Navigating tax laws and filing requirements can be overwhelming for many individuals and businesses. To help ease this burden, the IRS offers a valuable resource known as a Taxpayer Assistance Center (TAC). These centers provide in-person help for various tax-related issues. They help ensure that taxpayers have access to the information and support they need. This article explores what a Taxpayer Assistance Center is, the services it provides, and how to make the most of a visit to one.
What is a Taxpayer Assistance Center?
Imagine having a go-to place where you can get face-to-face help with your taxes. That’s exactly what a Taxpayer Assistance Center is. Operated by the IRS, these centers are spread across the country and staffed by knowledgeable IRS employees. Their mission is simple: to offer personalized assistance to those who might find online resources or phone support insufficient.
Services Offered by Taxpayer Assistance Centers
TACs provide a variety of services designed to assist taxpayers with their specific needs. Some of the key services include:
Account Assistance: If you’ve received a confusing notice or have issues with your tax payments, the staff at a TAC can help straighten things out.
Forms and Publications: If you’re unsure which tax forms you need or how to fill them out, TAC employees can guide you through the process.
Tax Return Preparation: While TAC staff won’t do your taxes for you, they can point you to free resources like the Volunteer Income Tax Assistance (VITA) and Tax Counseling for the Elderly (TCE) programs, where you can get help preparing your return.
Payments and Installments: If you need help making a tax payment or setting up an installment agreement, the TAC can assist with that.
ITIN Applications: If you need an Individual Taxpayer Identification Number (ITIN) but don’t qualify for a Social Security number, the TAC can help you apply.
Refund Inquiries: The staff can check your tax refund status for you.
Tax Law Assistance: The experts at the TAC can provide clarification and guidance on various tax laws and regulations.
Multilingual Services: Many TACs offer help in multiple languages, making it easier for non-English speakers to get the support they need.
Making an Appointment
Some services are available on a walk-in basis. However, it’s a good idea to schedule an appointment to ensure you get the help you need without long waits. You can make an appointment by calling the IRS or booking online through their website. Having an appointment can save you time and ensure you have enough time to address all your concerns.
Preparing for Your Visit
To get the most out of your visit to a Taxpayer Assistance Center, come prepared. Here are a few tips:
Bring Identification: Make sure you have a government-issued photo ID and your Social Security number or ITIN.
Gather Documents: Collect any relevant documents, such as previous tax returns, IRS notices, payment receipts, and any correspondence related to your tax issue.
Prepare Questions: Write down your questions or concerns to ensure you cover everything during your visit.
Know Your Rights: Familiarize yourself with the Taxpayer Bill of Rights, which outlines your rights when dealing with the IRS.
Tax Help for Those Who Owe
Taxpayer Assistance Centers are here to make dealing with taxes a little less stressful. By providing in-person support and a wide range of services, they ensure that you have the help you need to comply with tax laws and resolve any issues. Whether you need assistance with account inquiries, payment arrangements, or understanding tax laws, a visit to a Taxpayer Assistance Center can make the process smoother and more manageable. Asking for help can always make the tax process more bearable. Optima Tax Relief has over a decade of experience helping taxpayers with tough tax situations.
When most people first examine tax relief options, they might have their hopes set on an offer in compromise – or their tax debt settled for less than what they owe. Unfortunately, OICs are more often denied by the IRS than they are accepted. When tax debt becomes too much to manage, an IRS installment agreement might be your best option. Here’s an overview of how IRS installment agreements work, including eligibility criteria, application processes, types of agreements, and key considerations.
What Is an IRS Installment Agreement?
An installment agreement is basically an IRS payment plan to pay your tax bill over a set period of time. The installment agreement will bundle all taxes owed if you owe tax for more than a year. That said, you cannot have two installment agreements with the IRS. During this time, the IRS will generally stop levying. IRS collections are typically ceased or prolonged while the installment agreement is pending until it can be approved or rejected. However, the IRS will typically keep any tax refunds you receive and apply them to your tax bill. If the installment agreement request is rejected, collections will be suspended for 30 days. Every taxpayer has the right to appeal a rejection. In this case, collections will be suspended until a decision is made on the appeal.
Eligibility Criteria
To qualify for an IRS installment agreement, taxpayers generally must meet the following criteria:
File all required tax returns.
Have no other installment agreements in place.
Comply with current tax payment obligations.
However, there are also other eligibility requirements based on the type of installment agreement you apply for.
What IRS Installment Agreements Are Available?
The IRS offers four types of installment agreements, each catering to different situations. Let’s review the eligibility criteria, terms, and costs for both.
Guaranteed Installment Agreements
Guaranteed Installment Agreements are one of the simplest and most accessible types of IRS installment agreements, designed for taxpayers with relatively small tax debts of $10,000 or less, excluding penalties and interest. To qualify, you must have filed all required tax returns for the previous five years. You must not have had an installment agreement with the IRS in the past five years. You must prove they cannot pay the tax debt in full when it is due, or within 120 days. Finally, you must agree to comply with the tax laws and make timely payments for the duration of the installment agreement. To calculate your minimum monthly payment, you’d add your tax liability, interest, and penalties together and then divide it by 30.
Guaranteed installment agreements must be paid off within three years. If you miss a payment, the IRS may cancel your agreement and proceed with collections. To apply, you must submit IRS Form 9465, Installment Agreement Request, online, or by mail or phone.
Streamlined Installment Agreements
A Streamlined Installment Agreement (SIA) is a simplified payment plan offered by the IRS that allows taxpayers to pay off their tax debt in manageable monthly installments. To qualify, you must owe $50,000 or less in combined tax, penalties, and interest. If you’re a business, you cannot owe more than $25,000 in combined tax, penalties, and interest. To calculate your minimum monthly payment, you’d add your tax liability, interest, and penalties together and then divide it by 72. This type of installment agreement does come with a setup fee. This amount will depend on certain factors such as how you apply and how you plan to make your payments.
Streamlined installment agreements must be paid off within 72 months or before the Collection Statute Expiration Date (CSED), whichever is sooner. Again, if you miss a payment, the IRS may cancel your agreement and proceed with collections. To apply, you must submit IRS Form 9465, Installment Agreement Request, online, or by mail or phone.
Non-Streamlined Installment Agreements
A Non-Streamlined Installment Agreement is a type of payment plan offered by the IRS for taxpayers who owe more than the thresholds for streamlined agreements. To qualify, you must owe more than $50,000 in combined tax, penalties, and interest. For businesses, you must owe more than $25,000 in combined tax, penalties, and interest. This type of installment agreement also comes with a setup fee.
Your monthly payment is determined by the financial information you provide in IRS Form 433-F or 433-B, Collection Information Statement. The length of the agreement can vary based on your situation. Once the IRS reviews this form, they will either approve the proposed payment plan or suggest modifications based on their financial review. Once the agreement is in place, it’s crucial to inform the IRS of any significant changes in financial circumstances that may affect the ability to keep the agreement. Missed payments can result in the agreement being voided and other collection measures to resume.
Partial Payment Installment Agreement
A Partial Payment Installment Agreement (PPIA) is a type of IRS payment plan that allows taxpayers to settle their tax debt for less than the full amount owed. To qualify, you must demonstrate that you’re unable to pay the full tax liability, even over time. You must submit a detailed financial statement, Form 433-F or Form 433-B, to the IRS. Once you submit this form, the IRS will review the information provided and negotiate the monthly payment amount based on your ability to pay. They will also review your finances every two years. If your financial circumstances change, your payment may increase, or your agreement can be terminated altogether.
The agreement remains in effect until the tax debt is fully paid or the collection statute expires, whichever comes first. The CSED is typically 10 years from the date the tax was assessed. Remember to make all payments on time or you risk having your agreement voided.
Tax Help for Those Seeking an Installment Agreement
If you know you won’t qualify for tax debt settlement, an IRS installment agreement may be your best option to help manage your tax debt. An IRS installment agreement can truly be helpful to many taxpayers struggling with their tax debt. The most important thing to remember is to always make your installment agreement payment. If you default on your agreement, it may be terminated, and the IRS may begin enforcement actions. Be sure the installment agreement terms are viable for your own financial situation. Optima Tax Relief has over a decade of experience helping taxpayers get back on track with their tax debt.
Building a family can take many forms. Adoption stands as a powerful testament to the generosity and love that individuals and couples can offer to children in need. However, adoption can be an expensive process, often deterring potential parents from taking this big step. To alleviate some of the financial burdens associated with adoption, the U.S. government offers the adoption credit. This article explains what the adoption credit is, who qualifies for it, and how it can significantly ease the financial aspects of the adoption journey.
What is the Adoption Credit?
The adoption credit is a non-refundable tax credit that aims to reduce the financial burden of adoption by allowing eligible taxpayers to claim certain adoption-related expenses. For the tax year 2023, the maximum adoption credit was $15,950 per child. This amount can help cover a variety of expenses, including adoption fees, court costs, attorney fees, and other related expenses. Because it’s non-refundable, it’s limited to your tax liability for the year. However, any credit more than your tax liability may be carried forward for up to five years.
Who Qualifies for the Adoption Credit?
The adoption credit is available to individuals and couples who adopt a child under 18 or who is physically or mentally incapable of self-care. Let’s look at specific criteria for the credit.
Adoption Status
The credit applies to domestic and international adoptions. However, the timing and manner of the credit claimed can differ between the two. For domestic adoptions, expenses can be claimed before the adoption is finalized, while for international adoptions, the credit can only be claimed after the adoption is complete.
Qualified Expenses
Only certain expenses are eligible for the credit. These include reasonable and necessary adoption fees, court costs, attorney fees, travel expenses (including meals and lodging), and other expenses directly related to the legal adoption of a child. Expenses that don’t qualify can include any incurred from adopting the child of the taxpayer’s spouse.
Income Limits
The credit begins to phase out for taxpayers with modified adjusted gross incomes (MAGI) above a certain threshold. For 2023, the phase-out range starts at $239,230 and completely phases out at $279,230.
Previous Claims
The adoption credit also includes specific provisions for previous adoption claims. For instance, if you claimed a $5,000 credit for a domestic adoption in 2022 and then incurred an additional $15,000 in qualified adoption expenses in 2023 when the adoption was finalized, the maximum credit you can claim for 2023 is $10,950. This is calculated by subtracting the $5,000 previously claimed in 2022 from the $15,950 dollar limit for 2023.
Unsuccessful Claims
Additionally, the credit includes specific rules about previous unsuccessful adoption attempts. For example, consider that an individual claimed $6,500 in qualified adoption expenses for an unsuccessful adoption attempt in 2021. In 2022 and 2023, they spent an additional $12,000 on qualified adoption expenses for a successful domestic adoption finalized in 2023. The maximum adoption credit allowable in 2023 would be $9,450, which is the $15,950 dollar limit for 2023 minus the $6,500 previously claimed.
How to Claim the Adoption Credit
Claiming the adoption credit involves several steps, plus specific documentation. Here’s a simplified version of the process:
File Form 8839, “Qualified Adoption Expenses,” with your federal tax return. This form is used to calculate and claim the credit.
Use supporting records like receipts, invoices, court orders, and legal documents to substantiate your claims. For international adoptions, additional documentation such as foreign adoption decrees and translations might be required.
Submit your tax return for the year in which the adoption is finalized. For domestic adoptions, expenses can be claimed in the tax year following the year they were incurred if the adoption is not yet final.
Tax Help for Those Claiming the Adoption Credit
The adoption credit is a valuable tool for families looking to grow through adoption, providing crucial financial support that can make the process more manageable. By understanding the eligibility requirements and how to claim the credit, adoptive parents can take full advantage of this benefit while easing any financial burden. Optima Tax Relief has over a decade of experience helping taxpayers with tough tax situations.
There’s been a 45% increase in tax identity theft since the COVID-19 pandemic. If you’re dealing with tax identity theft, it could affect when you receive your tax refund! Optima CEO David King and Lead Tax Attorney Philip Hwang explain what tax fraud is, how your sensitive tax information can be used against you, and what to do if this happens to you.
Royalties represent payments made to an individual or entity for the ongoing use of their assets, such as intellectual property, natural resources, or creative works. These payments can provide a significant income stream, but they also come with tax implications that vary based on the type of royalty and the jurisdiction. Here’s a comprehensive look at how royalties are taxed in various scenarios.
What are Royalties?
Royalties are payments made to an individual or entity for the continuous use of their property, intellectual or otherwise. Royalties are reported on IRS Form 1099-MISC. Let’s break down each type of royalty.
Intellectual Property Royalties
If you create intellectual property as part of your trade or business, such as patents, trademarks, and copyrights, royalties are reported as business income on Schedule C (Form 1040). This income is subject to both income tax and self-employment tax, which covers Social Security and Medicare contributions. For example, a freelance author receiving book royalties would include this income on Schedule C, allowing them to deduct related business expenses like travel for book tours and marketing costs.
Royalties received by individuals not actively engaged in the trade or business of creating intellectual property are reported on Schedule E (Form 1040) and are subject to income tax but not self-employment tax. For example, an individual who inherited the rights to a patent but does not engage in the business of inventing would report royalty income on Schedule E.
Resource Royalties
Resource royalties are payments for the extraction or use of natural resources such as oil, gas, minerals, and timber. For instance, an oil company extracting crude oil from a landowner’s property would pay the landowner a percentage of the revenue from the oil sold. Resource royalties are usually reported on Schedule E (Form 1040). However, they can be subject to depletion allowances, which reduce taxable income based on the resource’s depletion over time. Depletion can be calculated using either the cost depletion method or the percentage depletion method, providing significant tax relief to resource owners by recognizing the decreasing value of the resource.
Performance and Licensing Royalties
Musicians receive performance royalties when their songs are played on the radio or in public venues. Similarly, actors receive residuals (a form of royalty) when TV shows or films they participated in are rebroadcast. Like intellectual property royalties, these are reported on Schedule E unless they are part of a business, in which case they go on Schedule C. Artists and performers who regularly earn from their work may need to treat this income as business income. That said, they may deduct related expenses.
Franchise Royalties
Payments made by franchisees to franchisors for the right to operate a business under the franchisor’s brand and system. These royalties are often a percentage of the franchisee’s sales revenue. For example, a fast-food franchisee pays royalties to the parent company for using its brand name, recipes, and business model. Payments received by franchisors are generally reported as ordinary income. They are then included in Schedule C if part of an active business. This allows franchisors to deduct business-related expenses such as legal fees, marketing costs, and franchise support services.
Withholding Tax on Royalties
For non-residents earning U.S. royalties, a withholding tax of 30% typically applies, unless a tax treaty specifies a lower rate. The payer of the royalty must withhold this tax and remit it to the IRS. For example, if a foreign author receives royalties from a U.S. publisher, the publisher must withhold 30% of the payment for tax purposes unless a treaty reduces this rate.
Deductions and Credits
Taxpayers can often claim deductions and credits related to royalty income, including:
Business Expenses: If royalties are part of a business, related expenses such as legal fees, marketing, and production costs may be deductible. For example, a musician can deduct the cost of producing an album if royalties from the album sales are treated as business income.
Depletion Allowances: For resource royalties, taxpayers can deduct a percentage of the income to account for resource depletion. For example, the IRS allows 15% for oil and gas, but only 5% for sand or gravel. This recognizes the diminishing value of the resource and reduces taxable income.
Foreign Tax Credit: U.S. taxpayers can claim a credit for foreign taxes paid on royalties to avoid double taxation. For example, if a U.S. resident pays tax on royalties earned abroad, they can credit these foreign taxes against their U.S. tax liability.
Planning for Royalty Income
Effective tax planning can help minimize the tax burden associated with royalties. Strategies include:
Structuring Contracts: Careful structuring of royalty agreements can optimize tax treatment. For example, specifying the allocation of payments for different rights can influence the applicable tax rates.
Utilizing Tax Treaties: Taking advantage of tax treaties to reduce withholding taxes on international royalties can significantly lower tax liabilities. This requires understanding and applying treaty provisions correctly.
Deferring Income: Timing the receipt of royalty payments to manage taxable income effectively can help taxpayers stay within lower tax brackets and benefit from various tax credits and deductions.
Tax Help for Those Who Receive Royalty Income
Royalties can be a lucrative source of income, but they come with complex tax considerations. Understanding the tax implications and utilizing strategic planning can help maximize the benefits of royalty income. Consulting with a tax professional is often advisable. By staying informed and proactive, taxpayers can ensure they make the most of their royalty income while minimizing their tax burden. Optima Tax Relief has a team of dedicated and experienced tax professionals with proven track records of success.
