors, partnerships, and S corporations.
  • Investment Income tax professionals specialize in big or small investments, and gains or losses. These tax professionals also show your current and future tax situations.
  • International Taxation tax professionals assist individuals who have lived or worked abroad. These tax professionals are trained in international taxation which includes, claiming foreign earned income exclusions, the foreign tax credit, or treaty benefits for nonresident aliens.

Professional Licenses

Enrolled Agents (EAs) and Certified Public Accountants (CPAs) are both experienced professionals who maintain high ethical standards. The main difference between an EA and CPA is that an EA specializes specifically in taxation. CPAs can provide a wider scope of tax services for individuals.

Working with an EA would be beneficial for those who have IRS issues such as individuals who are in collections or dealing with an audit with the IRS. An EA would be best suited for someone who needs assistance with the IRS to help them with their tax concerns. EAs are also a great option for those who need tax preparation assistance and planning advice for both individuals and businesses.

CPAs specialize in tax preparation that can help individuals identify both their credits and deductions that can help them qualify for an increase in their refund or help lower their tax bill. CPAs are also beneficial if someone needs their tax information compiled, reviewed, or audited. 

When should I hire a Tax Professional?

You should hire a tax professional if you are short on time, are unsure how to file your taxes correctly, or feel overwhelmed by IRS forms with preparing your taxes. Tax professionals can help answer tax questions that you may have and even resolve most tax issues you may have.

The tax code can be very complicated and if you are unsure on how to handle your tax matters, a tax professional can assist. For example, a tax professional can help reduce the risk of any audit and know how to deal with the IRS on your behalf if you do end up being audited. Tax professionals can also help taxpayers avoid making costly mistakes on their tax return such as missed deductions or triggering an IRS letter. Tax professionals can also review previous tax returns to see if there were any errors and needs to be amended.

How to find the right Tax Professional for you

Individuals searching for tax assistance should follow these steps in order to find a tax professional who best fits their needs:

  1. Confirm your preparer has a tax identification number (ITIN).
  2. Make sure to confirm tax fees to ensure you are not being overcharged.
  3. Avoid tax preparers who do not e-file tax returns.
  4. Make sure that your tax preparer signs their name and provides their Preparer Tax Identification Number (PTIN) on your tax return.
  5. Make sure your tax professional can respond to the IRS. Enrolled agents, CPAs and attorneys that have a PTIN can represent you when it comes to IRS audits, payments, and collection issues.

10 Questions to ask a Tax Professional

  1. Do you have an IRS-issued Preparer Tax Identification Number (PTIN)?
  2. How do you keep up with the latest tax law? Are you regularly taking education courses?
  3. Do you offer a free initial consultation?
  4. Will you be the one preparing my return or someone in your office?
  5. Do you offer IRS e-file, and will my tax return be submitted to the IRS electronically?
  6. Will you keep my records and receipts on file? How long will you keep my records for?
  7. When do you require payment?
  8. When can I expect to receive my completed tax return?
  9. What happens if I get audited?
  10. Do you outsource your tax preparation?

Things to look out for when hiring a Tax Professional

Taxpayers should be aware of any red flags they experience when looking to hire a tax relief professional. Here is what individuals should look out for before hiring a tax professional:

  • Check the preparer’s qualifications.
  • Review the preparer’s history.
  • Ask about services and fees.
  • Make sure that the preparer offers e-filing.
  • Ensure your preparer has open availability if you have additional questions regarding your taxes.
  • Never sign a return if your preparer has added their name or PTIN.

How much does it cost to hire a Tax Professional?

The average cost of hiring a tax professional will depend on the complexity of the case that they are working on.

Consequences of not Hiring a Tax Professional

The federal tax penalties you could face by not hiring a tax professional to help you prepare your taxes could far outweigh the cost of soliciting tax help. Here are the repercussions individuals could face if they choose to not hire a tax professional:

  • Filing your own taxes could be time-consuming and confusing if you have never filed before.
  • You can miss out on tax preparation fees that could have been deductible.
  • You could miss out on certain credits or deductions if you are not aware of them.
  • If you get audited, you will not have a tax professional that can assist you through the process.
  • Filing your own taxes could lead to you making avoidable mistakes that could cause you problems with the IRS down the road.

Tax Relief Services at Optima Tax Relief

Optima Tax Relief offers tax relief services to individuals who are struggling with their IRS or state tax debt. Taxpayers that need assistance with tax preparation, setting up a payment plan with the IRS, getting out of collections, resolving an audit, or are looking to see if they qualify for a possible reduction in their total tax debt, should consider using Optima’s services.

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What Taxpayers need to know about Their Right to Finality

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.

For taxpayers who have been working with the IRS, it is important for them to know that they have a right to finality. Specifically those who have had their tax return(s) audited by the IRS should know that there is a Taxpayer Bill of Rights in place to protect them.

For taxpayers currently in the audit process, here is what you need to know about your right to finality:

  • Taxpayers have the right to know
    • The maximum amount of time they have to challenge the IRS’s position.
    • The maximum amount of time the IRS has to audit a tax year or collect a tax debt.
    • When the IRS has finished an audit.
  • The IRS typically has three years from the date that a taxpayer files their return to review for an additional tax for the year in question.
  • There are very few exceptions when it comes to the three-year rule. An exception would be considered if a taxpayer fails to file a return or files a fraudulent return. In either case, the IRS would have an unlimited amount of time to assess tax for the tax years in question.
  • The IRS generally has 10 years from the date of assessment to collect unpaid taxes. It is important for a taxpayer to know that the 10-year period cannot be extended unless a taxpayer enters into a payment plan or the IRS obtains court judgments.
  • A 10-year collection period may be suspended when the IRS cannot collect money because a taxpayer has an ongoing bankruptcy or there’s a collection due process proceeding involving the taxpayer.
  • A taxpayer will only be subject to one audit per tax year. The IRS has the ability to reopen an audit for a previous tax year if the IRS deems it necessary.

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

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How Long does it Take to be Placed on an IRS Agreement?

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.

Dealing with the IRS can be a stressful ordeal, especially if you owe a tax liability. When attempting to set up an installment agreement with the IRS, it can take anywhere from a few hours to a few months depending on the type of agreement you’re attempting to qualify for. 

The IRS allows taxpayers to set up payment plans, such as extensions to pay and “streamlined” installment agreements. For more complicated agreements, the IRS will require that you provide financial information in order to verify whether or not you qualify.

Here are your options when attempting to get on a payment agreement with the IRS:

Request an extension. If you need more time to pay off your tax liability, the IRS allows taxpayers to request an extension for up to 120 days. The IRS will grant this extension for any tax balance amount as long as taxpayers pay their balance owed before the deadline. If the bill is not reconciled before the due date, the IRS will place the taxpayer in question back into collections. 

Set up a simple payment plan. These agreements are typically called streamline installment agreements and can be set up by a taxpayer that has a tax bill of up to $50,000. Taxpayers must pay their balance back within six years and generally the IRS does not file a tax lien. 

If you were previously set up on an agreement and defaulted, you may need to contact the IRS to set up another one and provide your current financial information.

Taxpayers that owe between $25,000 and $50,000 will be required to pay by direct debit or a payroll deduction in order to avoid a lien being filed against them. The typical time frame to set up this agreement is between 4-6 weeks.

Request a payment plan for a tax bill over $100,000 OR currently not collectible status. For those who have a tax balance over $100,000 or you’re financially strapped and unable to pay back the IRS within an 84 month period, the IRS does provide assistance. A taxpayer can request a currently not collectable status if they are in financial hardship and don’t have the ability to pay their tax liability. 

A taxpayer must submit their financials and prove that they are in a hardship in order to qualify for this agreement. The IRS typically files a tax lien for those who owe more than $10,000.

The agreement can be requested over the phone however, it can take months to complete. This is because the IRS requires a taxpayer’s most current financials as well as additional detailed information. If this agreement is requested via mail, it will typically take the IRS 1-2 months to consider your request and could even ask that a taxpayer forward more information if they deem the documentation they have on file is insufficient. 

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

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How to Find a Good Tax Lawyer

When looking for tax relief, how to find a good tax lawyer is critical.

Tax law is complicated and highly technical. In the legal world, the field of tax law is considered one of the more demanding specialties. Tax lawyers deal with a wide range of situations and the rules and laws are continually changing. Not only does a tax lawyer need to have superlative legal skills to succeed, they also need certain personality traits. Find a good tax attorney to help you with tax relief and avoid dealing with the IRS directly.

What qualities make a good attorney?

Consider these academic and professional guidelines for tax attorneys when looking for tax relief.

  • A good tax attorney has specific experience in the field of taxation. For example, are your tax issues related to a real estate transaction? Or are you running a business and need assistance with a sales tax challenge? Or with filing your income tax? A good tax lawyer will concentrate within certain fields and will be familiar with the laws and the protocols needed to address those particular areas of tax relief.
  • Being associated with an office that is exclusively focused on tax related matters is another important quality for a tax attorney.
  • Having an LLM (Masters Legal Degree in Law) in taxation is a sign that your attorney is serious about his profession and is academically qualified to work within the field of tax law.
  • A good tax lawyer has firsthand experience working with the IRS.
  • Successful tax attorneys are continually refreshing their knowledge and keeping up with the continually changing nature of tax law.
  • Tax lawyers should be in good standing with the Better Business Bureau and their local state bar.
  • Good tax attorneys keep their clients informed and up-to-date during the tax relief process.

Skills of a Good Tax Lawyer

Tax attorneys also need to have certain personal skills and abilities to succeed in the area of tax relief. Consider these skills when finding a tax lawyer.

  • A good tax lawyer has high level oral communication skills. They are the intermediary between you and the tax authorities. They need to be able to explain complicated issues and represent your case in a clear manner.
  • Above average written communication skills are another important qualification of a good tax attorney. Tax lawyers write complaints, documents and lawsuit responses.
  • Critical thinking skills are necessary when your attorney is working on a tax relief case. A good tax lawyer can take a look at a case, pick up on any weaknesses, and choose which course of action to take based on the specifics of the case.
  • Having an analytical and organized personality is highly important for a tax attorney. Tax relief cases are usually very complicated and involve numbers and specific, detailed information. A good tax attorney will be able to stay on top of all the elements of the case.
  • Good interpersonal skills are critical for a tax attorney to work effectively with a client in a tax relief case. They need to be able to communicate effectively with both the client and with the tax authorities.
  • Having a committed and persevering personality are necessary qualities for the person who will be representing your tax relief case.

Taxes are complicated and the laws are constantly changing. Your financial future is often at stake in a legal situation involving taxes. Getting appropriate representation for tax relief is very important and knowing what makes a good tax lawyer is a very important first step in getting a resolution.

Need some tax relief? Solutions start here. Learn about tax reduction strategies with Optima Tax Relief. Contact us for a tax consultation today.

Your IRS Letter Explained: What to Do

man late at work

As a taxpayer, one of the most frightening things you could receive in the mail is an IRS letter. Depending on the notice that you receive from the IRS, it can cause anxiety and fear, and you may even feel unsure about what your next move will be or what tax solutions may be available to you. The IRS does have tools available that taxpayers can utilize for IRS tax help, even if they received a notice that makes it unclear what their next steps would be. Below are some of the most common collection notices sent out to taxpayers every year. 

CP501/502

If you’ve received a CP501 notice, it means that the IRS is attempting to notify you of a past balance due. The IRS will request that you take action in order to resolve your outstanding balance. A CP502 notice also doubles as a reminder that the IRS sends about your tax balance. Typically, each notice indicates the interest and penalties that have accrued in addition to what you owe to the IRS. 

If you receive these types of notices, the IRS is letting you know of what the current balance, including interest and penalties, is owed. Once you confirm that the balance is accurate, you can either pay the balance for the tax year in question or contact the IRS to get set up on a payment plan. 

CP504

A CP504 notice is a secondary notice that the IRS will send to alert you of your tax debt if you owe a tax balance. This notice is to also notify you that they’re preparing to start collection action and to seize any tax refund you may have received. The IRS will continue their collection action against a taxpayer until their balance is paid in full. 

To avoid the IRS sending you into collections, it is important to stay compliant. You can do this by paying off your balance in full with the IRS or asking to be placed on a payment plan. It is also paramount that you continue to monitor your mail to ensure that you don’t receive any further notices from the IRS.

LT11/CP90

An LT11 is a notice to remind a taxpayer that they have an overdue payment for overdue taxes.

The IRS will send a CP90 notice if they have attempted to reach out to a taxpayer multiple times about their tax balance and have yet to receive a response. The letter states that the IRS has the intent to seize a taxpayer’s property or rights to their property if they fail to resolve their outstanding balance. 

Both these notices are a warning that the IRS will begin to take collection action against the taxpayer and it is up to the taxpayer to either continue to stay in collections with the IRS or settle their debt and get compliant. At this point in time, it is vital that you attempt to rectify the situation and get help with IRS debt by contacting them immediately to resolve your liability in addition to any interest and penalties that you have accrued.

Regardless of what notice you have received, it is important to review the notice and resolve the situation if needed. The IRS typically sends written communication to taxpayers to notify them of their tax balance and to reconcile their liability as soon as possible. If you need tax help and don’t know the first step to resolving your balance with the IRS, a tax relief company may be your best bet. A tax relief company will work with the IRS on your behalf to address your tax issues so you can be compliant moving forward.    

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 Fresh Start Program: How It Can Help with Your Tax Problems

The IRS Fresh Start Program Initiative, first announced, February, 2011, has had one goal: to make it easier for individuals and businesses to pay their back taxes and penalties. The Initiative has been expanded since then, but still holds true to its original purpose. How exactly will it affect you if you’re struggling to pay taxes? Here are the four components that Fresh Start Program has changed for your benefit.

What Is the IRS Fresh Start Program?

The IRS Fresh Start Program is a tax relief program that is designed to allow taxpayers to pay off substantial tax debts affordably over time.

Back in the bad old days, the image of the IRS was one of intimidation. Whether deliberately cultivated or not, the IRS did little to dispel this perception. In recent years, the IRS has sought to reboot the way it interacts with taxpayers, with agents receiving training and instruction in how to assist taxpayers who are in arrears rather than torment them. The IRS Fresh Start program combines penalty relief, installment payments; lien releases and a program known as Offer in Compromise that allows some taxpayers to settle their federal tax debts for less than what they actually owe.

How the IRS Fresh Start Program help waive Tax penalties

Originally, when paying and filing your taxes, missing the tax filing deadline meant immediate interest charges and penalties. But with the Fresh Start Initiative, qualifying unemployed taxpayers can apply to have Failure-to-Pay penalties waived for six months. This means that individuals have until October 15th, 2020 to pay their 2019 taxes.

How do you qualify for the IRS Fresh Start Program?

To qualify for the Fresh Start Program, you must:

  • Have been unemployed or seen a decrease in income
  • Earn less than $100,000 a year individually
  • Earn less than $200,000 a year as a couple
  • Not have a large tax balance from the previous tax year
  • The IRS Fresh Start Tax Relief program was launched in 2012 to help taxpayers who were struggling from the effects of the ongoing financial crisis. The first aspect of the program provided some unemployed taxpayers with exemption from the failure-to-pay penalty. Under this initial slice of the Fresh Start Initiative, taxpayers received a six-month reprieve from penalties on taxes owed for their 2011 federal tax returns. Although interest was still applied to any unpaid taxes, penalties were suspended from April 17 to October 15, 2012.

    Easy Installment Agreements

    The IRS Fresh Start Program also raised the maximum tax owed for taxpayers from $25,000 to $50,000 to qualify for streamlined repayment plans. Under the streamlined installment payment agreement program, taxpayers may establish payment plans online through the Online Payment Agreement page located on the IRS website. Taxpayers who owe more than $50,000 may still establish installment agreements but must either file a Collection Information Statement (Form 433-A or Form 433-F) or make sufficient payments against their past-due tax balance to bring the total tax owed below the $50,000 threshold.

    How To Withdraw Notice Of Federal Tax Lien

    The Fresh Start Initiative raises the minimum threshold for filing an IRS Notice of Federal Tax Lien on taxes owed from $5,000 to $10,000. The new standard is not retroactive, and the IRS may still impose liens against taxpayers who owe less than $10,000 when the agency deems that circumstances warrant doing so. To request that the IRS withdraw the Notice of Federal Tax Lien against liens that have been released, taxpayers must file Form 12777 – Application for Withdrawal, available on the IRS website. When citing a reason for the request, taxpayers should check the last box which states “the taxpayer, or the Taxpayer Advocate acting on behalf of the taxpayer, believes withdrawal is in the best interest of the taxpayer and the government.”

    How To Make use of ‘Offer in Compromise’ and settle for less Tax

    An Offer in Compromise, according to the IRS Fresh Start Program allows taxpayers to settle their obligations to the IRS for less than the total amount owed. The IRS only allows taxpayers to obtain relief under the Offer in Compromise program in circumstances where requiring repaying the full back taxes owed would constitute an undue burden or in cases where taxpayers demonstrate that they will be unlikely ever to be able to pay the full amount owed. Traditionally, the IRS has been stingy about accepting Offer in Compromise proposals from taxpayers; as a result, very few taxpayers were able to qualify for the program.

    The IRS Fresh Start Initiative has established more flexible standards in evaluating the financial standpoint of taxpayers who request relief under an Offer in Compromise. As a result, more taxpayers may qualify. To be eligible for this IRS tax relief program under the Offer in Compromise program for grounds other than Doubt as to Liability, taxpayers must meet all of the following conditions.

    Requirements to qualify for the Offer In Compromise program:

    • Cannot have an open personal or business bankruptcy petition
    • All required tax forms must have been filed
    • All required tax payments for the current year must be paid
    • Business owners with employees must have made current quarterly tax payments

    An Offer in Compromise may be either for a single lump-sum payment or for installment payments. To request an Offer in Compromise, taxpayers must submit Form 433-A (OIC) for individuals or Form 433-B (OIC) for businesses along with either $205 to cover the application fee and either a payment of 20 percent of the proposed lump-sum payment or an amount equal to the first proposed monthly installment payment. Individuals and sole proprietors who qualify under Low Income Certification guidelines set by the IRS are exempted from paying the application fee.

    New Installment Guidelines according to Fresh Start Program

    Installment agreements allow a person to make monthly payments on their tax debt if they can’t afford to pay the total at once, and/or aren’t eligible for an Offer in Compromise. In the past, once an individual’s tax balance reached $25,000, the IRS began conducting a financial analysis of the person’s income and expenses to determine how much the taxpayer would pay per month. Additionally, a Notice of Federal Tax Liens was filed.

    Under Fresh Start, more taxpayers will be able to avoid this invasive process altogether, as the tax balance threshold has been raised to $50,000. At that point, once the installment agreement process is started, you’ll now have six years to pay the debt off. If you are considering entering an installment agreement, let us know and we’ll make sure you qualify.

    Notice of Federal Tax Liens and the Fresh Start Program

    If an individual fails to pay their tax debt the government can file a claim against that person’s property with a federal tax lien. “Property” includes everything an individual owns, including real estate, vehicles and financial assets. The Notice of Federal Tax Lien alerts creditors that the government has a legal right to a taxpayer’s property. This may limit your ability to get credit.

    Similar to installment agreements, FSI has raised the Notice of Federal Tax Lien filing threshold to $10,000 from $5,000. The IRS might still choose to file at an amount less than $10,000, but it’s not as automatic as before.

    How the IRS Fresh Start Program can help with your Tax problems

    While none of these alternatives represents an easy tax solution, each of them does provide a viable avenue for tax relief. If you have been struggling to pay your federal income tax burden, investigating possible assistance under the IRS Fresh Start Tax Relief program is definitely worth your while, either on your own or with the assistance of a tax professional. You may find that your overall tax burden is significantly reduced.

    Wondering if you’re eligible for the Fresh Start program? Give us a call.

    Do you need tax relief help? If you’re struggling with paying your taxes, don’t know how to fill out an Offer in Compromise or don’t know which forms to file, contact us today. We’ll help you take advantage of the Fresh Start Initiative, and deal with the IRS so you don’t have to.

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    Summer Travel Plans? Stay Protected From Identity Theft

     

    The warm weather is finally here and with it comes the busy travel season that so many people have excitedly been anticipating. Some have been planning for months in advance, booking flights abroad and hoping to fit as many countries as they can into their itineraries.

    Be cautious of being a target for identity thieves before you start to head out on your summer adventure. Travelers are an extremely attractive target for identity thieves, especially if you’re traveling to a place you’ve never ventured to before. Any locals – or scammers! – can probably pick up on this. Many travelers also rely on public Wi-Fi to look things up pertaining to their trip. Add to this the fact that you are likely carrying around more documentation than usual, and you’ve got all the makings for a sizable bull’s eye on their back.

    An American Express Spending & Saving Tracker revealed that 8 in 10 Americans have summer travel plans, with 72% of these planning stateside escapes and 15% traveling overseas. No matter how you dice it, there’s going to be a lot of movement in the skies and on the roads in the coming summer months.

    With millions of people packing their bags and leaving their homes for adventures, retreats and getaways, there will surely be an uptick in opportunities for identity thieves this summer. Experian’s Summer Travel and Budget survey showed that identity theft personally affects nearly one in ten travelers and that one in five people have had sensitive information lost or stolen while traveling.

    Below are quick identity protection tips for each stage of your summer travels and adventures:

     BEFORE YOU GO:

    • Check for any travel warnings or alerts for your destination country. The Department of State provides the latest security messages. It’s always best to be in the know about any crime – such as pick pocketing – happening in your destination country so that you can be as vigilant as possible.
    • Put only your last name and phone number on your luggage tags. Your full name and address are one too many personal details if put in the wrong hands.
    • Notify your bank and credit card companies of your travel plans. Many such companies now place freezes on accounts when they see suspicious activity like out-of-country use as a means to prevent fraud – it’s easy to avoid this inconvenience!
    • Don’t post any vacation plans on social media. It’s okay to be excited about your trip, but you don’t need to publicize it. You never know who could be lurking behind a computer screen happy to learn that your house will be unattended for a period of time.
    • Put a hold on your mail while you’re gone. An overflowing mailbox is a jackpot for an identity thief. It not only signifies that you’re away, but thieves can then steal the pieces that contain your personally identifiable information (PII).
    • Clean out your wallet and/or purse before leaving. Remove any receipts and expired cards, along with anything else you don’t absolutely need to be carrying with you. Keep only the credit and debit cards you know you will need to use while traveling. Less is more!

    WHILE TRAVELING:

    • Limit your use of public Wi-Fi as much as possible. While these networks are incredibly convenient, they are very often unsecured. This means that any information you input while connected to the hotspot could be viewed by someone else. Never access your financial account or any other sites that require a password when using public Wi-Fi.
    • Use cash when possible and credit cards over debit cards. Travelers are often warned of the dangers of carrying around large amounts of cash. However, depending on where you are traveling, some merchants still practice questionable transaction processes – making cash a safer method of payment. In most cases though, using a credit card is considered safe. Furthermore, it’s almost always recommended to use the credit option of your card versus the debit option. If your card numbers ever get into the wrong hands, most credit card companies will quickly reverse or cover fraudulent charges, while recovering funds from your drained bank account can be more complicated.
    • Be cautious when using ATMs. Inspect the machine carefully before inserting your card. Fraudsters can attach card skimmers to the slot that capture your information when you insert it; very often, these look like they are part of the machine. Also, always shield the keypad when entering your PIN – scammers can also set up hidden video recorders. The safest ATMs to use are attached to banks in well-lit areas.
    • Lock up valuables and personal documents at the hotel. This includes boarding passes, confirmation emails, passports, and jewelry. Even hotel staff have been known to go through rooms while they are cleaning and steal items. Everything is much more secure in a safe!
    • Keep your phone password-protected. If you’re not the type of person to keep a password guard on your phone, make an exception while traveling. If your phone is ever lost or stolen, an identity thief could easily access banking apps and social media accounts.

    WHEN YOU RETURN:

    • Check your credit card and bank statements often for any fraudulent activity. It’s best to catch fraud as early as possible so that you can take action immediately. This minimizes damage and makes resolution that much easier.
    • Check your credit report throughout the year. Federal law requires the three major credit bureaus to provide you with a free credit report once a year. You can stagger these free reports every four months from each bureau so that you’re seeing your report somewhat regularly. Make sure you recognize everything that’s on there – if anything doesn’t ring a bell, look into it!
    • Change your PINs and passwords after a trip. This is especially important if you logged into any accounts while on the road or accessed an ATM. Traveling can open you up to all kinds of vulnerabilities; don’t take the risk with your PINs and passwords.
    • Make sure you properly dispose all trip confirmation emails and boarding passes. This means shredding them before tossing them into the recycling bin. These types of documents contain more information than most people think. Barcodes on boarding passes can actually contain your frequent flyer information, and other such documents reveal itineraries and other personally identifiable information that identity thieves would be happy to misuse.
    • Lastly, now is the time to post about your adventure on social media. Now that you’ve returned, you can share all those stunning snaps you shot. We really do want to hear about how much you enjoyed your vacation!

    Of course, nothing compares to the peace of mind you will receive from Optima’s ID Protection Plan, which includes services like suspicious activity alerts and identity monitoring that will provide you with an extra boost of confidence when you return from a trip. Most importantly, if you do fall victim to identity theft, our 24/7 Identity Theft Resolution Service Team will work to restore your identity and prevent further damage.

    Learn more and enroll in Optima’s ID Protection Plan at https://optimatax.idprotectiononline.com/enrollment/.

    Settle Tax Debt

    It is indisputable that the Internal Revenue Service is one of the most powerful collection agencies in existence. The IRS has the authority to access every U.S. financial entity in its mission to collect back taxes. The IRS can even penetrate the cloak of corporate anonymity to affix personal liability to its officers, with the ultimate authority to decide just who is responsible.

    gavel strike

    The IRS “Hammers”

    Although there are some constraints, the IRS has vast powers, defined in its approximately 80,000-page Tax Code. Specifically, the IRS has the authority to:

    • attach a lien on a taxpayer’s property to protect the government’s ability to collect delinquent taxes,
    • apply an outright levy, which freezes cash, securities and investment accounts, and seizes whatever property the taxpayer holds for sale to pay the tax debt, including a significant portion of a taxpayer’s paycheck.

    The IRS files a lien notice at the taxpayer’s local courthouse. An IRS lien is like an 800-pound gorilla: it acts as official notification that the IRS has first dibs on the taxpayer’s property. Third parties who are entangled within an IRS lien or levy — bank officers, employers, insurance brokers for permanent life insurance policies sold to the taxpayer — have absolutely no choice but to comply with IRS legal sanctions on the delinquent taxpayer.

    Facing Tax Debt Realistically

    Obviously, paying income taxes on time — or later with penalties — will forestall IRS liens and levies. The IRS auditor works under the premise that if the taxpayer has assets and owes taxes, and that tax debt takes precedence over any natural desire to preserve wealth.

    Time Is Not On Your Side

    On the other hand, for taxpayers who are in dire financial straits, there are options in getting out of tax debt. However, those options never include trying to stonewall the IRS, because time is definitely not on the taxpayer’s side.

    The IRS Paper Trail

    A formal notification process begins once the IRS determines that a taxpayer owes back taxes. It takes about six weeks from the first formal notification until the final notice is issued. At that point, the taxpayer has 30 days to appeal.

    Once a lien or levy has been issued, the IRS has provisions to lift or remove them. Each provision has the goal of freeing up the taxpayer’s assets to make it easier to pay off the debt.

    Time Payments And Offers In Compromise

    An experienced attorney can apply for a time payment plan to settle delinquent tax debts in manageable monthly installment payments. The IRS favors direct bank debits, but taxpayers may also mail in paper checks or money orders.

    Another option is an IRS Offer in Compromise, which, allows taxpayers to settle their delinquent tax bills by paying only a portion of what they owe. As you might imagine, there are strict eligibility requirements to qualify. The bottom line is that taxpayers must be able to demonstrate substantial financial hardship for the IRS to accept an Offer in Compromise.

    Getting Professional Tax Assistance

    It’s easy to become overwhelmed when attempting to navigate complex IRS regulations, voluminous and confusing instruction booklets and forms on your own. Owing money to the IRS can be a confusing and intimidating thing. It is hard to know what you’re supposed to do to settle that tax debt.

    Especially if you are faced with the immediate threat of a levy, or wish to negotiate an offer of compromise, it’s wise to seek professional help. That’s where Optima Tax Relief comes in. At Optima Tax Relief, it’s our job to be in your corner, helping you to eliminate IRS tax debt.

    Let Optima Tax Relief Fight For You

    We actually work with the IRS and the state authorities every day on behalf of our clients, and we use our knowledge to benefit you. From day one, our experienced staff is prepared to offer representation to provide you with full legal protection while we negotiate on your behalf. Further, we are able to help you understand what you should — and shouldn’t — say to the IRS.

    Your tax issues are not too big or too small for us. If you need help or have questions about preparing your tax paperwork, we can help you. If you’re facing liens, levies, wage garnishments, criminal action or other penalties, we can help you with that as well. And if you need someone to negotiate on your behalf or to represent you before auditors or revenue officers, we are prepared to do so fearlessly.

    Now is the time to rely on the experience and dedication offered by Optima Tax Relief. Contact us today for more information on how you can settle your tax debt.