Ask Phil Video Series Archives

Ask Phil: Employee Retention Credit

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 Employee Retention Credit (ERC) is a tax credit introduced in response to COVID-19 to provide financial relief to businesses that have experienced economic hardships due to the pandemic. 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 with tough tax situations.

As of September 14, 2023, the IRS has halted new Employee Retention Credit 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

By Elyssa Carlos|Ask Phil Video Series|Comments Off

Ask Phil: Mitigating & Removing IRS Penalties & Interest

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.

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

By Elyssa Carlos|Ask Phil Video Series|Comments Off

Ask Phil: Tax Extensions

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

By Elyssa Carlos|Ask Phil Video Series|Comments Off

Ask Phil: Taxes & Real Estate

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.

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

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!

If You Need Tax Help, Contact Us Today for a Free Consultation

By Elyssa Carlos|Ask Phil Video Series|Comments Off

Ask Phil: Passports & Taxes

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.

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:

Set up an installment agreement,
Establish a hardship status,
Getting an offer in compromise accepted by the IRS, or
Pay your tax debt in full

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

By Elyssa Carlos|Ask Phil Video Series|Comments Off

Ask Phil: No More Surprise RO Visits

Today, Optima Tax Relief’s Lead Tax Attorney, Phil Hwang, discusses an important update regarding IRS revenue officers, or ROs.

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

By Elyssa Carlos|Ask Phil Video Series|Comments Off

Ask Phil: Maximizing Tax Deductions

Today, Optima Tax Relief’s Lead Tax Attorney, Phil Hwang, discusses all things tax deductions.

Everyone wants a big refund. So, how do we know we’re maximizing our deductions to accomplish this? It depends on whether you choose to take the standard deduction or itemize your deductions. Most taxpayers find it more financially rewarding to take the standard deduction. In addition, itemizing deductions can be tedious work and meticulous expense tracking throughout the year. If you itemize, you can deduct expenses like:

Charitable deductions
State taxes paid
Mortgage interest
Property taxes paid

Some medical and dental expenses

How do you know which option is best for you? It depends on how many deductible expenses you had for the year, as well as the standard deduction amount for your filing status. In 2023, the standard deductions are:

$13,850 for single filers and married couples filing separately
$20,800 for heads of household
$27,700 for married couples filing jointly and surviving spouses

You can fill out a Schedule A on Form 1040 to see the total amount of itemized deductions you have for the year. If your itemized deductions do not exceed the standard deduction for your filing status, you should take the standard deduction as it will result in a lower taxable income.

Next week, Phil will discuss an important update about IRS revenue officers. See you next Friday!

If You Want to Maximize Your Deductions, Contact Us Today for a Free Consultation

By Elyssa Carlos|Ask Phil Video Series|Comments Off

Ask Phil: Private Collection Agencies

Today, Optima Tax Relief’s Lead Tax Attorney, Phil Hwang, discusses private collection agencies, otherwise known as PCAs.

Unbeknownst to some taxpayers, the IRS doesn’t always collect taxes on their own. Sometimes they hire private collection agencies (PCAs). These authorized agencies are contracted by the IRS to collect overdue tax debt from individuals and businesses.

That said, if you are contacted by a collection agency other than the IRS, you should still take the warning seriously. Keep in mind that the IRS currently only utilizes the services of three PCAs:

CBE Group Inc.

Coast Professional, Inc.
Conserve

If another company is trying to collect on the IRS’s behalf, you should report them to the IRS immediately. The IRS will send you Notice CP40 to let you know that your overdue tax account has been assigned to a PCA.

Taxpayers should keep in mind that once the IRS assigns their account to a PCA, they will no longer be able to claim hardship or submit an offer in compromise. However, getting your case back to the IRS is possible and should be considered if you want the best possible resolution.

Join us next Friday as Phil will answer your questions about tax deductions, including how to maximize them!

If Your Tax Account Has Been Assigned to a PCA, Contact Us Today for a Free Consultation

By Elyssa Carlos|Ask Phil Video Series|Comments Off

Ask Phil: Tax Forms

Today, Optima Tax Relief’s Lead Tax Attorney, Phil Hwang, discusses the most common tax forms every taxpayer should know about.

Tax Form 1040 or 1040-X

The well-known U.S. Individual Income Tax Return, Form 1040 is what you will use to report both your income and deductions to determine your tax liability every tax year. Form 1040-X, Amended U.S. Individual Income Tax Return, allows taxpayers to correct a previously submitted 1040, make specific elections after the tax deadline, or change an amount adjusted by the IRS.

Tax Form W-2

If you’ve ever earned money from an employer, you have probably received a W-2, Wage and Tax Statement. This critical document for wage earners includes your income earned in the previous year, as well as taxes withheld, and helps you file your federal and state tax returns. It may also include any benefits you received through your employer. If you changed jobs mid-year, worked more than one job as an employee, or if your employer was acquired by another company mid-year, you may receive multiple W-2s.

Tax Form 1099-NEC

A 1099-NEC will report your income earned as a freelancer or independent contractor. Businesses will distribute this form if they make payments to you totaling $600 or more. Non-employee income can also include fees, benefits, commissions, and other sources of income paid to you.

Tax Form W-4

Whenever you begin employment with a new employer, you will fill out a W-4, Employee’s Withholding Certificate. This form basically tells your employer how much taxes to withhold from your paycheck. Withholding too little can result in a big tax bill, while withholding too much can result in smaller than necessary paychecks. That said, it’s important to ensure that your withholding is always correct.

Tax Form W-9

Form W-9, Request for Taxpayer Identification Number and Certification, helps verify your tax information so your employer, or other paying entity, can report your earnings to the IRS. This form is for both employees and self-employed individuals.

Don’t miss next week’s episode where Phil will discuss private collection agencies. See you next Friday!

If You Need Tax Help, Contact Us Today for a Free Consultation

By Elyssa Carlos|Ask Phil Video Series|Comments Off

Ask Phil: Audits

Today, Optima Tax Relief’s Lead Tax Attorney, Phil Hwang, discusses his 5 top tips for how to avoid an IRS audit.

File Your Taxes: Some taxpayers don’t file because they think they don’t have to. The minimum requirement to file a tax return depends on your filing status and income, but generally most U.S. citizens and permanent residents need to file. Remember, if you don’t file when you’re required to, you will be hit with IRS penalties and interest. The IRS could also file a tax return on your behalf. While this might sound like a burden lifted off your own shoulders, this could be much worse than filing yourself because it can result in owing more taxes. You can use the IRS’s online Interactive Tax Assistant to find out if you need to file a tax return.

Report All Your Income: Failing to report all your income is the quickest way to being audited by the IRS. Keep in mind that the IRS receives copies of every W-2, 1099, and other tax forms that you receive. They know exactly how much you earned in the previous year and if your reported income does not match what they have on file, you’re much more likely to be audited.

Use Common Sense with Business Expenses: This tip is for the self-employed filers. The IRS requires all business expenses to be ordinary and necessary to be deductible during tax time. This means it should be common for your industry and necessary for the production of income. Excessive meals and entertainment, trips taken for non-business purposes, and commuting costs are examples of nondeductible business expenses.

Keep Good Records of Income and Expenses: Keeping good records of income and expenses can not only help you monitor the progress and financial well-being of your business, but also keep track of your deductible expenses, prepare your tax returns, and substantiate claims made on your tax returns. The IRS recommends keeping returns, records, and other tax documents for at least three years.

Be Wary of Multi-Year Losses: If your business consistently reports losses during tax time, the IRS will likely audit you. In addition, the IRS only allows you to write off losses for three of the five previous tax years. If you can’t prove your business is beginning to turn a profit, even a small one, the IRS can categorize your business as a hobby, at which point you will be unable to deduct any of your expenses.

Tune in next Friday for another episode of “Ask Phil” where Phil will review common IRS tax forms.

If You Think You’re at Risk of Being Audited by the IRS, Contact Us Today for a Free Consultation

By Elyssa Carlos|Ask Phil Video Series|Comments Off

12 Next

Ask Phil Video Series

Categories