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!
Today, Optima Tax Relief’s Lead Tax Attorney, Phil Hwang, discusses the October tax extension deadline.
The tax extension deadline this year is October 16, 2023. Remember, an extension to file your taxes is not an extension to pay your taxes. But what if you’re still unable to pay your tax bill? One option is to request a short-term payment plan with the IRS. If you have a total tax balance of less than $100,000 (including penalties and interest), you can be put on a payment plan to receive an extra 180 days to pay your balance in full. While this option won’t stop additional penalties and interest from accruing, it will stop any new liens, levies, or garnishments from being issued by the IRS.
If you need longer than 180 days to pay off your tax bill, you can request an IRS installment agreement, currently not collectible status, or submit an offer in compromise. These three options have their own set of rules so you should consult a tax professional to decide which is best for you. As always, doing something is better than doing nothing, especially if you owe a tax balance.
Next week, Phil will discuss tax refunds. See you next Friday!
Today, Optima Tax Relief’s Lead Tax Attorney, Phil Hwang, discusses marriage and taxes, including filing status options.
Married couples have two different options for filing their taxes: married filing jointly and married filing separately. If you choose to file jointly with your spouse, you will both be jointly and severally liable for the full tax liability. In other words, if you rack up a tax bill, both your incomes are up for grabs in order to satisfy your tax debt.
Filing separately keeps your tax liabilities separated from your spouse’s tax liability and vice versa. While this may seem to be a major positive point to consider in filing separately, filing jointly can offer more tax benefits at times. These can include a higher standard deduction, more advantageous tax brackets, and more access to tax credits. However, there are some scenarios in which it may be better to file separately if you are married. Be sure to consult a knowledgeable tax professional about your options to see what is best for your specific situation.
Tune in next Friday for another episode of “Ask Phil.” Next week’s topic: the tax extension deadline!
Today, Optima Tax Relief’s Lead Tax Attorney, Phil Hwang, discusses the Employee Retention Credit (ERC), including the rise in scams surrounding the credit.
The ERC is a tax credit that provides financial relief to businesses that have experienced economic hardships due to COVID-19. It encourages employers to retain their employees on payroll by offering a refundable tax credit against certain employment taxes.
Lately, there has been a rise in advertisements for the ERC by third parties claiming that they can help businesses obtain the credit easily for a fee. The issue at hand is that not all of these businesses actually qualify, and these third parties knowingly proceed with the application, leaving the businesses exposed to potential stressful IRS audits that can result in a hefty tax bills.
Before trusting any of these third parties, taxpayers should be sure to do their own research about the eligibility requirements. In addition, they should reach out to a trusted tax professional to give a second opinion. If you have already been duped by an ERC scammer, you may feel more at ease letting a professional team of tax experts handle the IRS for you. Optima Tax Relief is the nation’s leading tax resolution firm with over a decade of experience helping taxpayers.
As of September 14, 2023, the IRS has halted new ERC processing due to the astounding amount of fraudulent applications. The halt is set to last at least until the end of 2023 and could be extended longer if necessary.
Don’t miss next week’s episode where Phil will discuss marriage and taxes. See you next Friday!
Today, Optima Tax Relief’s Lead Tax Attorney, Phil Hwang, discusses penalties and interest again, but this time gives tips on how to mitigate and even remove them.
Penalties and interest can quickly get out of hand. The best way to mitigate them is to pay your tax liability. We understand that this may not be an option for everyone. If you can’t pay your tax bill in full, you can set up an installment agreement with the IRS. This will reduce your penalty from a 0.5% accrual per month to 0.25% per month.
Removing Penalties and Interest
If you’re looking to remove your penalties and interest, you have some options. The IRS offers penalty abatement for reasonable cause and first-time abatement. To request penalty relief for reasonable cause, you must prove to the IRS that you tried to file or pay but could not. Examples can include fires, natural disasters, inability to obtain records, death, serious illness, system issues, and some others. It does not include a reliance on a tax profession, lack of ignorance, errors, or lack of funds.
The IRS also offers penalty abatement by administration waiver, more commonly known as first-time abatement. You can request a first time abate if you failed to file, failed to pay, or failed to deposit. To qualify, you must have a good history of tax compliance and did not have any penalties during the prior 3 years, or a penalty was removed for good reason other than a first-time abatement.
While interest cannot be removed from your account, it can be adjusted if penalties are abated. Only the interest related to the abated penalty will be reduced or removed.
Don’t miss next week’s episode where Phil will discuss the Employee Retention Credit. See you next Friday!
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