GET TAX HELP (800) 536-0734

Ask Phil: What is the Child Tax Credit?

Today, Optima Tax Relief Lead Tax Attorney, Phil, talks about the Child Tax Credit, breaking down what it is and who qualifies. 

What is the Child Tax Credit? 

The child tax credit is a tax benefit provided by the IRS to parents or guardians who have dependent children. It’s designed to help offset the costs of raising children. Individuals with children under the age of 17 could potentially receive up to $2,000 per eligible dependent. $1,600 of that sum could be eligible for refund in the 2024 filing season. 

Who Qualifies for the Child Tax Credit? 

First, you’ll need to determine the child’s eligibility. The child must meet certain criteria such as: 

  • Relationship: The child must be your son, daughter, stepchild, foster child, brother, sister, stepbrother, stepsister, half-brother, half-sister, or a descendant of any of them (such as your grandchild, niece, or nephew). 
  • Age: The child must be under 17 years old at the end of the tax year for which you are claiming the credit. 
  • Support: The child must not have provided more than half of their own support for the tax year. 
  • Dependent: You must claim the child as a dependent on your federal tax return. 
  • Citizenship: The child must be a U.S. citizen, U.S. national, or U.S. resident alien. 
  • Not File Joint Return: The child must not file a joint return with their spouse for the tax year. If they did, they must only file to claim a refund of withheld income tax or estimated tax paid. 

There are also income limitations for the child tax credit. In 2023, eligibility for the child tax credit hinged on your modified adjusted gross income (MAGI). Thresholds were set at $400,000 or less for married couples filing jointly, and $200,000 or less for other filers. However, if your MAGI surpassed these limits, the $2,000 credit was gradually reduced by $50 for every additional $1,000 over the threshold. 

If you’re unsure about your eligibility for the child tax credit, consider asking for help from a tax professional.  

If you need tax help, contact us today for a Free Consultation. 

Ask Phil: Failure to Pay and Failure to File. Which is Worse? 

Today, Optima Tax Relief Lead Tax Attorney, Phil, talks about the common IRS penalties: failure to pay and failure to file, including what each are, and which one is worse for taxpayers. 

Failure to Pay Penalty 

The failure to pay penalty is a financial penalty imposed by the IRS on taxpayers who fail to pay their taxes by the due date. This penalty typically accrues at 0.5% of the unpaid taxes for each month or part of a month the tax remains unpaid. It will continue to accrue until the date the tax is paid in full. However, it will not exceed 25% of your unpaid taxes.  

Failure to File Penalty 

The failure to file penalty is a financial penalty imposed by the IRS on taxpayers who fail to submit their tax return by the deadline. This penalty typically accrues at 4.5% of the unpaid taxes for each month or part of a month the tax return is late. It will continue to accrue until the date the tax return is submitted, up to 22.5% of your unpaid taxes. 

So, Which is Worse? 

Well, our expert says the failure to file penalty is. This is because of the hefty penalty of 4.5% each month the balance goes unpaid your taxes are filed. So, as Phil says, “Do something.” In this case, do file your taxes, even if you can’t afford to pay your tax bill. At least then you won’t need to worry about the aggressive failure to file penalty. 

Tune in next Friday when Phil answers your questions about the Child Tax Credit. 

If you need tax help, contact us today for a Free Consultation 

Ask Phil: What’s on Phil’s Tax Radar?

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.  

If you need tax help, contact us today for a Free Consultation 

Ask Phil: What If I Can’t Afford to Do My Taxes? 

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. 

IRS Free File 

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. 

If you need tax help, contact us today for a Free Consultation 

Ask Phil: Tips To Avoid Levies & Liens 

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! 

If you need tax help, contact us today for a Free Consultation 

Ask Phil: What is a Tax Attorney?

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.  

If you need tax help, contact us today for a Free Consultation