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.
You may live or work abroad, but if you’re an American citizen or legal permanent resident, Uncle Sam still wants his rightful share of your income. Even if you reside outside the United States and receive earnings from a source located outside the country, you must report that income.
Depending on your circumstances, you may have to pay taxes both to the government where the company from which you earned your income is located and to the IRS. However, in some cases you may receive a foreign tax credit or tax exclusion for some or all of your foreign income.
The details of reporting foreign income vary according to individual circumstances. Nonetheless, there are general guidelines for nearly everyone who receives foreign income.
What is a Foreign Income Tax Credit?
If you are taxed by the country from which your income is earned and that country has established a tax treaty with the U.S., you may be able to claim the Foreign Income Tax Credit. This credit was designed to help you avoid double taxation and allows you to claim a credit for income tax that you have paid to a foreign government. The intended net result of the foreign tax credit is to ensure that the total amount you pay is no more than the highest result that you would have paid to a single government.
If you hire an accountant or a tax attorney to do your taxes, they will undoubtedly apply the Foreign Income Tax Credit on your income tax return. Some tax preparation software programs also include provisions to calculate the Foreign Income Tax Credit if it applies to you. If not, it would be advisable to choose a different tax preparation program.
What is the Foreign Earned Income Exclusion?
Do not confuse the Foreign Earned Income Exclusion with the Foreign Income Tax Credit. The Foreign Earned Income Exclusion is designed to allow American citizens and legal residents who reside outside the country to exclude most or all of the income earned from foreign sources from their federal income tax liability. The amount of the exclusion varies each year. For 2013, the maximum exclusion was $97,600 per individual taxpayer. Married couples could conceivably claim a larger exclusion.
The IRS has established strict guidelines for taxpayers who wish to claim the Foreign Earned Income Exclusion for a given tax year. Taxpayers must meet all the guidelines listed below to qualify for the exclusion.
Must have foreign earned income
Must have established a tax home in a foreign country
Must pass either the bona fide residence test or the physical presence test
The bona fide residence test requires that you are a bona fide resident in a foreign country for a period that includes at least a full tax year. The physical presence test requires you to be physically present in that foreign country for at least 330 days during a single 12-month period. You need not be present for 330 consecutive days, however.
What to do as a U.S. Government Employees Living Overseas
Income earned by employees of the U.S. government, including military personnel on active duty, does not qualify for the Foreign Income Credit or for the Foreign Earned Income Tax Exclusion – even if the income was earned overseas. However, spouses of government employees who earn income from foreign sources may be eligible for either the foreign tax credit or the foreign income exclusion. It is necessary to consult with an attorney or accountant who specializes in this subject with specific questions about your particular circumstances.
Foreign Income Earned While Living in the U.S.
If you reside within the U.S. full time, in most instances, you must report income earned from foreign sources on your federal income tax return, even if you are taxed on that income by the foreign government. This requirement pertains to earned and unearned income. Self-employed workers who earn income from foreign clients must also report their foreign earnings on their federal income tax returns.
How to Report Income with a W2 or 1099
The requirement to report foreign income applies even if you do not receive a W2 Form, Form 1099 or equivalent form from the foreign income source. It is your responsibility to provide an accurate calculation of your income by calculating payments from pay stubs, wire transfer records, dividend reports, bank statements, or PayPal monthly statements.
Once you calculate your foreign income, you must combine it with any domestic income you have earned in order to calculate the adjusted gross income to be included on your federal income tax return. Failure to report foreign income is considered tax evasion, and if you are caught, the consequences could be dire. You could be hit with hefty fines or even face jail time.
Need to speak with a licensed tax professional? Optima Tax Relief offers a comprehensive range of tax relief services. Schedule a consultation with one of our professionals today.
If you’re out of work due to the coronavirus and in need of money fast, you might want to consider withdrawing from your retirement savings. Taxpayers who have had a negative impact on their finances due to the pandemic should know that temporary changes to the rules under the CARES Act allows taxpayers to make early withdrawals from their traditional individual accounts. Here is everything you need to know about making an early distribution and what the possible tax implication could be for you.
Is My Social Security Number Required in Order to File My Taxes?
For those that are filing for the first time on their own, it can seem overwhelming trying to figure out what information you need to provide to the IRS in order for your return to be accepted. One question that many people ask is if a social security number is necessary to have when filing their taxes. Here’s everything you know about if your social security number is required and what you should do if you don’t have one.
The IRS to Contact Taxpayers Who are Eligible for a Stimulus Check
Due to the ongoing coronavirus pandemic, many Americans have been struggling to stay financially afloat. To help offset the many expenses that households across America are facing, the government issued out $1,200 stimulus checks to qualifying taxpayers. If you have yet to claim your check or didn’t realize that you were eligible for relief money, you can expect the IRS to contact you to notify you about your check.
If a Second Stimulus Check is Approved, When will it Arrive?
Ongoing negotiations are underway to pass another relief package to assist Americans that were affected by COVID-19. It is assumed that another economic relief rescue package will be passed and taxpayers will be paid out for a second time this year however, it will depend on how quickly the IRS can distribute the money to qualifying Americans. Here are important stimulus check facts taxpayers should know.
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.
Going green has tax benefits that could potentially reduce your total tax bill when filing your taxes. More taxpayers are taking advantage of these tax incentives by buying alternative vehicles, using Energy Star products or installing energy equipment in their home. Here are the top green tax credits you should be claiming.
Clean energy vehicle savings
Although tax credits for most hybrid vehicles have expired, there are still ways that taxpayers can take advantage of having an alternative vehicle.
There are certain vehicles that could qualify under the Alternative Motor Vehicle Tax Credit. The amount of the credits vary based on the make, model and year of the vehicle that a taxpayer is attempting to claim. Additional requirements to be aware of before claiming the tax credit are:
The car was purchased before 2017.
You are the original owner of the vehicle.
You drive your car primarily in the U.S.
For those who purchased a plug-in electric vehicle, you could be eligible for the Qualified Plug-In Electric Drive Motor Vehicle Credit. The credit applies to new electric vehicles bought after December 31, 2009. In order to qualify for the credit you will need the following:
The vehicle must have been purchased new.
The vehicle must have been made by an eligible manufacturer under the Clean Air Act.
Have at least four wheels.
Have the ability to be driven on highways and public streets.
Have a weight rating of less than 14,000 pounds.
Purchased an electric motor that uses a rechargeable battery to generate at least 5 kilowatt hours of capacity.
Tax credits for both of these can range from $2,500 to $7,500 based on the vehicle’s battery capacity and the overall size of the vehicle.
Make a donation for a smaller tax bill
Taxpayers who make charitable contributions such as cellphones, game consoles, computers or any other qualifying electronic donation, can write it off based on the fair market value. In order to be eligible for the tax credit, you must have the following:
A donation that is valued at less than $500, no forms will be required to be filled out.
Charitable deductions exceeding $500 must be submitted with Form 8283, which lists the name of the organizations and types of donations made with your tax return.
Keep a receipt for your files.
Use Energy Star products
The Energy Star program of the U.S. Environment Protection Agency and the U.S. Department of Energy helps taxpayers save money when they go green. Taxpayers should be advised that not all Energy Star products qualify for the incentive and some tax breaks for energy expired in 2011. There are still a few credits available through 2021 for certain energy programs that have been mentioned above.
If you need tax help, contact us for a free consultation.
If you have decided to dive into the sharing economy by renting your home or part of it out — whether it’s through a service like AirBnB or independently — you need to be aware of how the rental income will affect your taxes.
Renting any part of your home requires some work up-front and ongoing management. You have several tasks ahead of you. You’ll most likely want to spruce up the place with comfy furnishings and linens, and maybe a fresh coat of paint. You’ll also need to check the legal regulations for renting in your local area. You may discover there are limitations on the type of rentals you can offer, be they short-term or long-term.
And then, there’s landlord tax. Running afoul of the IRS can potentially wipe out any financial gains you may reap from renting your home – be sure to abide by the laws of landlord tax. Fortunately, you can reduce your potential tax bite with diligent record-keeping. Here’s everything you need to know about renting out a room and applicable taxes.
The 14-Day Rule & Paying Rental Income Taxes
The most convenient and potentially lucrative scenario would be to completely avoid reporting or paying rental income taxes on what you earn from renting out your home or a spare room. Well, you can, IF you meet two relatively easy requirements set by the IRS.
First, you must use the residence as a home at least 14 days out of each calendar year. Second, you must limit the time that you rent any part of the residence that you use as a home to 14 days or less each tax year. That’s it.
So if you have a primary residence plus a vacation home where you spend at least two weeks of the same year, you could rent out rooms in both and collect rental revenue for 28 days (14 days for each residence) completely tax-free. It gets better: the IRS places no upper limit on how much income you earn as long as you don’t exceed 14 total days of rental per property. (IRS.gov)
If you live near the town where the All-Star game for a major sport is being played that year, you could rent out one room or the entire place for the week, rake in major cash, and never report a dime on your tax return. Pretty sweet. But, if a renter burns a hole in your floor, you’re stuck paying for the repairs.
Rent Your Home for More Than 14 Days?
Should you exceed the 14-day threshold, things become a bit more complicated. First, you must determine whether you or family members will reside in the residence or use it for personal purposes for at least 10% of the time that you rent at a fair rental price. You don’t have to be there at the same time you’re renting, but your time in the residence must equal at least 10% of the total rental time. So if you rent out your vacation home for 300 days each year, you or another qualifying person will need to live there for at least 30 days during the same year for the IRS to qualify the residence as a home. For the purposes of this article, the assumption will be that the residence qualifies as a home for IRS purposes. (IRS.gov)
The rules differ for rental properties that are used for what the IRS calls “personal purposes” rather than as residences. There are also different regulations that apply if you use the rental property as a residence, but don’t live there enough of the time for the residence to qualify as a home. To sort out those types of issues, consult with a professional such as a tax attorney from Optima Tax Relief.
Which IRS Form Do You Need to File Rental Income?
As a contractor with AirBnB living within the U.S., you would complete Form W-9, Request for Taxpayer Identification Number and Certification. You would also receive Form 1099, Miscellaneous Income before you file your federal income tax return for the following year. (International contractors need to complete different forms.) If you operate as an independent, you will need to maintain your own records for rental income and expenses, preferably separate from your personal household expenses.
If you provide sleeping space, but no frills, report income and losses on Schedule E, Supplemental Income and Loss, attached to Form 1040, Form 1040NR or Form 1041. If you splash out on fluffy towels, turn-down service, and catered breakfast in bed for your guests, report income and expenses through Schedule C, Profit or Loss from Business, also filed with Form 1040, Form 1040NR or Form 1041.
In either case, you are also allowed to deduct the costs of repairs, depreciation (by filing Form 4562, Depreciation and Amortization), uncollected rents and actual operating expenses. But if a renter trashes the place and you file Schedule E, you will also need to complete Form 6198, At-Risk Limitations or Form 8582, Passive Activity Loss Limitations. If you’re not sure which form you should complete, consulting a tax professional is your best strategy.
Fair Rental Prices and How They’re Calculated
If you live in the heart of Manhattan or in a condo overlooking Lake Michigan in Chicago, you might think that setting your rents at bargain basement levels will help you beat the competition. If you set your prices too low, you may well attract the unfavorable attention of the IRS.
That doesn’t mean that you must charge exactly what every other landlord or private renter in your area charges for rent. It does mean that you must set prices for your rental that are comparable to the going rent for similar properties in your area – what the IRS calls “fair rental price.”
If you fail to charge fair rental prices or if you never report a profit from your rental, the IRS may decide that you’re not serious about making money. You don’t have to show a profit every year, but the IRS assumes that you have a genuine profit-making motive if you show gains during at least three of the most recent five years, including the current year. (IRS.gov)
The Hobby Loss Rule
If you fail to show profit, you could be hit by the so-called “hobby loss rule,” which prevents you from using losses related from your venture to offset other income on your federal tax return. Instead, you use most losses related to your rental activities as itemized deductions on Schedule A. Deductions would be limited to the following strict limitations.
Deductions such as mortgage interest and taxes are allowed in full
Deductions like advertising, insurance, and premiums are allowed only to the extent that gross income exceeds deductions from the first category
Deductions such as depreciation and amortization are allowed only to the extent that gross income exceeds the amount of deductions taken for both of the prior two categories.
How the Sharing Economy Works
Knowing the ins and outs of renting your home and taxes can be tricky. However, this article is not intended to discourage you from renting out your home, being a live-in landlord, or otherwise participating in the sharing economy. It’s a potentially exciting way to meet interesting people from all over the country or even other parts of the world.
But just as you want your house or apartment to look its best, you’ll also want your financial house to be in order, too. That way you can concentrate on being the best host you can be, without being hit with unpleasant surprises at tax time.
Need some help with landlord tax? Consult one of our tax professionals to learn more about renting out a room and taxes.
There are still many IRS terms and codes that are a mystery to the average taxpayer. Tax terms can be confusing, whether you’re a first-time tax filer or have been filing tax returns for years. IRS Code 9001 is a common error code, but many people don’t know what it means. We’ll explore what the IRS Code 9001 is, and how to avoid it.
IRS Code 9001
You filed your federal income tax return a while ago and you are expecting a refund. You can check the status of your return and your refund check (for paper returns) or direct deposit (for electronic returns) at the IRS.gov website. The “Where’s My Refund?” portal also provides an estimate of when you should expect your refund.
If you receive an error code such as IRS Code 9001 when you check the status of your return, you may worry that your return has been flagged for an audit. Relax. In fact, IRS Code 9001 is one of an entire set of codes that are included within the Internal Revenue Manual (IRM), which is the set of guidelines used by the IRS. This is not an audit flag, but rather an error code generated when taxpayers attempt to access return or refund results using the wrong Social Security Number or TIN.
Where’s My Refund?
The IRS established the “Where’s My Refund?” portal to allow taxpayers to check the status of their federal income tax return and refund. To access the portal you need three pieces of information: your Social Security Number (SSN) or Taxpayer Identification Number (TIN), your filing status, and amount of the refund that you are expecting. This refund amount should be listed in whole dollars and must match the amount listed on your tax forms exactly.
Taxpayer Identification Number (TIN)
Most taxpayers include a SSN on their tax returns. But certain taxpayers, such as resident and nonresident aliens, are not eligible to get one. The TIN is designed to allow individuals to file federal and state income tax returns, without an SSN.
How to Fix an IRS Code 9001
In most instances, when you check the status of your return on the “Where’s My Refund?” portal, you will receive a message stating that your return is being processed or that your refund is on its way. Occasionally, you may receive one or more error codes, including IRS Code 9001: “Taxpayer accessed Refund Status using a secondary TIN. Refund Status could not be returned. Get a Primary TIN Analyze account and follow appropriate IRM.” The fix is simple – enter the proper Social Security number or TIN into the “Where’s My Refund?” portal. If you still receive error messages, contact the IRS or an expert such as an attorney with Optima Tax Relieve for further assistance.
Wondering where your tax refund is? Read our dedicated blog to learn more. If you need tax help, contact us for a free consultation.
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’ve moved within the last year, you may have questions on how to prepare your tax return and how you should file in the current state you live in or the state you moved from. It’s also important to know if you will need to file multiple tax returns depending on whether or not the state you moved to has an income tax.
It can be confusing to know how you should file and how many tax returns you need to prepare. Here are a few answers to some questions that you may have:
Filing part-year resident tax returns
A part-year resident tax return will be filed for the year of your move. Taxpayers don’t have to worry about paying double the state tax since most states don’t tax the income earned in the other state.
If income was earned through interest or dividends that were paid during the year, a taxpayer will need to divide that in accordance with the number of days spent at each location.
Reporting income earned in some states
Some states require that all your income for the year is reported if you are a resident in that state at the end of the year. There’s also no need to worry about having to pay double the state tax on your income if you have to report some of the income you earned to the previous state that you lived in. On the tax return for your new state, you can claim a tax credit to your old state on the same income. The tax credit will offset any additional tax on the income that you reported to both states.
If you need tax help, contact us for a free consultation.
Getting a copy of your IRS transcript is easy and can be done entirely via the IRS.gov website. Follow these simple steps to retrieve your tax transcript.
Keep in mind that only transcripts for filed taxes are available. For example, if you did not file in 2003, there won’t be a tax transcript for that year. Also, if the IRS has not finished with your taxes, the transcript will not be available until they have completed those taxes.
What is an IRS Transcript used for?
IRS transcripts are typically used to validate past income and to prove income to lenders. They are often used to determine status for mortgage, student, and small business loan applications and help with tax preparation.
What information is on an IRS Transcript?
An IRS transcript includes most line items from your tax return, including all accompanying forms and schedules, as it was originally filed. Any changes made after the original filing will not be reflected. Key information listed on transcripts include marital status, AGI, taxable income, payment methods, and W-2 information.
How to get your IRS Transcript Online
You can request tax transcripts online for the current tax year and the three prior tax years. To request older transcripts, you’ll need to submit Form 4506-T. To request a transcript online:
Look under the Tools tab that is part way down the web page. Click: Get transcript for your tax records.
Once you reach the transcript page, you can request to get them by mail or continue getting them online by clicking on the box to the left, Get transcript online.
If you have gotten transcripts before, you can sign in. If not, you will need to click on the right side to create an account: Sign up.
Complete the sign up process and log in.
The next page will show a drop-down menu and ask why you need the transcript. Choose the answer that best fits your needs and continue. They ask you what you need it for so they can help you pick the right transcript.
The next page lists all your transcripts, in four different categories for all the years you filed. These include Tax Return Transcript, Record of Account Transcript, Account Transcript, and Wage and Income Transcript.
Select the transcript you need for the right year.
The site will automatically generate a PDF file of your transcript. Print it and save it.
Log out completely or close the browser when you are finished.
Make sure your pop-up blocker is off for the IRS site. It can cause errors when trying to retrieve your transcripts. If you chose mail, allow 5 to 10 business days for them to arrive before requesting another.
If you have problems navigating the website, you can contact the IRS for further assistance at 1-800-829-1040. For further assistance or help with a different tax issue, contact Optima Tax Relief. Optima Tax Relief offers a comprehensive range of tax relief services. Schedule a consultation with one of our professionals today.
As the most populous state in the union, California attracts new residents from all over the country and around the world. From the glow of Tinseltown to the technological buzz of Silicon Valley, dreamers and entrepreneurs alike are drawn to the state. But California is also one of the most expensive states to call home – 3rd highest to be exact. California tax rates are some of the highest in the nation.
Businesses in California are not spared from the tax hammer. California imposes corporate income taxes on “C” corporations and limited liability companies that operate like corporations. As a result, many entrepreneurs who operate small businesses in California are subject to quadruple taxation – double taxation from Uncle Sam and double from California.
But as of 2014, California has enacted a series of tax breaks which will award millions of dollars in tax credits to qualifying businesses. These tax incentives were designed to lure businesses to re-locate or keep their base of operations within the state.
Aerospace Industry Gets a Break with State Tax Credits
One business field seeing some high-profile tax breaks in California is the aerospace industry. California was at one point in time the center of the aerospace industry, before the US government was forced to make drastic cut-backs in the 1990’s, essentially reducing the workforce by more than 50% of its workers. California Governor, Jerry Brown, has been trying to put together an incentive package of sorts to entice some of the larger employers to come back to the state, which would improve employment rates, bring a huge influx of new business and cash flows, as well as help off-set the current financial problems that California is facing.
The Aerospace Tax Clarification Act, which was passed in April, cleared up some ambiguity regarding the classification of rocket propulsion systems. This new act clarifies that these rockets qualify for an existing business tax exemption, rather than being classified as a taxable business supply as the prior law read.
“The space commercialization industry is not only developing some of the most advanced space vehicles in the world,” stated Assembly member Al Muratsuchi, “but is also creating thousands of local, high-paying manufacturing jobs.” This law was a direct nod to the Space Exploration Technologies Corporation, a Los Angeles based enterprise founded by Tesla billionaire, Elon Musk. The bill was also supported by Northrop Grunman, the Commercial Spaceflight Federation, Aerojet Rocketdyne Inc., a division of GenCorp Inc. and Lockheed Martin.
Governor Brown is also pushing for the aerospace bill to be expanded to cover the automotive industry. California is one of several states currently bidding for Tesla to build its proposed $6 billion factory to manufacture a new auto battery, known as the “gigafactory”, here in the state. This addition to California would mean the creation of at least 6500 new jobs as well.
Additionally, Governor Brown signed a law in July 2014 which grants a 17.5 percent tax credit on wages for workers hired to build aircraft. The bill serves as an incentive to score lucrative contracts for high-paid aerospace jobs within the state. There was also a 10-year tax exemption granted for the manufacturing of equipment used for the space travel industry.
Is there a tax credit for small businesses in California?
Under the California Competes program, a full 25 percent of the $29 million in tax credits will be reserved to small businesses with gross receipts of less than $2 million annually. Huge corporations are not the only beneficiaries of the new tax incentives in California. The state recently instituted the California Competes tax credit program, designed to provide financial incentives for businesses to relocate to California or for businesses within the state to remain and add jobs.
The California Competes tax credit program replaces the former Enterprise Zone program, which was eliminated in 2013 due to it being wasteful and inefficient. Credits allocated by the program are tentatively set at $30 million for fiscal year 2013/14, $150 for fiscal year 2014/15 and $200 million for each fiscal year after that through 2018. The state’s website lists the following criteria by which California Competes tax credits will be awarded:
The number of jobs created or retained
Total compensation, including wages and fringe benefits
Investment in the state
Unemployment or poverty rates where businesses are located
Other state and local incentives available to the business
Incentives from other states
Duration of commitment of the business or project
Overall economic impact
Strategic importance of the business to the state, region, or locality
Future growth or expansion opportunities
Expected benefit to the state in excess of benefit to the business from the tax credit
The California Competes Tax Credit is a non-refundable tax credit, meaning that businesses cannot receive cash back even if the credit is greater than what they would otherwise owe in corporate income taxes. But excess funds from the credit can be carried forward for as long as five years, or until the excess funds are exhausted, whichever is sooner.
Other Business Tax Incentives in California
Other tax incentives for businesses that locate or expand within the state of California include the Manufacturing Equipment Sales Tax Exemption and the New Employment Credit program. Each program is for businesses located within designated Enterprise Zones, or areas that are struggling economically.
The sales tax exemption allows eligible businesses to exclude the State’s portion of the sales and use tax (currently 4.19%), from the first $200 million in equipment purchases made between July 1, 2014 and June 30, 2022. This program will generate significant savings for eligible businesses, allowing them to pay a reduced sales and use tax rate of 3.3125% on qualifying equipment purchases.
The New Employment Credit program allows eligible businesses to receive a credit that may be taken against corporate income tax. This credit may be taken for all qualified employees hired on or after January 1, 2014. The amount of the tax credit equals 35% of the qualified wages paid for each new full-time employee hired, making a potential tax break of up to $56,000 or more per new employee over a five-year period.
For a newly hired employee to qualify the business for the New Employment Credit, they must fall into one of the following categories:
Unemployed for 6 months or more (excluding students and self-employed workers) either without a degree or having completed a degree more than 12 months before being hired
Veterans separated from active duty for less than 12 months
Earned Income Tax Credit (EITC) recipients during the previous year
Ex-offenders convicted of felonies
Current CalWORKS or county general assistance recipients
Attracting New Business with Tax Incentives
Many Californians approve of Governor Brown’s latest attempts to keep California in the running when it comes to attracting new businesses and keeping the existing ones from moving to another state that offers better business incentives. California is beginning to offer many appealing incentives to businesses, including State Tax credits, new employee credits, green tax incentives, as well as energy and transportation credits. When combined with available Federal tax credits and discounts, California can be a very profitable place for business owners to call home.
Below is a list of some additional tax incentives and tax credits currently offered in the state of California.
Qualifies rocket propulsion systems for an existing business inventory tax exemption
California Motion Picture and Television Production Credit (AB-1839)
20% of expenditures for a qualified motion picture and 25% of production expenditures for an independent film or a TV series that relocates to California
Manufacturing Equipment Sales Tax Exemption
Allows businesses to exclude the state share of sales tax (4.19%) from the first $200 million equipment purchases.
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 Earned Income Tax Credit (EITC) is known as a refundable tax credit that applies to low and moderate-income workers. For those who have children, the amount will vary based on the number of kids placed on their tax return. For the tax year 2020, the current earned income credit ranges from $538 to $6,660.
If you qualify for this tax credit, be sure to claim it on your tax return so you can get the most out of your tax refund. Here’s how you know whether or not you qualify.
In order to know if you qualify for EITC you have to ensure that your earned income does not exceed a certain range. Taxpayers can meet the requirements for EITC without a qualifying child if you have a child that meets all the qualifying child rules for you or your spouse if filing a joint return. Taxpayers can utilize the EITC Assistant to find out their filing status and how they can qualify.
In order to meet the standards for an EITC credit you must use one of the following statuses:
Married filing jointly
Head of household
Qualifying widow of widower
Single
For those filing married filing separately, they will not be able to claim the EITC. If you or your spouse are a nonresident alien for any part of the year, you will be unable to claim the EITC unless your filing status is married filing jointly.
Additional 2019 income rules taxpayers must follow in order to qualify for the EITC:
Tax year investments must be $36,000 or less.
Form 2555, Foreign Earned Income, Form 2555-EZ, and Foreign Earned Income Exclusion can’t be filed.
Total earned income must be at least $1.
If you need tax help, contact us for a free consultation.
