Filing your taxes can be challenging, especially if you are missing crucial documents like your W-2 form. A W-2 tax form shows important information about the income you’ve earned from your employer, how much taxes were withheld from your paycheck, benefits provided and other details for the year. You file your federal and state taxes with this form. But what happens if you lose your W-2? If you lose your W-2 form, don’t panic. Here are some options you have if you do not have your W-2 form when filing your taxes.
Contact Your Employer
If you lose your W-2, your first reaction should be to contact your employer to request a replacement. You will typically need to contact your Human Resources department to obtain a duplicate. This is also true if you are trying to obtain a W-2 for a previous year or for an employer you no longer work for. Employers are required to keep copies of W-2 forms for four years; however, some may keep them for longer. It’s important to be aware that some employers might charge you a fee for providing a copy of your W-2. You should contact your employer for a copy of your W-2 form if you did not receive one for the year at all. Employers are required by law to distribute W-2s by January 31st of each year. You should note that some employers distribute these forms electronically through email or an employee portal. If you haven’t received one by early February, you might want to contact your employer.
Contact the IRS
In some rare cases, your employer may not be able to help you obtain another copy of your W-2. In this case, you can contact the IRS for help. During your phone call, you’ll need to verify your identity by providing your name, address, phone number and Social Security number. You will also need to provide your employer’s information and other employment information, including employment dates, estimate of wages and amount of federal taxes withheld last year. The IRS will reach out to your employer on your behalf and request your W-2 be sent to you. Note that the IRS will contact your employer about the current tax year’s W-2. If you’re looking for a previous tax year’s W-2, you’ll need to request a transcript copy from the IRS. The transcript will include federal tax information your employer reported. That said, it will not include any state or local tax information reported by your employer. Transcripts are available for up to 10 years.
Contact the Social Security Administration
Since your employer reports your earnings to the Social Security Administration, you can request copies of your W-2s from them if you lose the original. You can request a copy for any W-2 from the years 1978 to the present, however it may cost you. You can get free copies if you need them for a Social Security-related purpose. There is a $126 fee per request for other purposes including:
Federal or state tax filings
Residency establishment
Private pension entitlement
Worker’s compensation income information
If you are seeking W-2s from multiple tax years, this option can quickly become expensive. In some cases, it might be necessary to find all the relevant information needed to file both federal and state tax returns.
Tax Help for Those Who Lost Their W-2
Remember that just because you lost your W-2, or never received it, you still may need to file your taxes if you meet certain income thresholds. Locating a lost W-2 can be tricky and time-consuming, especially if it’s from a previous tax year or from an employer that you no longer work for. If you need help with your tax debt, tax relief is always an option. Optima Tax Relief is the nation’s leading tax resolution firm with over a decade of experience helping taxpayers with tough tax situations.
Did you know that foreign income is still taxed by the United States? Millions of Americans who earn money abroad or plan to earn money abroad should be aware of their tax obligations. The United States is currently one of the only countries in the world that taxes based on citizenship, and not residency. However, there are some exclusions and foreign tax credits that can reduce your tax liability. Overall, reporting foreign income can be tricky. Here’s an overview of how to report foreign income at tax time.
What is Foreign Income?
First, let’s clearly define foreign income. Foreign income is any income you receive overseas. This can include the following:
Foreign wages: Foreign wages are wages paid to you for services rendered or goods sold. This can mean being employed by a foreign company or being self-employed but working abroad.
Foreign interest and dividends: Foreign interest is money earned through foreign bank accounts. Foreign dividends are payouts from foreign-earned stocks.
Foreign real estate: Foreign rental income is income earned on a property you rent out located in a foreign country. Alternatively, if you sell a property that is located outside the United States, you’ll need to report the gains or losses on the sale during tax season.
How Do I Report Foreign Income on My U.S. Tax Return?
If you earned foreign income, you would need to report it on Form 1040 when filing your tax return. You may also need to file other tax forms depending on what type of income you earned. For example, if you earned foreign interest and dividends, you’d report these on Schedule B of Form 1040. Foreign business income is reported on Schedule C. Most capital gains are reported on Schedule D. Rental property income is reported on page 1 of Schedule E. However, in more complicated tax situations, there could be additional forms to file, like Form 8938, Statement of Specified Foreign Financial Assets or Form 114, Report of Bank and Financial Accounts. In any case, you should speak to a qualified tax preparer about which forms your specific tax situation requires.
What is the Foreign Tax Credit?
Some taxpayers might worry about paying taxes twice on the same income. The Foreign Tax Credit (FTC) is one of two safeguards that help American taxpayers avoid this issue. This credit allows American expats, or U.S. citizens who live abroad, to offset foreign taxes paid abroad dollar-for-dollar. For example, if you’re an American expat who paid income taxes to the foreign country where you reside, the FTC gives you a tax credit to use on your U.S. income tax return.
Requirements
To claim this credit, you must be the following requirements:
The tax must be imposed on you. This basically means that if your resident country does not require income taxes to be paid, you do not qualify for the FTC.
You must be the one who paid or accrued the tax. This means if you have not paid the tax or accrued it, you do not qualify for the FTC.
The tax must be the legal and actual foreign tax liability. This means that if the tax is not legal, and you are not required to pay it, you do not qualify for the FTC.
The tax must be an income tax. This means that if the tax is another type of tax besides income tax, you do not qualify for the FTC. The IRS has specific rules on what they deem to be a foreign income tax. Be sure to check with your tax preparer for clarification.
How to Calculate the Foreign Tax Credit
Calculating your maximum FTC can be tricky, but essentially you can divide your foreign taxable income by your total taxable income (including U.S. income). Then take this quotient and multiply it by your U.S. tax liability. For example, if you earned $50,000 in Spain and another $10,000 in U.S. income, you’d have a total taxable income of $60,000. Let’s also assume you had a U.S. tax liability of $12,000. You would take your foreign income of $50,000 and divide it by your total taxable income of $60,000 to get 0.83. You would then multiply 0.83 by your U.S. tax liability of $12,000 to get your maximum FTC of $10,000.
Additionally, the FTC can carry over to the next tax year or carry back to a previous tax year. Unused FTC amounts can be carried over for up to 10 years. Taxpayers can claim the FTC by filing Form 1116.
What is the Foreign Earned Income Exclusion?
The other safeguard that helps American taxpayers avoid paying taxes twice on the same income is the Foreign Earned Income Exclusion (FEIE). The FEIE allows you to exclude all or some of your foreign earned income on your U.S. tax return, including salaries, wages, bonuses, commissions, and self-employment income. It does not include passive or investment income. The FEIE is available to U.S. expats who meet one of the following requirements:
Work outside the United States as an employee
Work outside the United States in a self-employed or partnership structure
Pass the Bona Fide Residency Test. This requires being overseas for work for longer than one year and having a permanent place of work in the foreign country.
Pass the Physical Presence Test. This requires living outside the United States for 330 full days out of the year.
U.S. taxpayers must use Form 2555 to claim the FEIE and can exclude up to $120,000 of foreign income for the 2023 tax year. The amount is due to increase to $126,500 for tax year 2024. Married couples filing jointly can exclude up to $240,000 as long as both spouses meet either the bona fide residency test or the physical presence test.
Help Reporting Foreign Income
Reporting foreign income can get complicated very fast. While this article covers several topics related to foreign income, it really is just the tip of the iceberg and applies to most simple tax situations. American taxpayers who live in the country, as well as expats, who earn foreign income should seek best practices regarding foreign income from reliable and knowledgeable tax professionals. If you need tax help, Optima can assist.
Owing taxes is more expensive than ever before. Filing an accurate return on time is the best way to avoid penalties, interest, and IRS collections. CEO David King and Lead Tax Attorney Philip Hwang list three things to watch out for after the tax deadline.
If you have an unpaid tax bill, you know the stress that comes with owing the IRS. The IRS is a powerful agency with the ability to collect what is owed to them using severe methods. These can include garnishing your wages or levying your bank accounts. With a 10-year statute of limitations, the agency has plenty of time to forcefully collect tax debts. While some taxpayers might want to ignore their tax bills, doing so comes with many risks. Here are some of the top risks of owing the IRS.
The IRS will collect.
The IRS will always warn you of intent to collect or enforce through IRS notices. After these notices have been ignored, the IRS will place you in their Automated Collection System (ACS). This basically means they can issue liens, levy your bank accounts, and garnish your wages. Alternatively, the IRS may turn your tax debt over to a debt-collection agency.
The IRS may file a federal tax lien.
If a tax balance goes unpaid and notices are ignored, the IRS can file a Notice of Federal Tax Lien. This basically lets creditors know that you have tax debt. A lien is a legal claim against a property, usually placed because the property owner owes someone money. Liens can severely hinder your ability to access credit. In addition, they can also damage your reputation since they are public information.
The IRS can seize your assets.
If a tax balance goes unpaid, the IRS will send you a Notice of Intent to Levy. If they do not hear from you after 30 days, they may proceed with the levy. The IRS is known to levy bank accounts, wages, and more. Wage levies, also called wage garnishments, are when the IRS takes some of your paycheck to put toward your unpaid tax bill. The amount they levy will depend on your filing status and number of dependents.
The IRS may also levy your bank account. If your tax balance is greater than your bank account balance, they are authorized to levy the entire account. The same goes for joint bank accounts that you have access to. If you own a small business, or do contract work, the IRS can levy these earnings. If you file your taxes and are due a tax refund, the IRS will keep the refund and apply it to your unpaid tax bill. The IRS will stop levying if you arrange a payment agreement or if you pay your tax bill in full.
The IRS will charge you penalties and interest.
Your tax bill doesn’t end with your unpaid taxes. The IRS will charge you interest until the balance is paid in full. The current rate for underpayment is 7% annually, at least through June 2023. On top of that interest, the IRS will charge a failure-to-pay penalty on your unpaid taxes. The current rate is about 0.5% per month or partial month the balance remains unpaid, for a maximum of 25% of your unpaid tax. The amount is increased to 1% per month or partial month if you do not pay within 10 days of receiving an IRS Notice of Intent to Levy. However, if you set up a payment plan with the IRS, the rate drops to 0.25% per month or partial month.
You may lose traveling privileges.
Under the Fixing America’s Surface Transportation (FAST) Act, the IRS requires your Department of State to deny passport applications and renewals submitted by taxpayers with tax bills of $52,000 or more. The State may also revoke your valid passport or limit your ability to travel outside the U.S.
How Can I Get Relief from My Tax Debt?
Clearly, the risks of owing the IRS are extreme and affect all facets of life. If you’ve been ignoring IRS notices coming through your mail, it may not be long before these risks apply to you. Ignoring your tax issues will certainly not make them disappear. Your best bet is to find a way to work with the IRS to see what your options for repayment are. We know how stressful this process can be, but Optima is here to help you with all of your tax issues.
The average tax refund so far in 2023 has been just over $1,960, which is about 11% lower than last year. Tax professionals are warning taxpayers of potential “tax refund shock” and urge them to prepare for smaller tax refunds in 2023. Here’s a breakdown of what caused the decrease in the average tax refund amount.
Tax Credits Are Back to Pre-Pandemic Level
According to IRS data, American taxpayers saw an increase in their tax refunds in 2021, from an average of $2,549 to an average of $2,815. 2022 saw an even larger increase with an average tax refund of $3,252. These amounts can be credited to the COVID-era tax credits related to children, dependents, charitable deductions, and more. However, the IRS issued a statement urging taxpayers to prepare for lower refunds in 2023 due to the end of stimulus payments and changes to charitable contribution deductions.
Child Tax Credit
The Child Tax Credit (CTC) provided up to $3,600 per qualifying child in 2021 for working parents with certain qualifications. In 2022, the credit was reduced to $2,000 per qualifying child but still helped American families. However, the payments only went to families that earned enough income to owe taxes, so only the poorest U.S. households benefitted from the credit. This could be devastating to families relying on the credit, especially after data showed the CTC lifted nearly 3 million children out of poverty in 2021 at its peak level.
Child and Dependent Care Expenses Tax Credit
In addition, the Child and Dependent Care Expenses Tax Credit (CDCTC) returned to a maximum of $2,100 in 2022, a huge decrease from 2021 levels of $8,000. This credit was especially helpful to parents and guardians who had daycare, babysitting, or other care provider expenses.
Earned Income Tax Credit
The Earned Income Tax Credit (EITC) dropped from 2021 levels of $1,500 to just $560, but up to $6,935. Certain charitable donations are also no longer deductible up to $600 as it was in previous years.
COVID-Era Provisions
The United States saw a massive trend of layoffs in 2022. However, severance payments were taxable this year, unlike during the pandemic-era layoffs. Finally, the end to COVID-19 stimulus payments also meant no way to claim credits for stimulus payments.
The issue here is that the end of these helpful tax breaks comes during a time of the highest inflation the U.S. has seen in four decades, making it difficult for taxpayers to rely on their tax refunds for financial relief as they normally do. Nearly one third of Americans rely on their tax refunds to make ends meet.
How Can I Increase My Tax Refund Next Year?
While some people prefer to keep more of their paychecks during the year, others prefer to have a greater tax refund once a year. One way to do this is to have more taxes withheld from your paycheck. You can submit a new W-4 to your employer at any time during the year. It’s important to note that your W-4 should be reviewed and resubmitted when you have a personal or financial change in life. Other than this adjustment, you can take advantage of traditional IRA contribution deductions or max out your Health Savings Account (HSA) contributions.
With just a short amount of time before the April 18th tax filing deadline, you’ll want to ensure that you file a complete and accurate return as soon as possible. If you need tax help, Optima is here to assist.
