From a pandemic to inflation, American taxpayers haven’t been able to catch a break since 2020. To combat the current state of the economy, Senate has passed a new bill with a ten-year plan. The Inflation Reduction Act is being sent to President Biden’s desk, requesting nearly $80 billion to the IRS.
What is the Inflation Reduction Act?
While the funding will support the IRS, this will hopefully bring in more federal tax revenue to offset the cost of lowering prescription medicine and combating climate change. There are plans in motion to accomplish these goals, but federal funding to do so is lacking.
How will the IRS use these funds?
The IRS has been waiting for additional funding for years. In the last ten years, their activities have dwindled, and the agency’s budget decreased more than 15%. While IRS Commissioner Rettig has previously stated that the backlog will be complete by the end of 2022, there are still 11 million unprocessed tax returns.
The IRS will hire more staff and have access to more resources, such as legal representation for larger cases.
Cons
Naturally, more staff and resources for the IRS means more IRS enforcement. This act could trigger more audits for middle class businesses and individuals.
Outcome of the Inflation Reduction Act
Government officials have also stated that the goal is not to go after small businesses, but rather the large corporations and high net-worth individuals with high-end noncompliance.
Senior Fellow at the Urban-Brookings Tax Policy Center Janet Holzblatt was quoted as saying, “The goal should not only be to increase audits, but improve the productivity of audits. You want the IRS to select the businesses and people for audits who really have not been compliant.”
How the Inflation Reduction Act affects people who owe
With more IRS enforcement on the way, it’s better to be safe and get in compliance as soon as possible. Optima Tax Relief is the nation’s leading tax resolution firm with over $1 billion in resolved tax liabilities.
Small business loans can be helpful and sometimes necessary in order to continue or expand a business. There are several types of loans available to small businesses, each with their own sets of pros and cons.
Term Loans
One of the most common types of loans for small businesses, a term loan is a lump sum of funds that is paid back over a fixed term and typically via fixed monthly payments. Interest will be paid on top of the principal balance borrowed. Sometimes it’s at higher rates than those offered by a traditional bank. However, it is a popular loan because funding is quick and it offers opportunities for business expansion.
Small Business Administration (SBA) Loans
SBA loans are offered by banks and lenders but administered by the Small Business Administration, a government agency that provides support to small businesses. Some business owners will prefer this type of loan since it’s backed by the government. It also offers high borrowing amounts at low rates and has long repayment terms. On the other hand, it’s harder to qualify for and it comes with a long and tedious application process.
Business Lines of Credit
Like a regular credit card, a business line of credit gives business owners access to a credit line of a certain limit, which is usually determined by business revenue and credit. Interest is only paid on the money charged, allowing greater flexibility in cash flow. This type of loan may also require paying additional account maintenance fees.
Equipment Loans
Businesses that want to own equipment can look into obtaining an equipment loan, which allows them to pay for business equipment over a specific term. The equipment will then serve as collateral for the loan. Sometimes a down payment is required for this loan.
Microloans
Microloans are small loans usually offered by nonprofits or government agencies and loan business owners up to $50,000. They are popular among startups and businesses located in disadvantaged cities. Some of these loans are accompanied by mentoring or consulting from the loan provider as well.
Invoice Factoring
This service allows businesses to sell their unpaid invoices to lenders to collect on. In return, the business will receive a percentage of the invoice value. This can benefit businesses that are awaiting payment from customers but need cash immediately.
Invoice Financing
Similar to invoice factoring, invoice financing allows businesses to sell their unpaid invoices as collateral in order to receive a cash advance. In this case, the business is still responsible for collecting payments from their customers in order to repay the amount financed.
Tax Debt Relief for Small Businesses
There are several loan options available to small businesses, whether they are a startup in need of fast cash, or an established business looking to expand. It is essential for small businesses to ensure that they are compliant with all tax laws in order to keep their business going. If you need tax help, give us a call at 800-536-0734 for a free consultation today.
Renting out your property as an Airbnb can be a good way to secure residual income. While Airbnb may send you a tax form at the end of the year. It’s important to understand your tax responsibilities to check for errors and in the event you aren’t issued a form.
Reporting Airbnb or Vacation Rental Income
The IRS requires that all payment processing companies report gross earnings for all users within the US. Companies like this include Venmo, PayPal, Airbnb, Etsy, and others. Airbnb will issue Form 1099-K if you meet certain income thresholds. Non-US citizens will be provided Form W-8. However, you still must report the income if you do not receive this form.
Withholding taxes from Airbnb payouts
You do have the option to withhold taxes from your Airbnb earnings. This is particularly recommended to avoid a large tax bill at the end of the year. You can also use a tax calculator to get an estimate of your earnings to save money for taxes.
Vacation Home, Rental, or Personal Use
You’ll need to determine whether your Airbnb property falls under the category of a vacation home, rental property, or personal use. This depends on several factors. One is how you use the property. Another is how often you rent it out. Finally, your intentions with the property are also considered.
Vacation Home
If you primarily use the property for personal vacations and occasionally rent it out to cover expenses or generate additional income, it might be considered a vacation home. Typically, vacation homes are used by the owner for personal enjoyment and rented out to others on a short-term basis.
Rental Property
What if your primary purpose for owning the property is to generate rental income? If you rent it out consistently throughout the year, it’s likely considered a rental property. In short, rental properties are typically managed as investment properties with the primary goal of generating rental income.
Personal Use
If you use the property exclusively for personal purposes and do not rent it out to others, it would be considered for personal use only. This could also include using the property as a second home for personal vacations. However, there is something called the Augusta Rule, also known as the “14-day rule.” This is a provision that allows homeowners to rent out their primary residence for up to 14 days each year without having to report the rental income on their tax return. The IRS requires you to pay taxes rental income for 15 days or more out of the year.
Tax Relief and Filing Assistance for Airbnb Hosts
As a host, you may qualify for tax relief. Our tax professionals will review your case to determine the best course of action for your compliance. Optima Tax Relief is the nation’s leading tax resolution firm with over a decade of experience helping taxpayers.
Student loan debt is still on the rise and new developments regarding repayment and forgiveness have unfolded recently. President Biden will announce his plan for student loan forgiveness and repayment by the end of August 2022.
Student Loan Payment Pause
Loan payments are currently paused but are set to begin again on September 1, 2022. Payments have been paused several times since the Cares Act passed in March 2020. However, it seems the pause may be extended again past the August 31st deadline.
Student Loan Forgiveness
On the other hand, President Biden may announce a decision on student loan forgiveness. There has been some speculation that Biden plans to cancel $10,000 for more than 40 million federal student borrowers. Included loans are the Federal Family Education Loan Program (FFELP), Perkins Loans, Grad PLUS Loans, and Parent PLUS Loans, many of which have not been included in recent loan forgiveness initiatives.
Limited Waiver
A limited waiver was instituted in October 2021, allowing borrowers to count payments that were once considered ineligible toward forgiveness. Ineligible payments include late payments, partial payments and payments made under the incorrect payment plan. This one-time exception is due to expire after October 31, 2022. However, President Biden has named an extension of the waiver as another permanent means of loan forgiveness.
Republican Repayment Plan
Three Republican members of Congress introduced a new bill that serves as an alternative to President Biden’s potential plan. The plan does not include any major loan cancellation. It seeks to end the Public Service Loan Forgiveness program set to begin in July 2023 and the payment pause. The bill also introduces a new Income-Based Repayment (IBR) plan that would replace the current income-driven repayment plans. It would also eliminate capitalization of student loan interest. Finally, the bill would limits student loan interest to 10 years, which can save borrowers thousands of dollars.
Tax Debt Relief for Student Borrowers
While student loan forgiveness seems attractive to many, nothing is set in stone yet. That said, borrowers should continue to plan for repayment. Additionally, borrowers should remain mindful of available tax breaks and filing requirements. If you need tax help, give us a call at 800-536-0734 for a free consultation today.
The world of investments can be intimidating, especially for young adults and college students. However, it is known that one of the best ways to build long-term wealth is to start investing early. Doing will allow your money to compound interest for a longer period of time. More than anything, knowing investment tips will help you get started.
Invest in a High-Yield Savings Account
This investment tip is great for those who are just getting started and may be hesitant to try stock trading. Like a traditional savings account, a high-yield savings account pays interest on your account balance. The main difference is that the rates of a high-yield savings account are far higher than those of a traditional account. In fact, the rates are 20-25 times the national average of traditional accounts. This investment is ideal for building an emergency fund or safety net. It is money that is not meant to be touched but is still easily accessible when needed.
Open an Individual Retirement Account (IRA)
College days may seem early to begin thinking about retirement, but the sooner you start saving the better. One of the best ways to begin retirement savings is through an IRA account.
Traditional IRA accounts allow tax-deductible contributions on state and federal tax returns for the year the contribution was made. When you withdraw the money for retirement (beginning at 59 ½ years old), you will be taxed at that income tax rate. This is important to consider as some people will be in a higher tax bracket when they retire because of Social Security benefits, investment income, and more.
Roth IRAs are usually more popular with young adults because the earnings and contributions to the account compound tax-free. In other words, you pay taxes on the money before you contribute so you don’t have to pay it later. However, your contributions do not qualify as tax deductions. This option is also better for those who anticipate being in a higher tax bracket at retirement age.
Invest with a Robo-Advisor
This investment tip is ideal for those who want to invest through a brokerage account for cheap without doing a ton of research. Robo-advisors use artificial intelligence to create one-of-a-kind investment portfolios based on your goals. These goals are determined by amount of time left before retirement and risk level. This option usually does not require paying fees for small accounts, so there is not much risk involved in getting started. However, you may be required to pay a small percentage of your assets each year once you reach a certain account balance.
Tax Relief for Investors
The best investment tip is to always ensure you are compliant with tax laws and to report your investment earnings each year. Optima Tax Relief is the nation’s leading tax resolution firm with over $1 billion in resolved tax liabilities.
