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Tax Tips for 2023

tax tips for 2023

The 2023 tax filing season will be different than the past few years. That said, getting prepared early can help make the process much easier. Some of the changes expected in 2023 could affect tax bills, which in turn could affect tax refunds. Here are some tax tips for 2023.  

Wait for Form 1099-K Before Filing 

Perhaps the most notable change for tax year 2022 is the reporting rule change for Form 1099-K. The form reports all funds received through third-party payment networks like Venmo and PayPal. With the rise of small businesses and gig work, a large number of taxpayers are expected to receive this form. This is especially since the reporting threshold has changed. Prior to the American Rescue Plan Act of 2021, Form 1099-K was not sent out unless a taxpayer collected more than 200 transactions valued at an aggregate above $20,000. Now, that threshold has dramatically decreased to just $600. 1099-Ks must be sent out by January 31, 2023, which would make filing at the end of February or early March ideal for taxpayers. The IRS is urging everyone to wait until they receive these forms before filing. Failing to include this income can have serious, negative consequences. 

Consider Changes to Tax Credits 

Another major change for tax year 2022 is the end of expanded pandemic-era tax credits. Some of these credits, including the Child Tax Credit (CTC), Earned Income Tax Credit (EITC) and Child and Dependent Care Credit will return to pre-COVID levels. For example, the expanded CTC which previously granted $3,600 per dependent in 2021 will be reduced to $2,000 for the 2022 tax year. In 2021, eligible taxpayers without children received about $1,500 for the EITC but that amount will drop to about $500 for 2022. The Child and Dependent Care Credit is returning to a maximum of $2,100, down from 2021’s maximum of $8,000. These changes can drastically affect tax refunds so taxpayers should plan accordingly. 

Check Eligibility for a Clean Vehicle Credit 

The Inflation Reduction Act of 2022 amended the Qualified Plug-in Electric Drive Motor Vehicle Credit, also known as the Clean Vehicle Credit. If you purchased a new electric vehicle after August 16, 2022, you may be eligible for a tax credit. To qualify, your purchased vehicle must have finished assembly in North America. You can check the Department of Energy’s list of approved vehicles. If you purchased an electric vehicle before August 16, 2022 but did not take possession of the vehicle until on or after August 16, 2022, you may still claim the credit. In this scenario, the final assembly of your vehicle does not need to be in North America. The credit is worth up to $7,500.  

Tax Relief for Taxpayers 

Steps can and should be taken to prepare for 2023 tax filing season. These new changes can result in a more stressful tax season. Working with a qualified and dedicated tax professional can help ease the process. Optima Tax Relief has a team of dedicated and experienced tax professionals with proven track records of success.  

If You Need Tax Help, Contact Us Today for a Free Consultation 

Optima Newsletter – December 2022

Optima newsletter
Tax Forms for Self-Employed Individuals

Filing taxes when you are self-employed can be very complex. One of the ways you can better prepare yourself for the filing season is to ensure you have all the correct and relevant tax forms.

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An Update on Fed Rate Hikes

American households have been feeling the full effects of inflation all year with Fed rates at their highest since early 2008. Here’s the latest update on Fed rate hikes.

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Taxes on Social Security Benefits

Many taxpayers are often shocked to learn that their Social Security benefits can be taxed. Here’s a brief overview of how Social Security income is taxed, both at the federal and state level. 

Read More

An Overview of Property Taxes

an overview of property taxes

Property taxes are paid on property owned, either by an individual or a legal entity. How much property tax you are required to pay is determined by the local government where the property is located. Typically, the assessed taxes are used to fund things like water and sewer improvements, education, road construction, and public services like law enforcement and fire protection. Here is a brief overview of property taxes and what they mean for your taxes. 

How is property tax calculated? 

The amount of property tax you are required to pay depends on the value of your property. This includes the land, buildings sitting on it, your assessed property value, and the county’s projected mill tax. A mill tax rate is the sum of all tax rates levied on your property value.  

The mill tax is multiplied by the property value to calculate your assessed value of your property. This is then used to find the fair market value of your property. This figure is multiplied by an assessment rate to calculate your tax bill.  

Your property tax bill may be higher or lower than your neighbor’s. One example is if your plot of land is larger. Another is if your home’s assessed value is higher. In some rare cases, your neighbor’s property may fall in a different jurisdiction with a lower mill tax rate, resulting in a smaller tax bill.  

Who must pay property taxes? 

Typically, most owners of property must pay property taxes, whether they are an individual or legal entity. However, there are some groups or property types that are exempt. These include senior citizens, those with disabilities, and military veterans. Additionally, there is a homestead exemption that reduced property tax bills. The rules for exemption vary by state or municipality so it’s best to check with your local and state government. Also note that the agencies that collect property taxes will not always notify you if you do qualify for an exemption and you may need to apply for it on your own.  

What happens if I do not pay property taxes? 

Put simply, failing to pay property taxes can result in a lien on your home. A lien is a legal claim against your property that can be used as collateral to repay the debt owed. If you still do not pay off the balance, the taxing authority can legally sell your home, or sell the tax lien. In this case, the purchaser of the lien can have your home foreclosed or use other methods to obtain the deed to your property. The consequences vary by state.  

Tax Relief for Homeowners 

It goes without saying that all property owners should stay on top of their property tax bills. Homeowners who itemize their deductions can deduct property taxes paid on a primary residence and any other real estate owned. You can deduct up to $10,000 in state and local income taxes, which includes property taxes. Optima Tax Relief is the nation’s leading tax resolution firm with over $1 billion in resolved tax liabilities.  

If You Need Tax Help, Contact Us Today for a Free Consultation 

Optima Tax Relief Named an OC Top Workplace for Eighth Year

Optima Tax Relief Named an Orange County Top Workplace Winner for the Eighth Consecutive Year

Landing at No. 4 on this year’s list, the company was one of only two companies to rank in the “Top 5” over the last five years. 

Optima Tax Relief, the nation’s leading tax resolution firm, has been honored as a 2022 Top Workplace winner by the Orange County Register for the eighth consecutive year. This year the company ranked fourth out of the 17 large company honorees, making them one of only two companies to land in the “Top 5” in a five-year span. Orange County Top Workplaces recognizes U.S. employers that have fostered a people-first company culture.  

“At Optima, our success is deeply rooted in our company culture,” said Optima CEO David King. “We recognize that employee satisfaction and customer satisfaction not only go hand in hand, but also build each other up. Because of that, we are constantly working to cultivate a culture that is inclusive, nurturing and diverse.” 

The list of honorees is based solely on employee feedback gathered through a third-party survey administered by employee engagement technology partner Energage LLC. The confidential survey uniquely measures 15 culture drivers that are critical to the success of any organization, including alignment, execution, and connection, just to name a few.  

The Top Workplaces in Orange County award comes just months after Optima Tax Relief was named a Top Workplace USA winner for the second year in a row. The company was also recognized with Culture Excellence Awards in five categories: Leadership, Purpose & Value, Work-Life Flexibility, Innovation, and Compensation & Benefits. Optima was also honored with the “Excellence in Management” award for the last two years. 

Optima’s Associate Vice President of Human Resources Kimberly Carson credits the company’s success to their close-knit staff. “Our best quality is our people,” Carson said. “The level of engagement (even in a remote or hybrid environment), teamwork, inclusivity, and drive for excellence every day is exactly why we are such a fun place to work while still delivering the highest quality service to our clients.” 

An in-person awards program to celebrate the 2022 Orange County Top Workplaces winners took place on Wednesday, December 7th at the Irvine Improv.  A complete list of this year’s winners can be found on the Top Workplaces website. 

An Overview of Sin Taxes

an overview of sin taxes

With sports betting on the ballot this past midterm election, many wonder if sin taxes are healthy for the economy. These taxes have been levied both at the federal and state levels. Here are some examples of sin taxes and what they mean for the economy. 

What is a sin tax? 

A sin tax is one that is levied on a specific activity or good that society deems harmful or costly. Sin taxes are forms of excise tax and Pigouvian tax. In other words, it is usually charged to businesses that sell the good or service. However, these businesses then pass down the cost to consumers through higher prices. The most commonly taxed goods and services are alcohol, cigarettes, gambling, soft drinks, fast food, lotteries, gasoline, firearms, and airline tickets.  

Why do sin taxes exist? 

These items are taxed to deter people from purchasing them or from engaging in certain behaviors. However, they also generate a huge amount of revenue both at the federal level and state.  

Advantages

Research has shown that sin taxes can help deter certain behaviors. For example, they have helped discourage the consumption of certain substances like tobacco and alcohol. This helps reduce the number of health issues that are associated with the consumption of these substances.  

The revenue that these taxes generate helps the government to fund programs that address public health. The government may be able to use the gasoline tax revenue to build a new road or subsidize healthcare.  

Ultimately, sin taxes are a more viable option of taxation compared to others. In fact, society has shown broad support for taxation on certain items. It is much easier for policymakers to turn to these taxes to generate more revenue than other types, like income taxes. In recent years, many states have even begun viewing sin taxes as solutions to budget issues.  

Disadvantages

Policymakers claim that the main reason sin taxes exist is to prevent certain behaviors, but many argue that they are not high enough to actually offset these behaviors. To truly deter these behaviors, states would need to raise the tax on these items.  

Many critics already argue that increasing taxation will not only be an overstep by the government, but it will target certain demographic groups. There is evidence that sin taxes heavily affect the poor and uneducated. For example, those who earn less feel the weight of the tax far more than those who earn more.  

Tax Help for Taxpayers Who Owe

Whether you are for sin taxes or against them, they exist and will continue to exist as the revenue generated is far too great to reduce or eliminate. Now that legalizing sports betting has become a more popular topic, we can anticipate new goods and services to be taxed. While these taxes are paid upon purchase, others are not and it’s important to always ensure that they are paid on time and in the correct amounts. Optima Tax Relief has a team of dedicated and experienced tax professionals with proven track records of success.  

If You Need Tax Help, Contact Us Today for a Free Consultation