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!
If You’ve Fallen Victim to an ERC Scam, Contact Us Today for a Free Consultation
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!
If You Need Help Removing Your IRS Penalties, Contact Us Today for a Free Consultation
Today, Optima Tax Relief’s Lead Tax Attorney, Phil Hwang, breaks down tax extensions. Can anyone file a tax extension? When is the deadline to file?
A tax extension is an additional 6-month period the IRS grants a taxpayer to file their tax return. It is not an extension to pay your taxes. That said, failure to pay your taxes by the original due date will result in a Failure to Pay penalty. The Failure to Pay penalty is currently 0.5% of your unpaid tax bill for every month or partial month the tax remains unpaid, up to a maximum of 25% of your tax bill.
Anyone can file a tax extension, including individuals and businesses. However, you must file your tax extension before the original due date of the return. If you don’t, your return will be considered late, and you will begin to incur penalties and interest.
If you’re an individual who is trying to file a tax extension, you’ll need to file IRS Form 4868, also known as the Application for Automatic Extension of Time to File U.S. Individual Income Tax Return. As a business, you will need to file IRS Form 7004, which is the Application for Automatic Extension of Time to File Certain Business Income Tax, Information, and Other Returns.
Next week, Phil will discuss how to mitigate or remove IRS penalties and interest. See you next Friday!
If You Need Help Filing a Tax Extension, Contact Us Today for a Free Consultation
Today, Optima Tax Relief’s Lead Tax Attorney, Phil Hwang, discusses taxes and real estate, including buying, selling, and refinancing your home while owing taxes.
Tax Liens
Real estate transactions can quickly become tricky if you owe taxes and even more so if the IRS places a tax lien on your property. This means that if you sell your home, after the bank is paid, the IRS will then have first dibs on any profits from the sale. That said, it’s not impossible to sell your home while a tax lien is attached to it. However, it might make it more difficult. Plus, you’ll likely lose out on profits. One option you have is to request a lien discharge with IRS Form 14135, Application for Certificate of Discharge of Property from Federal Tax Lien. The IRS may consider discharging the lien if:
You want to take out a loan against the property and use the funds to pay your tax bill and need the lien to be discharged in order to qualify for the loan
You want to refinance your existing home loan so you can afford monthly tax payments
You want to sell the property and agree to pay the IRS the profits of sale up to the lien value
You want to sell or transfer the property but there is no value that the IRS can claim
Refinancing While Owing Back Taxes
When it comes to refinancing while owing back taxes, you’ll need to apply for a lien subordination through IRS Form 14134, Application for Certificate of Subordination of Federal Tax Lien. This will request that the IRS allows your mortgage refinance lender to move ahead of the tax lien in priority.
Tune in next Friday for another episode of “Ask Phil.” Next week’s topic: tax extensions!
Today, Optima Tax Relief’s Lead Tax Attorney, Phil Hwang, discusses how owing back taxes can affect your travel plans, including renewing your passport or obtaining one for the first time. Here’s what you need to know about passports and taxes.
You might be wondering what your passport has to do with taxes. The IRS works with state departments to make sure that those with seriously delinquent tax accounts cannot leave the country. Actions that can be taken are a denial of application of a passport, denial of passport renewal, or even a revocation of your passport.
So, what exactly is a seriously delinquent tax account? This amount can change year to year but in 2023, tax balances of $59,000 or more are considered seriously delinquent. This amount includes penalties and interest.
If your passport gets revoked, or if your passport application or renewal is denied, you’ll need to resolve your tax debt before getting your travel privileges back. To do this, you’ll need to:
Getting an offer in compromise accepted by the IRS, or
Pay your tax debt in full
Now you know how passports and taxes are linked. Remember, always do something to help resolve the issue. If you’re not sure where to start, consult a tax professional for help.
Tune in next Friday for another episode of “Ask Phil” where Phil will talk taxes and real estate.
If Your Travel Privileges Were Revoked Because of Back Taxes, Contact Us Today for a Free Consultation
Today, Optima Tax Relief’s Lead Tax Attorney, Phil Hwang, discusses an important update regarding surprise RO visits.
The IRS just announced that it is discontinuing home visits as an enforcement method. This means the days of intimidating revenue officers (ROs) knocking on your door are over. Instead, you will receive IRS Letter 725-B, which serves as an appointment letter to schedule an in-person meeting between you and an RO. In this meeting, you and the RO will review your financials, analyze your ability to pay your back taxes, and discuss how you can remain tax compliant moving forward.
Remember, the IRS will never contact you via social media or text message. If you receive a message through one of these channels, you should report it to the IRS immediately. In addition, all letters coming in the mail from the IRS should be reviewed for potential scams. Be wary of letters advising you of unclaimed refunds, unclaimed Economic Impact payments, or unclaimed Child Tax Credits. If you’re unsure about a letter or notice, contact the IRS directly to confirm its validity.
Don’t miss next week’s episode where Phil will discuss passports and taxes. See you next Friday!
If You Need Help Dealing with the IRS, Contact Us Today for a Free Consultation
