Taxes & Your Savings

Tax Withholding: How to get it Right

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.

As a W2 earner, you have the option to change your withholdings on your paycheck to either earn more or less. As a taxpayer, it is important to understand the repercussions you could potentially face for you adjusting your withholding and how it could affect you when it comes time to file your taxes. 

Here is everything you need to know about withholding and what you need to be aware of:

Your withholding is determined by several factors:

  1. The amount of income that you have earned.
  2. Your filing status – either the single or married rate.
  3. Number of withholding allowances claimed. With each claim you add on, it reduces your withholding amount.
  4. Additional withholding – an employee can request through their employer to withhold an additional amount from their paycheck. 

How your withholding could affect you:

  1. Withholding too little on your paycheck could lead to you owing a tax balance.
  2. You could be withholding too much. If this is the case, you will receive a refund once you file your tax return.
  3. Your income increased but your withholding stayed the same. You could potentially owe come tax time, make sure to see if your income bracket has changed and consult with a tax professional to see what you can do to avoid owing money or having your refund reduced when you file your taxes.

What you can do to avoid running into tax trouble:

  1. Use a tax withholding estimator to check if you are withholding the most accurate amount. The IRS provides a calculator for taxpayers to use.
  2. Consult with a tax professional to discuss what your withholding options are and what you can do moving forward to ensure you won’t run into any issues come tax time.

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

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Do You Qualify for the Child Care Credit?

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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.

Raising children can lead to unexpected expenses that seem to come out of nowhere. As a parent, you may be wondering what tax benefits are available when you file your tax return. You may just find you qualify for the Child Tax Credit.  This tax credit was put into place not just to help taxpayers get the most out of their tax refund, but to also supply some relief for amongst all the expenses that pile up from having children. 

Since the passing of the Tax Cuts and Jobs Act of 2017 (TCJA), parents can now take advantage of the perks that come with the TCJA for child care expenses – this also includes adult kids that are still living under your household. 

If you’re not expecting a refund this year, the Child Tax Credit can help reduce a possible tax liability that you may owe, with a savings of up to $2,000 per child.  Even if you’re expecting a refund, you could still receive up to $1,400 back on your return. The Child Tax Credit is considered one of the most valuable credits to apply when filing your taxes. 

Some of the criteria you would need to meet in order to qualify for the Child Care Credit is:

  • Your child needs to be a U.S. citizen or legal resident
  • Children must be 16 years or younger 
  • The taxpayer’s child must be claimed on their tax return.
  • The child should have lived with you for more than half the year

Make sure that you take advantage of the Child Tax Credit this tax season in order to get the most out of your refund or help reduce your tax bill. Remember that there are a few qualifying factors to consider before utilizing the Child Tax Credit: age, relationship, support, dependent status, citizenship, length of residency as well as family income. 

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

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Should Taxpayers Consider Using Direct Deposit for Tax Refunds?

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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’re looking to receive a tax refund this season and want it expedited, consider direct deposit.
  • It’s completely free to request direct deposit on your tax return
  • You’ll receive your refund through your bank instead of via check
  • It costs the IRS more to cut a check compared to transferring the money directly to your bank account. 

It’s tax time and everyone is scrambling to get their last-minute tax appointments scheduled before the deadline. If you’re expecting a refund this year, choosing the direct deposit option may be the more viable choice. Let’s explore the benefits:

It doesn’t cost you anything 

Whether you have a tax preparer file for you or you’re filing your tax return yourself, adding your bank information is free to include on your tax return. 

Get your refund faster

When you e-file with your direct debit information on your tax return, you’ll receive your refund much quicker compared to mailing off the return and having the IRS process it.

It’s secure

Using direct deposit information prevents the risk of having a paper check lost or stolen since the funds will be transferred directly to your bank.

You don’t have to e-file

If you prefer to mail out your tax return instead of e-filing, don’t worry, you’re still able to include your direct deposit information and receive your refund through your requested bank of choice.

It will save you money

It costs the IRS more than $1 for every paper refund check issued, but only a dime for each direct deposit made.

Tax season is a busy enough time to get through without having to worry about how you’re going to receive your refund or when it’s going to come. Having your refund deposited directly into your bank account is the ideal way to receive your money because it’s secure, quick, free, and saves taxpayers money. 

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

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10 Travel Hacks when You’re on a Budget

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 ways to travel and go on vacation without having to go broke. 
  • If you’re looking to travel but don’t want to spend the high prices, consider planning around off-peak travel times. 
  • Find a hotel that has additional amenities, saving you more money in the long run.
  • Staying at a hostel is probably one of the most cost-effective ways to travel. 
  • Try doing some sightseeing and look for iconic landscapes that you can’t find back home. 

As the season gets warmer, and with summer looming just around the corner, it’s time to start planning on where you want to go on vacation – and, inevitably, spend more money than usual. Typically, flight costs go up as the temperature does and hotels start to upcharge a bit more than they usually do. So what do you do if you’re on a budget but still want to vacation? Believe it or not, there are ways to travel and go on vacation without having to go broke. 

1. Plan Around Travel Time

Certain times of the year can cause flight and hotel prices to go up because of the surge in tourists that are visiting their location. If you’re looking to travel but don’t want to spend the high prices, consider planning around off-peak travel times. 

If you’re looking to get more bang for your buck, start looking at countries that fit into your budget based on the price of their merchandise and how affordable the country is overall.

2. Check to see if your hotel offers free breakfast

Traveling can become expensive very quickly.  If you’re looking to take a more economical route, consider looking for a hotel that serves their guests’ breakfast. Some hotels provide a few morning snacks while others have a full continental breakfast served to guests every morning. In the end, it might benefit you to find a hotel that has additional amenities, saving you more money in the long run.

3. Hostels may be the cheaper option

Staying at a hostel is probably one of the most cost-effective ways to travel. Not only are you getting the lowest price compared to hotels or rentals, but you’ll also be able to have the opportunity to connect with many other travelers from all around the world. No matter where you travel to, there is usually a hostel that can accommodate you.

4. Explore the town

Believe it or not, the best experiences are typically free. Try doing some sightseeing, like looking for iconic landscapes that you can’t find back home. You could also try looking for hiking trails that may lead to hidden treasures or views you never dreamed of. 

If you’re planning to travel, try to get the most out of your experience without having to hurt your wallet. Always make sure that you compare prices against other hotels and prepare an itinerary ahead of time to project what possible costs you may have to incur. Traveling doesn’t have to be expensive, and you can still have an enjoyable trip without breaking the bank.

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

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Don’t Break the Bank this Valentine’s Day

  • With Valentine’s Day around the corner, it can become expensive to plan out activities for the holiday.
  • If you’re looking to save money, consider making dinner at home using fresh and/or seasonal ingredients.
  • Making a homemade gift is another alternative to purchasing roses or jewelry. Writing a love letter or creating something unique for your loved one might just be the extra effort to show that you care.
  • Preparing in advance for Valentine’s Day will allow you to splurge more without having to put a dent in your wallet. Make plans ahead of time to know how much you will need to save.

If you haven’t planned anything for Valentine’s Day yet and you’re on a budget, don’t start to panic just yet, as there are alternative options to make this Valentine’s Day memorable without having to break the bank. Most people associate this romantic holiday with dining out or giving extravagant presents as a declaration of one’s love, but don’t worry: there are still ways to show your love for your significant other while still staying on a budget. 

Romantic Dinner at home

If it slipped your mind and you forgot to make a reservation, or if you’re on a tight budget and can’t afford to spend additional cash for a fancy restaurant, don’t worry!  You can still have a delicious and romantic dinner without having to be concerned about how much the bill is coming out to. Making a home-cooked meal can be just as extravagant as a dinner at a fancy restaurant without having to shell out the same amount of cash. You can also check your local grocery stores to see what type of promotions or deals they’re having on their produce; more often than not, there’s a sale on some fresh, fancy foods. You can also stick to purchasing in-season vegetables and fruit as they are typically much cheaper than foods that are out of season. 

Homemade gifts

The cost of buying a Valentine’s gift can add up very quickly, especially if you’re buying multiple gifts. The price only goes up if you’re considering buying chocolates or flowers to go with it!  Although everyone loves to receive pricey gifts every once in a while, it isn’t necessary to actually spend the money on something that is already overpriced. Sometimes, the best gifts are the ones that you put the most thought and care into. Writing a letter or creating something by hand shows that you’ve taken the time to create something special and unique, and often can mean more to your significant other than something much more expensive.

Saving ahead of time

If you’re looking to splurge this upcoming holiday, start planning in advance how much you want to spend and what fits into your budget. Once you have an idea, you can start saving ahead of time to ensure that you won’t be caught off guard with any additional expenses. Just make sure that you have enough time to plan ahead and save extra cash, as restaurants typically start getting booked up the week before Valentine’s Day.

Whether you’re looking to save money this upcoming holiday or have a budget, it’s always a good idea to see what you can do to make the most out of Valentine’s day for you and your special someone. Valentine’s Day is about showing someone how much you care about them, there are many ways that you can do this without having to splurge. 

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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Your Financial Diet for the New Year

man planting with son

With each new year inevitably comes the new year resolutions. For most, this is the time of the year we aspire to make big changes in our lives and create new goals to reach by year’s end. One of the most common resolutions that people make is about money: spend less and save more. Giving your finances a fresh start and taking a break from frivolous spending can be very beneficial to you – and give some breathing room to your bank account. This article details how to make your money a priority by starting towards new goals, making a budget and cutting out impractical spending that could affect the way that you save money.

Set goals

One of the first things you should do is to create goals for yourself for the new year. A good way to start is by writing down goals that are realistic and attainable for the year. Make sure that your goals are measurable so that you’re able to track your progress every month to ensure you’re staying on track to meet your objectives.  

Create a budget

Once you have decided what financial goals you want to focus on, it’s time to create a budget.  This will help to give yourself a visual representation of how you’re spending your money. You should start by figuring out how much income you make on a month-to-month basis. If you aren’t salaried or if you receive a commission as part of your compensation, and therefore don’t see a flat rate of pay each month, a good approach is to average out your income from the months prior to seeing what you earn on average. 

The next step is to determine what your spending habits are.  Some expenses are the same every month, such as your mortgage/rent or car payment, while other expenses vary month to month such as your utilities or groceries; you can take the average from your prior months to determine how much you can expect to spend. 

Get rid of the excess spending

After you’ve created a budget, it’s time to take a look at what you’re spending every month – and figuring out what expenses you can do without. A great way to look at where your money is going is by checking your bank statements. It may surprise you, but once you review your expenses, you’ll begin to realize how many times you’ve gone out to eat, went shopping for clothes or splurged a little extra at your favorite coffee shop. Once you are able to identify your impractical expenses, you can be more mindful of them so you can focus on putting more money in your savings. 

The new year allows you to press the restart button on any bad habits that you had previously and this includes how you are spending your money. If you’re looking to refresh your finances, make sure to make attainable money goals, make a budget to ensure that you stay on track and review your expenses regularly to avoid overspending. 

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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Setting Financial Goals for the New Year

Women writing in her journal

The new year is the one time of year when everyone reevaluates their life goals and vow to make big changes in their lives. Typically, you’ll see people going back to the gym to reach their goal weight or decide that this is going to be the year that they’re going to travel the world. While any aspiration you set for yourself is a great start, some of the best resolutions are the ones with objectives that will help you move up into the dream position that you’ve always wanted or even buy that house you’ve had your eye on for a while. Here are a few simple tips to get you on the right track for both advancing your career opportunities and saving more money in the bank.

Look for growth opportunities

More and more companies are looking to create growth for employees internally. If you’re looking for a way to earn more money and gain a new set of skills, you may not have to look too far. You can start by looking at job listings that your company is hiring for, if you see something that interests you and you feel you’re more than capable of handling the position, talk to your recruiting team or even the manager of the department that you are interested in. Alternatively, you can also look at positions at other companies and apply.

Create a budget

With the new year comes new ambitions, which means it may be time to economize your budget for the year. Creating a budget means that you set limits on how much you are spending every month to ensure that you don’t overspend and cut into your savings goals. Typically, a budget requires you limit what your spending on necessary items you need throughout the month. For example, if you are going grocery shopping, stick to the basics that you will need; don’t spend frivolously on snacks and sweets just because you’re craving them at that moment. Avoid eating out consistently throughout the month and save it more for a special occasion. If you are looking to splurge, you can always allot a certain amount of money to spending on personal items throughout the month.

Build your savings

Having a cushion to land on if you fall onto hard times, or if you need cash right away in order to respond to an unexpected emergency, is exactly the reason millions of Americans open up a saving’s account.  If you don’t have one yet, then the new year is the perfect time to start. Whether you’re building your savings to invest in a house, vehicle, school, etc., it’s vital to have a savings account as a backup to ensure that you’re able to get out of a financial bind quickly.

Cancel old subscriptions

Make sure to review your monthly bank statements; you may be surprised to find you are paying for services that you no longer use or thought you had canceled long ago. Be on the lookout for subscriptions or gym services that are automatically being deducted from your bank account. You could potentially save yourself some money.

You don’t have to get a financial rut in the new year, with just a few simple changes you can get off to the right start and reach your financial goals. Looking for career opportunities, starting a budget, opening up a savings account or getting rid of old subscriptions could help you move in the right direction and provide you with a better outlook on your financial future.

Optima Tax Relief provides assistance to individuals struggling with unmanageable IRS tax burdens. To assess your tax situation and determine if you qualify for tax relief, contact us for a free consultation.

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What to do if you need more money for the Holiday Season

Santa Claus on the run with bag

This holiday season is all about giving back to family and friends. It can become very expensive with all the gifts and food that you’re purchasing during this time, leaving both you and your wallet financially exhausted. Before you start becoming concerned about how you’ll get through the holidays, keep in mind that there are ways to prepare yourself mentally and financially. Below are a few ways to start preparing for the next holiday season without breaking the bank.

Start saving ahead of time

Not saving for the holidays can wreak havoc on your bank account and leave you in financial hardship. There are ways to prepare for the holiday season ahead of time to help you avoid going broke. One
way you can prepare is by saving up your change from the entire year. Believe it or not, your change will add up and could potentially cover the cost for several gifts you plan on purchasing. 

If you’re not the type to carry cash in your pocket that could give you change, you can always sell unwanted items that you’ve been holding on to. You can hold a garage sale, or you even sell your items on an eCommerce marketplace like eBay. This is an easy way to make money and clean out your home at the same time!

Look for Black Friday deals

With the holidays around the corner, nearly all department stores are preparing to put their products on sale. Typically stores will release their Black Friday deals in advance so you can review what items you want to purchase at a bargain price. Waiting for items to go on a discount is the best way to get some of the newest products for cheap.

If you have a really tight budget, you can also make homemade gifts. This will seem more like a personal gesture to someone as opposed to just purchasing a gift card and it will seem much more refreshing since everyone will be shopping for the latest tech on the market. 

Take on a seasonal job

If you plan on making the holidays an extravagant affair by buying the latest gifts for friends and family but don’t want to put a dent in your savings, consider taking a part-time seasonal job. This could help boost your holiday budget and give you the ability to spend more money on gifts. Seasonal jobs are typically flexible with the hours they assign so they can work around your schedule. This means that you can request to work just a few hours or ask for more hours so you can build a larger budget for yourself. 

With the holidays approaching, it can become very easy to get caught up in all the holiday shopping and spending. You don’t have to go broke buying presents for friends and family and there are solutions to getting everything on everyone’s wish list and not having to deplete your savings. To avoid curbing your spending, you can start saving in advance as well as look at what deals or sales will be coming up so you can save some cash while buying the most current item. Finally, if you’re wanting to splurge this holiday season but don’t have the cash on hand to do so, consider taking up a seasonal job for the holidays. All the money you earn can go towards the gifts you’ve been wanting to buy all year. 

Optima Tax Relief provides assistance to individuals struggling with unmanageable IRS tax burdens. To assess your tax situation and determine if you qualify for tax relief, contact us for a free consultation.

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Criteria for Qualifying for a First-Time Abatement

homemade folder labels

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

Failure to file your tax return or filing it late

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

Failing to pay on time or make estimated tax payments

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

Failure to deposit certain taxes as required

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

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

Optima Tax Relief provides assistance to individuals struggling with unmanageable IRS tax burdens. To assess your tax situation and determine if you qualify for tax relief, contact us for a free consultation.

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Tax Tips: Your Child’s Summer Camp And Daycare Expense Tax Credit

Summer is right around the corner – the wonderful season of good ol’ sunshine and time for relaxing. School is out for summer vacation and with it comes a whirlwind of family activities and the seasonal tradition of sending your kids off to summer camp. And if you’re a working parent who depends on summer day camp and and daycare, you know summer also means dishing out some extra expenses.

Fortunately, you may have a break. Some of the added expenses may help you qualify for tax deductions and credits that can save you some money next tax season. Here are nine facts you need to know for claiming summer camp and daycare expenses, also known as the Child and Depended Care Credit:

  • Earned income. To qualify, you (and your spouse if filing jointly) must have earned income during the year.
  • Expenses must be work-related. Essentially, this means you’re paying for the camp or daycare for the qualifying child so you can work, or look for work.
  • Correct tax forms. To be able to claim this credit, you must file a Form 1040, 1040A, or Form 1040NR; you cannot claim the credit on Forms 1040EZ or 1040NR-EZ.
  • Age of your qualifying child or dependent. Qualifying child must be under the age of 13 and must be your dependent when care was provided.
  • Some qualifying care restrictions. Expenses for overnight camps or schooling/tutoring costs do not qualify – it is not considered a work-related expense for purposes of the credit. You also cannot claim the credit if you paid for someone else’s child or if someone else paid for your child.
  • Specialized summer camps. Camps that specialize in a particular activity, such as sport camps, math camps, or even art camps can qualify for the credit. Keep in mind expenses that go towards required, but personal items for the camp such as sports equipment, clothing, art supplies or even a laptop don’t qualify – they are still considered personal accessories.
  • Health-related expenses. The costs of “preparing” for the camp or daycare, such as required vaccinations or wellness exams are deductible if you itemize on Schedule A and if the total medical expenses during the year exceed 10% of your AGI, or adjusted gross income.
  • Qualifying childcare provider restriction. Your childcare provider cannot be your spouse, dependent, or the child’s parent.
  • “Are we there yet?” The costs to take your child to and from the daycare or camp location in your own transportation doesn’t qualify as an expense for purposes of the credit; however, if there are transportation fees associated with or included in the camp or daycare during operating hours, the costs may qualify as an expense.

The purpose of this tax break is to financially assists working parents and guardians involved with raising children (or caring for a disabled dependent). The tax credit can be up to 35 percent of your allowable expenses, depending on your income. The total expense limit is $3,000 for one qualifying child or $6,000 for two or more qualifying children.

Of course, we all know the tax code is very long and complex, so other exceptions and restrictions may apply. You can check out the IRS publication 503, Child and Dependent Care Expenses for full details about this tax credit on their website.