If you have an unpaid tax bill, you know the stress that comes with owing the IRS. The IRS is a powerful agency with the ability to collect what is owed to them using severe methods. These can include garnishing your wages or levying your bank accounts. With a 10-year statute of limitations, the agency has plenty of time to forcefully collect tax debts. While some taxpayers might want to ignore their tax bills, doing so comes with many risks. Here are some of the top risks of owing the IRS.
The IRS will collect.
The IRS will always warn you of intent to collect or enforce through IRS notices. After these notices have been ignored, the IRS will place you in their Automated Collection System (ACS). This basically means they can issue liens, levy your bank accounts, and garnish your wages. Alternatively, the IRS may turn your tax debt over to a debt-collection agency.
The IRS may file a federal tax lien.
If a tax balance goes unpaid and notices are ignored, the IRS can file a Notice of Federal Tax Lien. This basically lets creditors know that you have tax debt. A lien is a legal claim against a property, usually placed because the property owner owes someone money. Liens can severely hinder your ability to access credit. In addition, they can also damage your reputation since they are public information.
The IRS can seize your assets.
If a tax balance goes unpaid, the IRS will send you a Notice of Intent to Levy. If they do not hear from you after 30 days, they may proceed with the levy. The IRS is known to levy bank accounts, wages, and more. Wage levies, also called wage garnishments, are when the IRS takes some of your paycheck to put toward your unpaid tax bill. The amount they levy will depend on your filing status and number of dependents.
The IRS may also levy your bank account. If your tax balance is greater than your bank account balance, they are authorized to levy the entire account. The same goes for joint bank accounts that you have access to. If you own a small business, or do contract work, the IRS can levy these earnings. If you file your taxes and are due a tax refund, the IRS will keep the refund and apply it to your unpaid tax bill. The IRS will stop levying if you arrange a payment agreement or if you pay your tax bill in full.
The IRS will charge you penalties and interest.
Your tax bill doesn’t end with your unpaid taxes. The IRS will charge you interest until the balance is paid in full. The current rate for underpayment is 7% annually, at least through June 2023. On top of that interest, the IRS will charge a failure-to-pay penalty on your unpaid taxes. The current rate is about 0.5% per month or partial month the balance remains unpaid, for a maximum of 25% of your unpaid tax. The amount is increased to 1% per month or partial month if you do not pay within 10 days of receiving an IRS Notice of Intent to Levy. However, if you set up a payment plan with the IRS, the rate drops to 0.25% per month or partial month.
You may lose traveling privileges.
Under the Fixing America’s Surface Transportation (FAST) Act, the IRS requires your Department of State to deny passport applications and renewals submitted by taxpayers with tax bills of $52,000 or more. The State may also revoke your valid passport or limit your ability to travel outside the U.S.
How Can I Get Relief from My Tax Debt?
Clearly, the risks of owing the IRS are extreme and affect all facets of life. If you’ve been ignoring IRS notices coming through your mail, it may not be long before these risks apply to you. Ignoring your tax issues will certainly not make them disappear. Your best bet is to find a way to work with the IRS to see what your options for repayment are. We know how stressful this process can be, but Optima is here to help you with all of your tax issues.
Many taxpayers are reporting smaller refunds this year. While many cases can be credited to tax credits returning to pre-pandemic levels, several others could be because of an outdated Form W-4. Unbeknownst to some, a W-4 needs to be updated whenever certain life changes occur. If it‘s outdated, you may not have enough tax withheld during the year. This basically results in a smaller refund at tax time. However, the recent 2020 changes to the W-4 form have confused some taxpayers. Here’s a breakdown of how to fill out a W-4.
What is a W-4?
Formally known as the Employee’s Withholding Certificate, a W-4 is an IRS tax form that helps employers calculate how much tax to withhold from an employee’s paycheck. This form is most commonly filled out by an employee upon starting a new job. However, it can be submitted at any time of the year. An accurate W-4 will help you avoid overpaying or underpaying your taxes during the year.
When Should I Fill Out a W-4?
You should fill out a W-4 each time you start a new job. This is true even when the new job is a second job or gig work. This basically means you will have multiple W-4s if you have multiple jobs. You should also fill out a new W-4 when you experience a life change that can trigger a tax liability. For example, getting married or divorced should result in a new W-4 being submitted to your employer. Having a child, claiming a new dependent or removing a dependent are other scenarios in which you might want to adjust your withholding.
How To Fill Out a W-4
Step 1: Fill in your personal information.
First, you’ll enter your personal information, such as your full name, address, Social Security number (SSN), and tax-filing status. Your tax-filing status is very important here as it will determine which tax credits and deductions you might qualify for during tax time. Technically, you can stop at this step and sign the W-4. Your employer will withhold at a default rate. However, this may not result in the right balance of a decent-sized paycheck and tax refund.
Step 2: Determine your withholding.
For most, this is the trickiest section of the W-4. If you need clarification, you should seek help from your Human Resources department at work. Here you’ll need to choose your tax withholding according to the number of jobs and combined income you have, including self-employment. This also includes your spouse if you file jointly.
If you have multiple jobs, the W-4 for the highest paying job should have Steps 2 through 4(b) filled out. The W-4s for all other jobs can have Steps 2 through 4(b) blank. This will ensure accurate tax withholding.
If you have multiple jobs, and the earnings for both are roughly equal, you can choose to check box 2(c). You will need to make sure the W-4s for both jobs have this box checked.
If you want to omit the fact that you have a second job, you can choose to withhold a certain amount of tax from your paycheck on line 4(c). If you do not want to have additional tax withheld, you can opt to make estimated payments to the IRS instead.
Step 3: Add your dependents.
If you earn under $200,000, or $400,000 for married couples filing jointly, you can claim your dependents by following Step 3 on the W-4. If you are filing jointly, make sure only one of you claims these child-related tax credits through withholding. Claiming credits on both forms can result in too little tax will be withheld, and you could have a tax bill at tax time. In general, it is recommended that the highest-earning job claims the child-related tax credits on Form W-4. Taxpayers should note that they are not required to claim dependents here if they would rather have more taxes withheld from their paychecks to reduce their tax bill.
Step 4: Make other adjustments.
Here you will make other adjustments, including other income you receive outside of work, deductions other than the standard deduction, and extra withholding. You might want extra tax withholding if you are self-employed and want taxes withheld from these earnings.
Step 5: Sign the W-4 and submit to HR.
Sign and date the complete W-4. This step is required for the form to be accepted.
Additional Help With a W-4
These steps should help you successfully fill out a W-4, resulting in the appropriate amount of tax withheld from your earnings. Some taxpayers might be interested in altering their W-4 in order to have more taxes taken out of their paycheck to receive a larger tax refund at tax time. To do this, you can reduce the number of dependents on your W-4 or add extra withholding on line 4(c). Alternatively, if you want fewer taxes withheld, you can increase the number of dependents, reduce the number on line 4(a) or 4(c), or increase the number on line 4(b). Beware though, as this can result in a tax bill at tax time.
Taxpayers should always ensure that they are adjusting their W-4 when necessary to avoid unwelcome surprises at tax time. If you need tax help, Optima Tax Relief and our team of knowledgeable tax professionals are here to assist you.
The average tax refund so far in 2023 has been just over $1,960, which is about 11% lower than last year. Tax professionals are warning taxpayers of potential “tax refund shock” and urge them to prepare for smaller tax refunds in 2023. Here’s a breakdown of what caused the decrease in the average tax refund amount.
Tax Credits Are Back to Pre-Pandemic Level
According to IRS data, American taxpayers saw an increase in their tax refunds in 2021, from an average of $2,549 to an average of $2,815. 2022 saw an even larger increase with an average tax refund of $3,252. These amounts can be credited to the COVID-era tax credits related to children, dependents, charitable deductions, and more. However, the IRS issued a statement urging taxpayers to prepare for lower refunds in 2023 due to the end of stimulus payments and changes to charitable contribution deductions.
Child Tax Credit
The Child Tax Credit (CTC) provided up to $3,600 per qualifying child in 2021 for working parents with certain qualifications. In 2022, the credit was reduced to $2,000 per qualifying child but still helped American families. However, the payments only went to families that earned enough income to owe taxes, so only the poorest U.S. households benefitted from the credit. This could be devastating to families relying on the credit, especially after data showed the CTC lifted nearly 3 million children out of poverty in 2021 at its peak level.
Child and Dependent Care Expenses Tax Credit
In addition, the Child and Dependent Care Expenses Tax Credit (CDCTC) returned to a maximum of $2,100 in 2022, a huge decrease from 2021 levels of $8,000. This credit was especially helpful to parents and guardians who had daycare, babysitting, or other care provider expenses.
Earned Income Tax Credit
The Earned Income Tax Credit (EITC) dropped from 2021 levels of $1,500 to just $560, but up to $6,935. Certain charitable donations are also no longer deductible up to $600 as it was in previous years.
COVID-Era Provisions
The United States saw a massive trend of layoffs in 2022. However, severance payments were taxable this year, unlike during the pandemic-era layoffs. Finally, the end to COVID-19 stimulus payments also meant no way to claim credits for stimulus payments.
The issue here is that the end of these helpful tax breaks comes during a time of the highest inflation the U.S. has seen in four decades, making it difficult for taxpayers to rely on their tax refunds for financial relief as they normally do. Nearly one third of Americans rely on their tax refunds to make ends meet.
How Can I Increase My Tax Refund Next Year?
While some people prefer to keep more of their paychecks during the year, others prefer to have a greater tax refund once a year. One way to do this is to have more taxes withheld from your paycheck. You can submit a new W-4 to your employer at any time during the year. It’s important to note that your W-4 should be reviewed and resubmitted when you have a personal or financial change in life. Other than this adjustment, you can take advantage of traditional IRA contribution deductions or max out your Health Savings Account (HSA) contributions.
With just a short amount of time before the April 18th tax filing deadline, you’ll want to ensure that you file a complete and accurate return as soon as possible. If you need tax help, Optima is here to assist.
The company’s exemplary customer service team was recognized for the fourth straight year.
Optima Tax Relief, the leading nationwide tax resolution firm, is proud to announce that it has won four Stevie® Awards for excellence in customer service and technology. The Stevie Awards for Sales & Customer Service are one of the world’s top honors for sales, customer service, and call center professionals. This year’s awards include:
Frontline Customer Service Team of the Year (Gold)
Customer Service Department of the Year – 100+ employees (first-time finalist) (Gold)
Innovation in Customer Service – Financial Services (Silver)
Best Use of Technology – Customer Service (Silver)
Optima Tax Relief’s Customer Service Team was recognized for its outstanding performance in handling customer inquiries, providing timely and accurate information, and resolving customer issues with the utmost professionalism and care. It is Optima’s fourth year in a row receiving the gold Frontline Customer Service Team of the Year award for the financial services industry, and their first time winning the gold award for Customer Service Department of the Year (100+ employees). The team’s commitment to excellence has helped to establish Optima Tax Relief as a trusted name in tax resolution among clients.
David King, CEO of Optima Tax Relief, expressed his gratitude for the honors stating, “We are thrilled to continue our remarkable streak of success in the area that matters most to us, service. We recognize that most customers would prefer not to need Optima’s services, so we take great pride ensuring they are taken care of when they do. It will be difficult to continue this unprecedented run amongst some of the best brands in the world, but we will have fun taking a run at it.”
Chief Customer Officer, Christine Bui added, “These awards are a testament to not only the innovative ways our team delivers exceptional customer service but also the high level of care our team provides for each of our clients. Regardless of what may be going on in their personal lives, our staff consistently shows up for our clients and helps them navigate through a very challenging time in their lives. I am proud of our team and their dedication to providing our clients with the best possible experience.”
Optima’s use of technology also helped them lead their industry in innovation. The Innovation in Customer Service – Financial Services silver award was given to Optima Tax Relief for its innovative approach to customer service, which includes the use of cutting-edge technology to provide clients with fast and efficient service. The company has developed a range of tools and platforms that enable its customer service representatives to deliver exceptional service to clients, including intelligent call routing, an enhanced client portal, and improved systems.
More than 2,300 nominations from organizations of all sizes and in virtually every industry were evaluated in this year’s competition. Finalists were determined by the average scores of more than 170 professionals worldwide in seven specialized judging committees. Entries were considered in more than 60 categories for customer service and contact center achievements, including Contact Center of the Year, Award for Innovation in Customer Service, and Customer Service Department of the Year; 60 categories for sales and business development achievements, ranging from Senior Sales Executive of the Year to Sales Training or Business Development Executive of the Year to Sales Department of the Year; and categories to recognize new products and services and solution providers, among others. Winners were announced at the awards gala held on Friday, March 3 at Caesars Palace in Las Vegas.
Details about the Stevie Awards for Sales & Customer Service and the list of Stevie winners in all categories are available at https://stevieawards.com/Sales.
Tax scams have become one of the most popular ways criminals steal money and identities. The IRS flagged over $5.7 billion in tax fraud last year and 2023 is not looking any better with so many tax scams circulating. Luckily, there are ways to help avoid tax scams and fraud. Here are the most common tax scams in 2023 and how you can avoid them.
What Are Tax Scams & Fraud?
Tax scams are when criminals use stolen information, like your name, address, birthdate or Social Security Number (SSN), to file a phony tax return. The criminals then steal your refund and leave you with the burden of dealing with the IRS. Tax scams happen all year long but especially during tax season.
Most Common Tax Scams in 2023
According to the IRS, there are a handful of popular scams that you should be wary of in 2023.
IRS Impersonation Scams: Criminals will ask for personal or financial information through unsolicited emails, phone calls, or text messages. Sometimes, scammers will send malicious links via email that entices you to click on it. This action prompts a download of identity-stealing malware onto your computer.
Ghost Tax Preparer Scams: Scammers pose as tax preparers and file your tax returns but do not sign the return or include a preparer tax ID number (PTIN). During the process, they can steal your identity and/or your tax refund.
Social Media Tax Scams: Criminals use your social media information to get other personal information. They might pose as a friend or relative to ask for money or donations. Alternatively, they can send messages that contain malware to steal your identity.
Fraudulent Unemployment Claim Scams: Scammers attempt to steal personal information to claim unemployment benefits on your behalf. You may not realize you were scammed until you receive a Form 1099-G at the end of the year.
Phony Charity Request Scams: Thieves set up phony charities to steal personal information or donations. These fake charities will not have an actual employer identification number (EIN), which is required to verify the existence of a charity.
Economic Impact Payment Scams: COVID-19 stimulus checks have stopped being sent out, but scammers are still sending malicious text messages, phone calls, and emails to request bank account information. They lead you to believe you will receive a new stimulus check, when really they are stealing your personal and financial information.
How to Avoid Tax Scams & Fraud
Knowing how the IRS operates can be the best way to protect yourself against tax scams and fraud. For example, the IRS will reach out to you initially through regular mail through the U.S. Postal Service. If your IRS notice looks suspicious, you can go on the IRS website to search for the letter or notice and confirm its authenticity. The IRS does make phone calls to taxpayers but never threatens legal action or requests payment information over the phone. If you receive a suspicious email or text claiming to be from the IRS, do not reply, click on any links, or open any attachments. If in doubt, you can call the IRS yourself to communicate your concerns.
Report All Tax Scams
Most importantly, you should report all tax scams. Just because you might recognize the scam immediately, it does not mean everyone else will. Reporting the scams can potentially help thousands of other taxpayers. Here’s a breakdown of what to do if you think you are being scammed.
If you receive a suspicious email about your taxes, forward the email to phishing@irs.gov.
If you receive a phony call, email a summary of the occurrence to phishing@irs.gov.
If you clicked on a link within a suspicious email, or entered personal information, report the incident on the IRS Identity Theft Central webpage.
If you receive a suspicious text message about your taxes, you can forward it to 202-552-1226.
If you were scammed by your tax preparer, or believe your tax preparer is not following IRS rules, you can report them with Form 3949-A, Information Referral.
If you receive a bogus form from a financial institution, you should report the incident to the financial institution directly.
It’s better to be safe than sorry in these scenarios, so always report when in doubt. Not doing so can lead to several issues with the IRS that can take months to correct. Dealing with the IRS under any circumstances can be tough. If you need tax help, Optima and our team of experts are here.
The company’s exemplary customer service team was recognized for the fourth straight year. 