The IRS recently announced that there has been an increase in tax-related scams where taxpayers personal financial information could be at risk of being exposed or stolen. CEO David King and Lead Tax Attorney Philip Hwang provide helpful insight on what tax scams to be on the lookout for and how to avoid them in the future.
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Every year, the IRS makes inflation adjustments. With consistently high inflation in 2022, some experts are predicting larger adjustments than normal that can affect tax brackets in 2023.
With the recent passing of The Inflation Reduction Act, individuals who have unfiled tax years or unpaid tax debt may now expect an increase in IRS collection enforcement. Optima CEO David King and Lead Tax Attorney Philip Hwang explain how the Inflation Reduction Act can directly affect taxpayers and how to get compliant with the IRS.
As the cost of living continues to rise, it is becoming increasingly difficult for single individuals to live comfortably. Without the safety net of a second income, the need to manage finances as a single individual is more important than ever. The process comes with unique benefits and challenges, both throughout the year and during tax time.
While there is no guaranteed method of avoiding audits, there are things to steer clear of that could trigger an IRS audit. The Senate recently approved nearly $80 billion in IRS funding, with $45.6 billion for enforcement, which could lead to more audits. Here are four things that the IRS has historically viewed as “red flags,” which could increase the chances of an audit for taxpayers.
Every year, the IRS makes inflation adjustments. With consistently high inflation in 2022, some experts are predicting larger adjustments than normal that can affect tax brackets in 2023.
Put simply, inflation is the overall increase in prices of goods and services over a given period of time. Inflation is the reason a gallon of milk costs about $4.33 today but only $2.72 in 2002. The increase can come from a rise in demand, like when a tech giant charges increasingly high prices for a new product because of growing popularity. The increase can also result from a decrease in supply, usually because of an increase in cost of production, materials or labor.
Inflation does always affect taxes. In fact, the IRS automatically adjusts income tax brackets and the standard deduction each year according to inflation rates. Since the 1980s, the U.S. inflation rate has staggered around 2%, which is considered a healthy rate by the Federal Reserve’s standards. In some years when inflation has been relatively higher or lower, the rate has fluctuated between 0% and 4%.
The consistently high inflation in 2022 has resulted in higher-than-expected inflation adjustments for income tax brackets, with most sitting between 6.5% and 8%. This essentially means that taxes will apply to less of your earnings beginning on January 1, 2023, to reflect the newest value of money based on inflation. The most notable changes are as follows:
The standard deduction will also increase.
Tax planning can be very complicated and sometimes it’s best to seek help from professionals in the industry. Optima Tax Relief is the nation’s leading tax resolution firm with over $1 billion in resolved tax liabilities.
If You Need Tax Help, Contact Us Today for a Free Consultation
As the cost of living continues to rise, it is becoming increasingly difficult for single individuals to live comfortably. Without the safety net of a second income, the need to manage finances as a single individual is more important than ever. The process comes with unique benefits and challenges, both throughout the year and during tax time.
There are countless budget strategies you can use as a single individual. Some of the most popular ones are the 50/30/20 budget and the zero-based budget.
One of the most popular methods is the 50/30/20 budget, in which you spend about half of your after-tax income on necessities. This includes bills, groceries, housing, and all the other items that are necessary to live. Thirty percent of your income should then go to your “wants”, like dinners, entertainment, and travel. The final 20% should be designated for savings and debt repayment. These percentages can be altered to fit your own specific needs.
In the zero-based budget strategy, every dollar you earn is allocated to a specific expense. A certain dollar amount goes to housing, another goes to utilities, another goes to debt, and so on until every dollar in your paycheck is assigned to one expense. At the end of the pay period, whatever is left over is sent to your savings. This strategy is especially helpful in preventing impulse spending.
The key to retirement savings is understanding that the earlier you start, the better. Let’s say two people begin saving $100 per month. One begins at age 25 and the other begins at age 35. The one who begins saving earlier will have nearly twice as much savings by age 65. Prioritizing any portion of your income for retirement can really maximize your savings, especially if you take advantage of employer contributions.
Having an emergency fund that can cover three to six months of expenses is crucial if you don’t have a second income to rely on if you lose your job or cannot work. Automating your savings can help you reach your goals faster. You can create automatic bank account transfers or even use mobile apps that schedule money transfers from your checking account to your savings account or online account. While you’re at it, you can maximize your savings by opening a high-yield savings account that will accrue interest at a higher rate than a typical savings account.
During tax season, it’s important to know which tax bracket you’ll fall into as a single filer. The federal income tax bracket for 2023 is as follows:
Single filers do not qualify for deductions that many families take advantage of, so it’s also important to learn which ones you are eligible for in order to reduce your taxable income, and even your tax bracket. Remember, the tax bracket ranges above are based on taxable income, and not the actual amount of earned income you receive. In other words, the tax bracket is based on your income after deductions and credits are taken. Doing taxes on your own can be intimidating and stressful. Optima Tax Relief is the nation’s leading tax resolution firm with over $1 billion in resolved tax liabilities.
If You Need Tax Help, Contact Us Today for a Free Consultation
Owing a tax liability means that individuals are at a higher risk of falling into collections with the IRS. Optima CEO David King and Lead Tax Attorney Philip Hwang explain the risks taxpayers face when handling a tax liability on their own, as well as the benefits of hiring a tax professional to help you when dealing with a revenue officer.
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