Today, Phil discusses the 2024 tax season, including penalty relief and who qualifies for it.
The IRS is providing $1 billion in penalty relief to nearly 5 million 2020 and 2021 tax returns. To qualify, you must owe less than $100,000 on either year’s tax return. This amount includes penalties and interest. Finally, you must have received a CP14 notice from the IRS informing you of a balance due.
The relief will come in the form of waivers for failure-to-pay penalties. Eligible taxpayers will automatically receive penalty abatement in their online accounts with no further action needed. You will then have until March 31, 2024, to pay back all your unpaid taxes. If the balance is not paid, the failure to pay penalty will begin to accrue again.
Tune in next Friday as Phil covers his top 5 tax tips for 2024!
If you need help with the 2024 tax season, contact us today for a Free Consultation
Today, Optima Tax Relief’s Lead Tax Attorney, Phil Hwang, discusses gift taxes, including how they work and who is responsible for paying them.
The government imposes gift taxes on the transfer of property, money, or assets from one person to another without receiving something of equal value in return. These taxes are typically levied to prevent individuals from avoiding estate taxes by giving away their assets before they pass away.
The person responsible for paying gift taxes is generally the person making the gift (the donor), not the person receiving the gift (the donee). In 2023, you can give up to $17,000 each year to as many people as you want without incurring gift tax. Gifts within this annual exclusion amount do not require you to report or pay gift tax.
In addition, the lifetime gift tax exemption allows you to make larger gifts without paying gift tax. However, once you exceed this exemption, you’ll be required to pay gift taxes on the excess amount. As of 2023, the lifetime gift tax exemption is about $13 million per person.
Once you reach either of these thresholds, a giver will be responsible for paying gift taxes. This tax can range from 18% to 40% depending on the taxable amount. In addition, if you give over the current $17,000 limit, you will need to file a gift tax return. This r formally known as the United States Gift (and Generation-Skipping Transfer) Tax Return.
Given these thresholds, it can be fairly simple to avoid the gift tax. However, certain actions can trigger the gift tax. These include unpaid loans to friends and family or excess contributions to a 529 savings plan. Be sure to speak with a knowledgeable tax professional if you’re unsure about how to properly gift your assets.
Today, Optima Tax Relief’s Lead Tax Attorney, Phil Hwang, discusses IRS online accounts, including why it’s beneficial for taxpayers to have them.
Having an IRS online account can offer several benefits to individuals and businesses. Here are some of the advantages of creating and using an IRS online account:
Convenience: Online accounts provide easy and convenient access to a wide range of IRS services, including filing tax returns, checking the status of tax refunds, making payments, and managing your tax information. You can access these services from the comfort of your own home or office, eliminating the need to call the IRS.
24/7 Accessibility: You can access your IRS online account at any time, day or night. This is particularly useful for people with busy schedules, those who prefer to handle their taxes outside of regular business hours, or individuals in different time zones.
Electronic Payment Options: You can make tax payments, such as estimated tax payments, electronically through your online account, including the option to pay by credit or debit card.
Online Account Management: Your online account allows you to update your personal information, such as your address or direct deposit details. It also provides access to your tax transcripts and IRS notices.
Tax Alerts and Notifications: The IRS can send important notifications and alerts through your online account, helping you stay informed about tax deadlines, changes in your tax status, or issues that require your attention.
Creating an IRS online account can help make your experience with taxes and the IRS much easier.
Tune in next Friday for another episode of “Ask Phil.” Next week’s topic: gift taxes!
Today, Optima Tax Relief’s Lead Tax Attorney, Phil Hwang, discusses state taxes and collections, including how they differ from federal taxes and collections.
State tax collections and federal tax collections are two distinct systems of revenue collection within the United States. Here are some key differences between them.
Authority and Jurisdiction
States have the authority to collect taxes within their own jurisdiction. Each state can set its tax rates and determine what types of taxes it levies. These can include income taxes, sales taxes, property taxes, excise taxes, and others. The federal government collects taxes nationwide and has authority over issues that affect the entire country, such as income taxes, corporate taxes, Medicare taxes, and more.
Tax Rates and Structures
States have the flexibility to set their own tax rates and structures, which can vary significantly between states. Some states may have high income taxes but no sales tax, while others may have the opposite. Federal tax rates, on the other hand, are determined by the U.S. government and are the same across the entire country, with variations based on income levels and filing status.
Use of Revenue
The revenue collected by states is primarily used to fund state-specific programs and services, such as education, healthcare, infrastructure, and public safety. Each state decides how it allocates its revenue. Federal tax revenue is used to fund programs and services that benefit the entire nation, such as defense, social security, healthcare (e.g., Medicare and Medicaid), infrastructure projects, and federal agencies’ operations.
Collections, Enforcement, and Audits
State revenue agencies or departments, such as the Department of Revenue, are responsible for collecting state taxes. In addition, state tax authorities enforce and audit state tax compliance. Penalties for non-compliance vary by state. For example, if you owe more than $100,000 in the state of California, the state can have your business license or driver’s license suspended, as well as cease any operations they have with your business.
At the federal level, collections are done by the Internal Revenue Service (IRS). The IRS is responsible for enforcing federal tax laws and conducting audits for federal tax returns. Federal penalties can apply for non-compliance with federal tax laws.
Don’t miss next week’s episode where Phil will discuss IRS online accounts. See you next Friday!
If You Need State Tax Help, Contact Us Today for a Free Consultation
Today, Optima Tax Relief’s Lead Tax Attorney, Phil Hwang, discusses bankruptcy, including if and when tax debt is discharged.
When you file for bankruptcy, you are relieved from most of your debts, including credit card debt, medical bills, payday loans, utility bills, car loans, mortgages, and more. Many taxpayers want to know if bankruptcies also relieve them of their tax balances. In order for tax debt to be discharged in bankruptcy, it must be at least three years old, two years since you filed that year’s return, and 240 days since the tax has been assessed. In other words, new tax liabilities won’t qualify for discharge in bankruptcy.
The good news is that when you file for bankruptcy, all creditors will cease collections of debts owed to them, including the IRS. This is at least a temporary measure while your case is being processed. Of course, every bankruptcy case is different. If you’re unsure if your tax debt is qualified for discharge during bankruptcy, you should reach out to a professional for help.
Today, Optima Tax Relief’s Lead Tax Attorney, Phil Hwang, discusses tax refunds, including how to track when you’ll receive yours.
When it comes to tax refunds, most taxpayers want to know one of three things: how much they will receive, where it is, and when they will receive it. By the time you file your tax return, you’ll know the answer to the first question. How do you find your refund after filing? Luckily, the IRS provides a very helpful online tool called Where’s My Refund? The tool will you tell you when the IRS received your return and when the IRS processed your return. When the IRS processes your return, it will then issue your tax refund.
So, when will you receive your tax refund? Most taxpayers receive their refunds within 21 days of the processing date. However, there are some things that can delay a tax refund. For example, the IRS could need more information from you, or they may need to conduct an audit to review your return more thoroughly. You could also have an outstanding tax balance. If this is the case, the IRS will use your tax refund to offset that debt. You can check if you have a tax balance by checking your online IRS account or by contacting the IRS directly. If none of these scenarios apply to you and your refund is late, you can contact the IRS for more information.
Don’t miss next week’s episode where Phil will discuss bankruptcy. See you next Friday!
