CEO David King and Lead Tax Attorney Phil Hwang reconvene to continue the discussion on IRS installment agreements. In this episode of The Tax Show for People Who Owe, the hosts discuss solutions to unaffordable payment plans. What should you do if you can’t make a payment? Tune in for suggestions.
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Owing the IRS can be a scary and confusing time, especially if you don’t know what to expect. The IRS has protocols to collect past due balances. This article will review the consequences of owing taxes.
The IRS adds interest to your tax liability daily until you pay it in full. The maximum penalty is 25% of your unpaid tax. The current interest rates are:
Penalties include:
The IRS has the ability to garnish your wages when you have an unpaid balance. This means that the IRS can seize your income and apply it to your tax liability. They can also garnish your paychecks, commissions, and bonuses. By paying the balance in full, or setting up a payment plan, you can stop garnishments.
You would receive a notice prior to the IRS levying the balance. This consequence is for delinquent taxpayers and involves the IRS legally seizing your bank accounts, wages, or property to settle the tax debt. To stop a levy, contact the IRS directly. If you can prove that you’re in hardship, they may release the levy. You can also pay the balance in full to release a levy sooner.
Liens are placed on physical assets, such as homes or vehicles, to satisfy tax debt. This means that the IRS takes possession of your assets, or collects a portion of what you make for selling them. You can avoid a lien by paying your balance in full, on time, or by contacting the IRS for a payment plan.
Major tax debt can result in the denial of acquiring a passport. State Departments can also revoke an existing passport if you’re delinquent. The IRS is allowed to deny citizens the right to travel internationally. If you receive a notice while overseas, you may receive a temporary passport to return to the US.
You can reverse passport denial by changing your status (no longer seriously delinquent), if the debt becomes legally unenforceable, or by satisfying the tax debt.
Optima Tax Relief has a team of dedicated and experienced tax professionals with proven track records of success.
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While taxes are inevitable, you want to make sure that you’re not paying more than you have to. You can legally reduce your taxes by using strategies that you may not be aware of. Here are some tax reduction strategies from Optima Tax Relief.
A simple way to reduce your taxes is by making retirement account contributions. You can make these contributions to any traditional IRA until the filing deadline in April. The amount you owe in federal taxes will be reduced as a result of 401(k) and IRA accounts being deducted from your taxable income.
If you have a Roth IRA, it’s funded with after-tax dollars. This doesn’t equate to a tax deduction, but the money in the account is tax-free even in retirement.
By deferring your income, such as year-end bonuses, you can reduce your tax burden for the year. The amount of taxes reduced depends on the amount contributed over the year.
While you are able to defer wage and salary, it’s often more difficult for taxpayers to do so. It’s in your best interest to defer income if you will remain in the same tax bracket or lower the following year. This is to prevent a larger tax bill in the future. If you believe you will be in a higher tax bracket next year, you can accelerate income so that you can pay it on a lower bracket now, than a higher bracket later.
Being a member of the military reserves and traveling more than 100 miles from home qualifies you for a deduction for unreimbursed travel expenses. Eligible military expenses include transportation, meals, and lodging.
As an active-duty service member, moving costs for permanent station changes can be deducted.
Flexible spending accounts are fringe benefits offered by employers to steer part of your pay into a special account. This account can be used to pay bills for childcare and medical expenses.
The money in flex accounts is free of income and Social Security taxes. However, there is a use-it-or-lose-it rule that can forfeit the excess money that isn’t used by the end of the year.
Now that you know some tax reduction strategies, you may be able to put these into practice. Tax relief is available, and can come in different forms for eligible cases. Optima Tax Relief is the nation’s leading tax resolution firm with over $1 billion in resolved tax liabilities.
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There are instances where income will not be taxed, whether or not you report it during tax season. Understanding which earnings are taxable versus non-taxable could save you a lot of time and trouble when you file your tax returns.
The following forms of income are non-taxable:
In order for income to be considered non-taxable, it must be legally exempt.
Some examples of taxable income would be employee wages, or constructively received income. Constructively received income is income that is available to you before the end of the tax year. This could be in the form of cash or deposit.
If an agent receives income on your behalf, this is called assignment of income. Assignment of income is still taxable, even if a third party is accepting your earnings.
Prepaid income is another taxable compensation that may include payment for future services.
Copyrights, patents, and other properties such as oil and gas are examples of royalties. These items are taxable as income.
Business earnings such as rental properties and other investments are very much taxable. Business owners are required to pay taxes quarterly to cover Social Security and Medicare tax.
While non-profit agencies are tax exempt, you still have obligations to file a return.
Taxable and non-taxable income can be a confusing topic. It’s best to ask a professional for assistance if you’re unsure about how or when to report income. Should you find yourself in the midst of a tax liability that is unaffordable, give Optima a call at (800) 536-0734 for a free consultation.
Paying an IRS liability in full isn’t always an option. This is why the IRS offers installment agreements, or payment plans, to help taxpayers pay off their debt. For this week’s episode, CEO David King discusses installment agreement options with Lead Tax Attorney Philip Hwang.
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IRS Unclaimed Tax Refunds 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.
Where is My Tax Refund? The IRS backlog has caused delays in millions of tax refunds, but not all refunds are delayed due to the pandemic. Lead Tax Attorney Philip Hwang and CEO David King discuss how you can avoid refund delays when you file and how your refund may be affected by various circumstances.
What to do if You Missed the Tax Filing Deadline The end of tax season was officially April 18, 2022, which means the IRS is diving into enforcements and catching up on notices. What should you do, and what should you expect if you missed the filing deadline?
Payroll Taxes: What they are and how to file As a business owner, you have the responsibility of paying payroll taxes. It’s important to keep in mind the benefits of e-filing and to consider using this method for your payroll tax return.
Penalty abatements provide relief from IRS tax penalties. How do you know if you’re eligible? If you are looking to resolve your tax burden with the IRS, you may qualify for a penalty abatement. Optima CEO David King and Lead Tax Attorney Philip Hwang discuss the two most common circumstances that would qualify you for penalty relief.
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The IRS shared a reminder for tax-exempt organizations that have a filing deadline of May 16, 2022. Filing is mandatory, so if you need more time, you should request an extension as soon as possible.
Tax-exempt organizations would file one of four tax forms for a return:
You should e-file to save time on processing and to avoid inevitable delays that occur when filing by paper. E-filing also reports your compliance with the IRS.
However, for tax-exempt organizations filing a Form 990, 990-EZ, 990-PF or 990-T for 2021, it’s mandatory to file electronically.
For organizations filing Form 990-N, the IRS website states, “organizations eligible to submit Form 990-N must do so electronically and can submit it through Form 990-N (e-Postcard) on IRS.gov.”
Should you need additional time to file, you can request a 6 month extension by filing Form 8868, Application for Extension of Time To File an Exempt Organization Return. While this form allows you to file later, it does not push payment due dates if you owe the IRS.
Optima Tax Relief takes on clients with both individual and business tax debt. Give us a call for a free consultation today at (800) 536-0734.
IRS Sends Large Tax Bills for 2021 Unemployment Benefits 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.
Does Inflation Affect Your Tax Debt? The state of the economy can be detrimental to your IRS or state tax liability. What exactly happens to your tax debt during inflationary periods? CEO David King and Lead Tax Attorney Phillip Hwang discuss the difference in interest rates, deadlines, and what to do if you find yourself in this circumstance.
IRS Backlog to Clear Up by End of 2022 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.
Gas Stimulus: What You Need to Know 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.
The end of tax season was officially April 18, 2022, which means the IRS is diving into enforcements and catching up on notices. What should you do, and what should you expect if you missed the filing deadline?
For late filers who have a history of filing and making payments on-time, you may qualify for one-time penalty relief. One-time penalty relief could reduce your owed balance by removing penalties such as interest. It’s also referred to as penalty abatement.
Although your return is late, you should still file your taxes as soon as possible. If you are expecting to receive a return, but you filed late, you may have some of the balance offset and receive a smaller refund.
If you qualify for one-time penalty relief, you will not owe a balance and you can expect to receive the full refund.
Because you filed late, your refund will likely be late as well. The IRS has a huge backlog and the returns that are e-filed on time are top priority. Filing by paper and filing late will increase the likelihood of delays.
Penalties for late filing range based on how late you file. Filing a few days late could result in interest on your balance. You will continue to accrue interest daily until you file, or the IRS will take more serious enforcement action.
Some of these more serious actions include levies and account liens, or even garnishing your wages to pay the balance owed.
Cases of tax returns that are years behind, or accounts that have been levied may benefit from professional assistance. Tax debt relief is available for many cases, in the form of payment agreements, offer in compromise, penalty abatement, and innocent spouse relief.
Call Optima for a free consultation today at (800) 536-0734. Our tax professionals may be able to assist you with your case.
