With the pandemic still ongoing and many Americans out of a job, the distribution of two stimulus checks has helped many individuals pay their bills. Now that it is tax filing time, tax filers should have received Notice 1444 in the mail from the IRS. This notice will be required when filing your taxes in order to notify the IRS you have received the stimulus check.
Understanding Notice 1444
If you were sent Notice 1444, you probably received an economic impact payment (EIP), also known as the stimulus payment. Notice 1444 was sent out to each stimulus recipient within 15 days of the IRS issuing out the payment. The notice should indicate the following:
The amount of the payment.
A phone number to call if a recipient has any questions.
Where a recipient can find information about their payment.
How the payment was made i.e. direct deposit, check, or debit card.
A reminder to keep the notice with your taxpayer records for your 2020 tax return.
Why Notice 1444 was mailed out
Notice 1444 was issued by the IRS to recipients of the economic impact payment. It should be kept with other important tax documents to be used for when it comes time to filing your 2020 taxes. For those who did not receive the full amount for the stimulus payment but qualified for the full amount, having Notice 1444 will come in handy. The notice will reflect the total amount you received and can be used when filing your taxes in order to get the rest of your payment.
Is there a deadline for IRS Notice 1444? There is no deadline for Notice 1444. It is important that taxpayers hold on to their notice and file it away with their other tax documents for end of year tax preparation.
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.
Receiving a notice from the IRS can be stressful and terrifying, especially if you don’t know what it means. Join Optima CEO David King and Lead Tax Attorney Philip Hwang as they dive into various IRS tax notices that a typical taxpayer could receive and show you how to look out for some common tax scams.
Taxpayers can expect to receive a third stimulus check in addition to aid for individuals who are unemployed and facing eviction from their homes. The new Economic Rescue Package would also provide assistance to small businesses, states and local governments and will increase funding for vaccinations and testing.
Individuals may be able to receive up to $15,000 when buying their first property thanks to President Biden’s proposal. Although the details of the credit are still being worked out, if passed, taxpayers can expect to receive up to $15,000 in advance when purchasing their first home.
Taxpayers should start collecting all their important tax documents ahead of tax season in order to get the most out of their tax return and to ensure that avoidable errors are not made that could potentially delay their refund. Here are some tax filing tips taxpayers need to review before filing their taxes.
Working from Home? Here’s what You need to know about the Home Office Deduction.
A large number of Americans have made the transition from working in the office to working at home. With so many people starting to file their tax return, they may have questions about if they qualify for any working from home tax breaks. Here’s everything you need to know about claiming a home office tax deduction.
Many taxpayers have questions surrounding their Economic Impact Payments (EIP). What to do if they haven’t received their latest stimulus check? Do they qualify to receive the full amount? How can they check the status of their payment? Optima CEO David King and Lead Tax Attorney Phillip Hwang provide answers to some of the most important questions Americans have regarding Economic Impact Payments.
The IRS and the Treasury Department have already begun to distribute a second round of stimulus checks to individuals. For those who opted for direct deposit, they can expect to receive their money very soon if they haven’t already. Taxpayers who are receiving their economic impact payment in check form, can expect to receive it throughout all of January.
If Student Loan Forgiveness is Adopted, it Could Impact Your Taxes.
Student debt cancellation is currently being discussed between Senate Minority Leader Chuck Schumer and President-elect Joe Biden. Because of the ongoing pandemic, many Americans are struggling to financially stay afloat because of the ongoing pandemic. Student loan relief could help those who don’t have the ability to make their monthly payments. Here are some possible tax implications you could face if your student debt goes away.
Although the stock market has been unstable throughout the course of the pandemic, millions of individuals have still been investing in stocks and making the most of stock prices that have hit their lowest. Those who have been investing in the stock market or have sold any stock will need to report any capital gains they received to the IRS in order to avoid any tax implications.
Small Businesses have been hit with a PPP tax Change. Here’s Everything You need to Know.
The IRS has added additional information to the Small Business Administration’s Paycheck Protection Program. The additional details entail that tax-deductible items will not be deductible if they were paid through PPP funds.
Every tax year, a large number of people are claimed as dependents on tax returns. Under certain circumstances, a dependent can be claimed if they are not related to you. Once someone is identified as a dependent and placed on your tax return, you’re essentially informing the IRS that you’re financially responsible for that person.
For 2020, the dependent credit for other than qualifying children is $500. A credit is different from a deduction because the credit reduces any taxes that are owed while a deduction will reduce the amount of income that is subject to tax.
A partner can be claimed as a dependent if they meet the following criteria:
No one else is able to claim your partner as a dependent child on their tax return.
The person that is being claimed must be a U.S. citizen, a U.S. national, a U.S. resident alien, or a resident of Canada or Mexico also might qualify.
Your partner must live with you year-round.
Your partner’s gross income for the year cannot exceed $4,300 for 2020.
You will need to require half of your partner’s financial support during the year.
Your partner cannot be married to someone else or file a joint return with that other person.
You and your partner must live together for the entirety of the year in order to qualify as a dependent. If you have moved in the middle of the year, you will be required to wait until the next year before claiming your partner as a dependent.
If you’ve taken a vacation, or were deployed with the military, you will be considered living together. Based off IRS guidelines, the following types of absences will not count against you:
Illness, such as time spent in a hospital or rehabilitation facility
Vacations
Business travel or assignments
Education-related absences
Absences for military service
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.
The CARES Act has allowed millions of student loan borrowers to pause their student loans until January 31st. For the time being, loan payments, interest and collections on defaulted federal loans have been put on hold in order to provide financial relief for those who were financially affected by COVID-19.
McConnell Announces Second COVID-19 Stimulus Deal may be Reached by the End of the Year
A possible COVID-19 stimulus deal may happen by the end of December. Both House Speaker Nancy Pelosi and Senate Minority Leader Chuck Schumer have been working to announce a stimulus deal to present to the American people and businesses.
Are Short-Term Disability Claim Payments Considered Additional Income?
For those who suffer from serious medical conditions, disabled temporarily from an injury or are pregnant, you could be covered by short-term disability payments through a private insurer that can be obtained through your employer. The payments that you received could be considered taxable, here’s what you need to know.
Every year taxpayers are required to file their taxes in order to remain compliant with the IRS. When filing, a taxpayer will either receive a refund or owe a balance which they have the option to pay off in order to stay out of collections. For those who earn a low income, they may not be required to file their tax returns. Here’s everything you need to know.
As the spirit of generosity is in the air, companies and employees need to know that holiday bonuses are considered supplemental wages and subject to taxes. Holiday bonuses are viewed by the IRS as compensation, just like paychecks, so taxes need to be withheld from your holiday bonus.
How Much are Holiday Bonuses Taxed?
Some of the taxes you will need to pay on your holiday bonus include:
Social security tax:
You pay social security tax on all compensation up to $132,900 in 2019. If you haven’t passed this threshold, then you can expect your employer to deduct 6.20% from your bonus for social security.
Medicare tax:
You can expect another 1.45% to be deducted from your holiday bonus for Medicare tax.
Federal income tax:
The IRS requires a set percentage of your bonus to be withheld when you receive it. This is because your holiday bonus is considered a supplemental income. Under tax reform, the federal tax rate for withholding on a bonus was lowered to 22%. This is lower than the federal income tax rate of 25%.
State income tax:
depending on which state you live in, state income tax will be withheld at the rate the state requires by law.
Retirement Plans (401k):
If you have requested that your employer contribute a portion of your wages to your retirement plan, then the rate at which you have set will be the same rate that will be taken out of your holiday bonus.
Ultimately, you should check with your employer about your holiday bonus and taxes. Your employer has the option to combine your regular paycheck and holiday bonus and withhold taxes on the whole amount. If your employer does this, it may result in a higher withholding than 22%.
If this is the case, don’t worry as you will eventually get some of the money back as part of your federal tax refund when you file your taxes.
How to Avoid Holiday Bonus Tax
Are there any ways to avoid paying tax on the bonus? No. And failing to report and pay taxes could lead to problems down the road. But there are ways to minimize or delay the impact. Here are three options:
Give a little more:
Employers can estimate the taxes an employee would have to pay on the bonus and add that to the total amount. That way, after taxes, the employee would get to keep the intended bonus amount. Obviously, this requires the employer to be more generous, which is not always possible.
Invest in the future:
Another option – that would avoid both payroll and income taxes – is to put the bonus into the employee’s 401K retirement plan. While employees would not actually receive a check during the holidays, they would also not have to pay taxes on that money until they withdraw it. In the meantime, that bonus could continue to grow.
Kick Off a Healthy New Year:
Employers can decide to award holiday bonuses in January and offer the option of placing the money in a Flexible Spending Account for healthcare. None of that money would be taxed, but the employee would have to use it on qualifying health or dependent care expenses.
If you’re an employee and your company will not offer any of the options above, then do your best to plan ahead and factor the taxes into your holiday budget. And if it makes you feel any better, giving is always better than receiving.
Looking for assistance with tax relief? Optima Tax Relief’s licensed professionals offer a range of tax services to help you. Reach out for a consultation today.
Many Americans show their support for their preferred political candidate by voting for or donating to the candidate’s political party. If you’re wondering if your financial contribution to a political campaign affects your taxes in any way, you’re not alone. Here’s everything you need to know about tax deductible contributions for political campaigns.
Are Political Contributions Tax Deductible for Businesses?
In short, yes. However, businesses are cautioned against deducting political contributions, donations, or payments on their tax returns.
Can I Deduct My Expenses If I Volunteer for a Political Campaign?
For those who volunteer for a political candidate, campaign, or political action committee, the time you volunteer will not be considered a tax deductible donation when filing your taxes.
Is it Considered a Tax Deduction When Supporting a Presidential Campaign?
When filing your taxes, you have the option to set aside $3 of your taxes to go towards the Presidential Election Campaign Fund when you complete your 1040 federal income tax return form. You can check the box to donate the funds and it will not affect your taxes or deductions.
Are There Limits to Political Contributions?
Taxpayers wanting to support a political candidate or party can contribute the following amounts:
Up to $2,800 per candidate and election.
Up to $10,000 to state, district, and local parties combined each year.
Up to $106,500 to a national political party, per account, and per year.
Are there any Political Donations that are Tax Deductible?
To qualify, you must be a registered non-profit organization that operates as a true charity to take a tax deduction for the donation.
If you volunteer, give cash or non-cash items to a 501(c)(3) organization, your donation may be a qualified tax-deductible charitable contribution. To confirm if the organization you gave a donation to is a 501(c)(3) organization, you can use the Tax-Exempt Organization Search Tool from the IRS.
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.
The ongoing pandemic has caused many Americans to suffer financially due to a loss of jobs and businesses shutting down. Proposals for another coronavirus relief package are currently ongoing and should include another stimulus check distributed out to taxpayers as well as providing assistance to businesses that are finding it difficult to stay open.
Many taxpayers have switched from working in the office to working at home because of COVID. Most people don’t realize that there could be tax implications when working from home and could end up with a tax-time surprise if they’re not up to date on current tax laws.
Economic Impact Payment Extended for Non-Filers to November 21st
Taxpayers who don’t typically file their taxes and have yet to receive a stimulus check should register online on the IRS website in order to receive their economic impact payment. The IRS is allowing Americans to register online until November 21, 2020.
Taxpayers in Financial Hardship could Qualify for Stimulus Check
Many Americans are facing homelessness or financial hardship during the ongoing pandemic could qualify for a $1,200 Economic Impact payment. If your income threshold is below $12,200 or $24,000 if you’re married, you will need to register with the IRS by November 21st in order to receive your money.
