Today, Optima Tax Relief’s Lead Tax Attorney, Phil Hwang, discusses the October tax extension deadline.
The tax extension deadline this year is October 16, 2023. Remember, an extension to file your taxes is not an extension to pay your taxes. But what if you’re still unable to pay your tax bill? One option is to request a short-term payment plan with the IRS. If you have a total tax balance of less than $100,000 (including penalties and interest), you can be put on a payment plan to receive an extra 180 days to pay your balance in full. While this option won’t stop additional penalties and interest from accruing, it will stop any new liens, levies, or garnishments from being issued by the IRS.
If you need longer than 180 days to pay off your tax bill, you can request an IRS installment agreement, currently not collectible status, or submit an offer in compromise. These three options have their own set of rules so you should consult a tax professional to decide which is best for you. As always, doing something is better than doing nothing, especially if you owe a tax balance.
Next week, Phil will discuss tax refunds. See you next Friday!
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Filing taxes can be a complex and daunting task, with various rules and regulations to consider. One common question that often arises is whether you need health insurance to file taxes. The answer to this question is intricately tied to the Affordable Care Act (ACA) and its provisions. In this article, we’ll explore the relationship between health insurance and tax filing to help you better understand your obligations and options.
The Affordable Care Act (ACA)
The ACA was signed into law in 2010 with the aim of making healthcare more accessible and affordable for Americans. One of its key provisions was the individual mandate, which required most individuals to have health insurance coverage or an exemption or face a penalty when filing their federal taxes.
If you did not have health coverage, you were required to pay the greater of two amounts:
2.5% of your total annual household income above the tax filing threshold
$695 per adult and $347.50 per child under the age of 18, up to a maximum of $2,085. If you or anyone in your household was uninsured for part of the year, you would’ve been penalized 1/12 of this annual amount for every month you were uninsured.
However, you could qualify for an exemption from the penalty if you were uninsured for less than three months. Other exemptions included having too little income, religious objections, being incarcerated, or being overseas. Any penalties were added to tax liabilities or reduced tax refunds.
The Tax Cuts and Jobs Act (TCJA)
However, in 2017, the Tax Cuts and Jobs Act effectively eliminated the individual mandate penalty, starting in tax year 2019. This change means that you are no longer penalized for not having health insurance coverage when filing your federal taxes. So, from a federal tax perspective, you generally do not need health insurance to file your taxes as of 2019.
State Mandates
The federal penalty for not having health insurance has been eliminated. However, it’s important to note that some states have implemented their own individual mandates. These state-level mandates may require residents to have health insurance or pay a penalty when filing state taxes. Several states have individual mandates in place, including California, Massachusetts, New Jersey, Washington, D.C., and Rhode Island.
Health Insurance and Tax Benefits
While you may not be required to have health insurance for federal tax purposes, there are some tax benefits associated with having coverage. These benefits include:
Premium Tax Credits: If you purchase health insurance through the Health Insurance Marketplace (also known as the Exchange) and meet certain income requirements, you may be eligible for premium tax credits. These credits can lower the cost of your monthly premiums.
The Premium Tax Credit Reconciliation: If you received premium tax credits during the year but had a change in income or family size, you’ll need to reconcile those credits when you file your taxes. This can result in either additional tax credits or repayments, depending on your circumstances.
Health Savings Accounts (HSAs):Contributions to HSAs are tax-deductible, and withdrawals used for qualified medical expenses are tax-free. If you have an HSA, it can provide tax advantages when it comes to healthcare expenses.
Medical Expense Deductions: If you have significant medical expenses that exceed a certain percentage of your adjusted gross income (AGI), you may be able to deduct them on your tax return. Having health insurance can help cover some of these expenses, making it easier to reach the threshold for deductions.
Tax Help
In summary, you generally do not need health insurance to file federal taxes since the individual mandate penalty was eliminated in 2019. However, it’s essential to be aware of state-level mandates if you reside in a state that has implemented them. Additionally, having health insurance can provide tax benefits such as premium tax credits, HSA deductions, and potential medical expense deductions. Tax laws and regulations can change. That said, it’s advisable to consult a tax professional or use tax preparation software to ensure you are meeting all of your tax obligations. Doing so will also help you take advantage of any available benefits related to health insurance. Staying informed and seeking expert advice can help you navigate the ever-evolving landscape of healthcare and taxes. Optima Tax Relief is the nation’s leading tax resolution firm with over a decade of experience helping taxpayers with tough tax situations.
Social media influencers have become a prominent and lucrative part of the digital landscape. With millions of followers and lucrative brand partnerships, many influencers are turning their passion for content creation into a full-time career. However, with great success comes greater financial responsibility, including managing taxes. In this article, we’ll provide valuable tax tips for social media influencers to help them navigate the complex world of taxation and ensure they stay on the right side of the law.
Understand Your Tax Status
One of the first steps in managing your taxes as a social media influencer is to understand your tax status. Are you considered a self-employed individual, a sole proprietor, or perhaps even an LLC (Limited Liability Company)? Your tax status will determine how you report your income and the deductions you can claim. Consulting with a tax professional or accountant can help you make the right determination.
Separate Personal and Business Finances
To maintain financial clarity and make tax preparation smoother, create a clear separation between your personal and business finances. Open a separate bank account and credit card for your influencer income and expenses. This will not only help with record-keeping but also provide a clear trail of your financial transactions.
Deduct Qualified Business Expenses
As an influencer, you may be eligible for various deductions related to your business expenses on Schedule C. These may include expenses for equipment, software, marketing, travel, and even a portion of your home office if you use it for business purposes. Make sure to consult with a tax professional to ensure you’re claiming all eligible deductions while adhering to tax laws.
Pay Estimated Taxes Quarterly
Unlike traditional employees who have taxes withheld from their paychecks, influencers are typically responsible for paying their taxes directly to the government. To avoid penalties and interest, consider paying estimated taxes on a quarterly basis. This can help you budget for your tax liability and prevent a significant financial burden when tax season arrives.
Pay Self-Employment Tax
Social media influencers are typically considered self-employed individuals for tax purposes, and they are generally subject to self-employment tax. Self-employment tax is a combination of Social Security and Medicare taxes that individuals who work for themselves must pay.
Understand Sales Tax Obligations
If you sell merchandise or offer services, you may also have sales tax obligations, depending on your location and the nature of your business. Research and understand your local and state sales tax regulations, and make sure to collect and remit sales tax as required.
Plan for Retirement
Don’t forget about your long-term financial health. Consider setting up retirement accounts like a Simplified Employee Pension (SEP) IRA or a Solo 401(k). Contributing to these accounts can reduce your taxable income while securing your financial future.
Conclusion
As a social media influencer, managing your taxes is a crucial aspect of maintaining a successful and sustainable career. By understanding your tax status, keeping detailed records, and leveraging available deductions and credits, you can navigate the tax landscape with confidence. Remember that tax laws can be complex and subject to change, so it’s always wise to consult with a tax professional or accountant who specializes in influencer taxation to ensure compliance and maximize your financial well-being. Optima Tax Relief is the nation’s leading tax resolution firm with over a decade of experience helping taxpayers with tough tax situations.
Every year when you file your taxes, you are asked a question about whether you want to donate $3 to the Presidential Election Campaign. The Presidential Election Campaign Fund (PECF) is a system of public funding for presidential campaigns in the United States. It was established as a result of the Federal Election Campaign Act (FECA) in 1971, which aimed to reform campaign finance laws and reduce the influence of money in politics. Here is what you need to know about the Presidential Election Campaign Fund and what your $3 donation supports.
The PECF Runs on Voluntary Participation
The PECF is funded through voluntary contributions made by taxpayers on their federal income tax returns. Taxpayers have the option to allocate $3 of their tax payments (or $6 for married couples filing jointly) to the PECF. This contribution does not increase the taxpayer’s tax liability but is a way to fund presidential campaigns.
The PECF is a Source of Public Financing for Presidential Candidates
Eligible presidential candidates can choose to participate in the PECF system. If they do, they can receive public financing for their primary and general election campaigns. This funding is intended to reduce candidates’ dependence on private contributions and limit the influence of wealthy donors.
Candidates Who Use the PECF Must Agree to Several Conditions
Candidates who accept public financing through the PECF are subject to spending limits on their campaigns. These limits are designed to ensure a level playing field and prevent excessive spending in presidential elections. Candidates who opt for public financing must adhere to certain restrictions and reporting requirements, including limits on campaign spending and the use of funds. They also need to meet criteria such as demonstrating significant public support by raising a minimum number of private contributions.
To qualify for matching funds, the candidates must raise over $5,000 in 20 different states. However, this $5,000 must consist of small contributions or $250 or less. They must also forgo private contributions. Because of all the rules surrounding the use of the PECF, many candidates now opt out of accessing the fund. In fact, the last major presidential nominee to accept public funding was John McCain in 2008. As of 2022, the PECF held more than $410 million.
Donating to the PECF Does Not Affect Your Taxes
Donating to the (PECF) does not affect your taxes in the sense that it increases your tax liability or reduces your tax refund. Instead, it allows you to allocate a portion of your federal income tax payment to the PECF voluntarily. In addition, it does not disqualify you from donating to presidential campaigns privately. Currently, an individual can contribute up to $3,300 per election and this $3 contribution to the PECF will not count towards that limit. Optima Tax Relief is the nation’s leading tax resolution firm with over $1 billion in resolved tax liabilities.
Military service members receive various benefits and compensation packages from the government to support them and their families. That said, one common question that often arises is whether these military benefits are taxable. The answer isn’t always straightforward, as it depends on the specific benefit and various other factors. In this article, we will explore the tax implications of military benefits and help service members better understand their financial situation.
Taxable Military Income
First, it’s important to clarify that not all military benefits are taxable. There are specific benefits and allowances provided to service members that are considered taxable income. Some examples include:
Basic Pay: Service members‘ basic salary is considered taxable income, just like any other job’s wages.
Special Pay: Some specialized pay, such as foreign duty pay, is also considered taxable income.
Bonuses: Enlistment and re-enlistment bonuses, accrued leave, and other similar payments are generally taxable.
Separation Pay: In cases where service members are involuntarily separated from the military, certain separation pay may be taxable.
Non-Taxable Military Benefits
Fortunately, many military benefits are not subject to federal income tax. These non-taxable benefits help support service members and their families, including:
Basic Allowance for Housing (BAH): BAH is intended to help service members cover housing costs and is generally not considered taxable income.
Basic Allowance for Subsistence (BAS): BAS assists with food expenses and is also not taxable.
Overseas Housing Allowance (OHA): OHA assists military members in covering the costs of overseas housing and is not taxable.
Military Disability Benefits: Disability benefits received as a result of military service are generally not subject to federal income tax.
Veterans’ Benefits: Benefits provided by the Department of Veterans Affairs (VA), such as disability compensation, pension, and education assistance, are generally non-taxable.
Survivor Benefits: Survivor benefits, including Dependency and Indemnity Compensation (DIC), are typically not taxable.
Combat Pay: Combat pay is a special type of compensation provided to U.S. military service members who are deployed to specific designated combat zones or who are exposed to imminent danger as a result of their military service. It is explicitly exempt from federal income tax.
State Tax Considerations
While many military benefits are exempt from federal income tax, the tax treatment of these benefits can vary at the state level. Some states may exempt all military pay and benefits from state income tax, while others may tax a portion of it. Service members should check their state’s tax laws to understand how their military benefits are treated.
Reporting Military Income
Service members should ensure they accurately report their taxable military income on their federal income tax returns. Failing to report taxable income can result in penalties and interest charges. It’s advisable to consult with a tax professional who specializes in military tax matters for assistance in preparing tax returns.
Conclusion
In summary, not all military benefits are taxable. While some components of military compensation, such as basic pay and certain bonuses, are subject to federal income tax, many other benefits, including housing allowances, subsistence allowances, and disability benefits, are typically non-taxable. Additionally, state tax laws can further impact the tax treatment of military income. It is essential for service members to be aware of these tax considerations and, when in doubt, seek guidance from tax professionals who can provide accurate and up-to-date information on their tax obligations. By understanding the tax implications of their military benefits, service members can make informed financial decisions and ensure compliance with tax laws. Optima Tax Relief is the nation’s leading tax resolution firm with over $1 billion in resolved tax liabilities.
