Today, Optima Tax Relief Lead Tax Attorney, Phil, talks about his three takeaways from the current tax landscape.
IRS Interest Rates Could Increase
For much of the pandemic, we saw IRS interest rates hold steady. For example, the interest rate accumulating on unpaid taxes was 3% for half of 2020 and all of 2021. In April 2022, we saw it increase by 1% each quarter until it hit 6%. Now, the second quarter of 2024 will mark the third consecutive quarter with a rate of 8% for interest. The question remains: Will the rate continue to increase? Phil thinks so. It’s been said numerous times that now is a terrible time to owe the IRS. Spiking interest rates mean more expensive penalties and interest. Taxpayers should act immediately to get their tax issues resolved.
Back Taxes Affect Your Passports
If you owe a significant amount of back taxes and the IRS has issued a certification to the U.S. State Department, they can deny your passport application or revoke your current passport. But don’t worry. Before the IRS certifies your tax debt to the State Department, they will notify you in writing about the impending certification. You have the opportunity to resolve your tax debt, enter into a payment plan, or request other relief options before the certification occurs.
The 1099-K is a Wild Card
The reporting thresholds for Form 1099-K have changed quite a bit in the past few years. Remember, Form 1099-K is an informational tax form used to report certain types of payment card and third-party network transactions to the IRS. If you collect payments for your business through PayPal, Venmo, or others, you probably know about Form 1099-K. As of now, you would receive a 1099-K in 2025 if you had transactions of $5,000 or more in 2024. However, a much smaller $600 threshold will go into effect for tax year 2025. Remember, you should report this taxable income even if you do not receive IRS Form 1099-K.
Today, Phil discusses what options you have if you cannot afford to do your taxes.
If you can’t afford to do your taxes, you can check to see if you’re eligible for free tax preparation. You can check out these two sites for more information.
If you would like to file your own taxes for free, you also have options. One of these is through IRS Free File. The program is a partnership between the IRS and various tax preparation software companies that provide free online tax preparation and filing services to eligible taxpayers based on their income level. IRS Free File offers a variety of tax preparation options, including both guided and self-preparation tools, to accommodate different levels of tax filing complexity. Taxpayers can choose the software that best fits their needs and preferences.
IRS Direct File
The IRS just launched a new program, Direct File, which allows residents of 12 pilot states to file their federal taxes online directly with the IRS for free. The pilot states included are Arizona, California, Florida, Massachusetts, Nevada, New Hampshire, New York, South Dakota, Tennessee, Texas, Washington and Wyoming. Taxpayers should also be aware of other limitations surrounding wages, deductions, and credits.
Be sure to take advantage of one of the many free tax-filing services the IRS offers. Tune in next Friday when Phil talks about his three takeaways from the current tax landscape.
Today, Phil gives his top tips on how to avoid IRS levies and liens.
Tip #1: Don’t Owe the IRS
Avoiding owing the IRS begins with responsible financial management and proactive tax planning. First, maintain accurate records of all income and expenses throughout the year, ensuring you’re well-informed about your financial standing. Next, regularly review and adjust your tax withholding or estimated tax payments to align with your actual tax liability. Utilize tax-saving strategies such as contributing to retirement accounts or taking advantage of tax credits and deductions. Stay updated on tax law changes that may affect your situation. Consider consulting with a tax professional for personalized guidance.
Tip #2: Open Your IRS Mail
Opening IRS mail is crucial because it often contains important information regarding your tax obligations, potential refunds, or any issues that may require your attention. Ignoring IRS correspondence can lead to missed deadlines, penalties, or even legal consequences. By promptly opening and reviewing IRS mail, you can stay informed about any adjustments to your tax return, requests for additional information, or notifications about potential errors or discrepancies. Additionally, timely action can help you address any issues efficiently, potentially avoiding escalated problems or further complications.
Tip #3: Pay Your Tax Balance ASAP
Paying your tax balance as soon as possible is essential for several reasons. Timely payment helps you avoid accruing interest and penalties, which can significantly increase your overall tax liability. Paying your taxes on time demonstrates compliance with tax laws, which can help maintain your good standing with the IRS and potentially mitigate any future issues, like liens, levies, or audits.
Join us next Friday as Phil will answer your questions about what to do if you can’t afford to do your taxes!
Today, Phil explains what a tax attorney is, including what it takes to become one and how they can help you with your tax issues.
What is a Tax Attorney?
A tax attorney is a legal professional who specializes in tax law. They are trained and experienced in dealing with complex tax issues, including tax planning, compliance, disputes, and litigation. One of the privileges they have is being able to represent taxpayers before tax authorities, such as the IRS.
Becoming a Tax Attorney
What does it take to become a tax attorney? For one, it means going to and completing law school. It also means passing the bar exam. However, they shouldn’t stop there. Staying updated on changes in tax laws and regulations is essential for tax attorneys to effectively advise their clients and navigate complex tax issues.
Tax attorneys can make a significant impact on their clients’ financial well-being by helping them minimize tax liabilities, resolve disputes with tax authorities, and plan for the future. Just be sure to vet your attorney to ensure they are qualified to represent you before the IRS. Rest assured, the attorneys and enrolled agents at Optima Tax Relief can help.
Today, Phil discusses the Financial Crimes Enforcement Network, also known as FinCEN.
If you’ve never heard of the Financial Crimes Enforcement Network, you aren’t alone. FinCEN is a bureau of the United States Department of the Treasury. The Financial Crimes Enforcement Network’s primary mission is to combat and prevent financial crimes, including money laundering, terrorist financing, and other illicit activities that involve the financial system.
FinCEN is important to know about because they may have filing requirements that apply to small businesses. You can check if you have a filing requirement for your small business on their website, fincen.gov. If your business was founded and registered before 2024, you have until January 1, 2025, to report all beneficial ownership interest.
Today, Phil discusses his top 5 tax tips for 2024.
Tax Tip #5: Gather Your Tax Documents Early
Most tax forms, including your W-2s and most 1099s, should be sent to you by January 31. However, there are some tax documents that come in a bit later. For example, 1099-B and 1099-MISC are due to recipients by February 15. 1095 health coverage forms are due by March 1. Be sure to wait for all your documents to arrive before filing your tax return.
Tax Tip #4: Don’t Forget About Estimated Tax Payments
If you are a small business owner, investor, landlord, or any taxpayer who receives income outside your normal job, you might need to pay estimated quarterly taxes. The 2024 quarterly tax payment deadlines are April 15, June 15, September 15, and January 15, 2025. Knowing these deadlines can help avoid tax penalties. You can use Form 1040-ES to calculate your estimated tax for the year.
Tax Tip #3: Don’t Wait on Your Tax Refund
In general, it takes about 21 days to receive your tax refund. However, some returns may take more time to review than others. That said, it’s best to not rely on your tax refund to make a big purchase or cover large expenses. You can use the online Where’s My Refund tool on the IRS’s website to track your refund status within 24 hours after e-filing and within 4 weeks of mailing a paper return.
Tax Tip #2: Report 1099-K Income – Even If You Don’t Receive the Form
If you receive payments on Venmo, PayPal, Etsy, eBay, or other third-party sites for your business, you probably know what a 1099-K is. The 1099-K reporting thresholds have changed quite a bit in the last couple of years, making the topic confusing for many small businesses. In short, if you receive income from these third-party payment networks, you must report it on your tax return, even if you do not receive a 1099-K form. This income is still considered taxable income, which means not reporting it can result in taxes owed to the IRS.
Tax Tip #1: Create an IRS Online Account
The IRS Online Account allows taxpayers to access various services and information related to their tax obligations. Taxpayers can access their tax return transcripts, make payments, access IRS notices and letters, apply for installment agreements, view payment histories, and more. Put simply, it helps you know where you stand with the IRS.
Join us next Friday as Phil will answer your questions about FinCEN!
If you need help with your taxes in 2024, contact us today for a Free Consultation
