How Filing for an Extension Affects Your Taxes

With a massive increase in taxpayers filing for an extension, what does this mean for people who owe? How does the extension deadline work? Hosts CEO David King and Lead Tax Attorney Philip Hwang discuss these details and more in this week’s episode.

Got an IRS Notice? Get a FREE Risk Review with our Optima® TAX APP with Notice Analyzer.

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Tax Tips for Remote Workers

remote workers

There has been a surge in remote work since 2020, qualifying employees for certain tax deductions.

Tax Deductions for Remote Workers

Generally, your home office must be used for the sole purpose of your work to qualify for deductions on your tax return. Expenses such as internet, phone bills, and similar items could also be for personal use. Items you might consider deducting would be a computer purchase for the sole use of your job, a special phone line, other equipment and materials required for your work, or maintenance for the upkeep of said equipment.

Another qualifying factor for a home office would be a space that is utilized specifically for meeting with clients. If your work requires you to have a physical space to host meetings, store inventory, or to conduct business that is not virtual, you may qualify for deductions when you file.

Leased Office Space for Remote Workers

As a self-employed or remote worker, you may have a separate space for your work. However, a leased office, or a workstation located on premises that is not your home would not qualify as a home office. The IRS will see this as an optional work environment.

Records and Receipts for Remote Workers

No matter your work location, it is imperative that you document and keep track of all records pertaining to work-related purchases. Receipts and records are the only tangible evidence of your expenses that can qualify you for deductions. You must know the exact dollar amount of your expenses; estimations of round, even numbers will often flag your return.

Too many round numbers for your expenses could trigger an audit.

Simplified and Direct Deductions: What’s the difference?

The simplified method for home office deductions is done by expensing $5 per square foot of your office, up to 300 square feet max. This method can qualify up to $1,500 in deductions.

The direct method requires you to track all your expenses and maintenance costs for your home office. This method allows you to qualify for a bigger deduction.

Tax Debt Relief for Remote Workers

Whether you work from home or in an office, Optima assists self-employed and W-2 workers with tax liabilities. Give us a call at 800-536-0734 for a free consultation today.

Download the Optima Tax App to analyze your IRS notice instantly.

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The Fair Debt Collection Practices Act: What is it and how does is protect taxpayers?

fair debt collection

Being in debt is a stressful circumstance that collectors can often intensify with unfair practices. Therefore, the Fair Debt Collection Practices Act (FDCPA) prohibits companies from using such practices to collect debts from you.

What Does the FDCPA Cover?

Mortgages, credit cards, medical, and personal debts are all covered by the FDCPA. The collectors that are prohibited by this act include the following:

  • Collection agencies
  • Debt buyers
  • Lawyers who regularly collect debts as part of their business
  • Other entities that buy past-due debts from creditors to collect them

Business debts are not covered by the FDCPA. It also doesn’t cover collection by the original creditor that you’re indebted to.

FDCPA Communication Restrictions

Debt collectors are not allowed to contact you under certain circumstances.

  • Harassment: Debt collectors cannot harass you over the phone or by any other form of contact
  • Inconvenient Times: Debt collectors may not contact you at inappropriate hours or places. This includes before 8:00 a.m. and after 9:00 p.m. Contacting your place of work is also not allowed under the FDCPA.
  • Power of Attorney: Once you have attorney representation, the collector must cease contact with you. The attorney is now responsible as the main point of contact regarding your case. If you are contacted by a collector, you should inform them that you’re represented by an attorney and give them the attorney’s name.

Once you tell a collector to stop contacting you, they can only contact you to inform you that there will be no further contact, or to notify you that legal action (such as a lawsuit) is taking place.

Debt Information

The collector calling you for a payment is required by law to inform you about the debt. Things they should share include:

  • Identify the creditor (name and address of current or former creditor)
  • Amount owed
  • That you can dispute the debt

FDCPA and Tax Debt

The IRS must also abide by the Fair Debt Collection Practices Act. You have rights as a taxpayer that restricts their communication and enforcement practices. If you have unaffordable tax debt and need assistance with your case, give Optima a call for a free consultation at 800-536-0734.

Received a notice from the IRS? Download the Optima Tax App to analyze your notice instantly!

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New Consequences of Payroll Tax Debt


The responsibility of payroll taxes falls on the shoulders of employers, although they come from employee paychecks. The federal government, Social Security and Medicare heavily rely on taxes from employee wages.

IRS revenue officers are now tracking how unpaid payroll taxes were spent during their “trust fund investigation.”

Payroll Taxes Used for the Employer’s Benefit

Employers will now face more penalties for spending payroll tax money for their own benefit, or pocketing it for themselves. Maintaining a luxury lifestyle while owing payroll taxes can now lead to prosecution.

Revenue officers are being instructed to pull employer 1040 tax returns to learn whether the money that benefited them was reported as income. If the money was not reported as income, the RO will submit the returns and investigation records to the civil audit division. Another option is that the RO will refer the case to the IRS Criminal Investigation Division to review for criminal prosecution. The course of action made by the RO depends on the severity of the case.

What This Means for Business Owners

Business owners should utilize their tax professionals and seek advise to avoid any possible criminal activity. It’s important to review and track where the payroll money goes for the year. If you know that some of your payroll tax money went to yourself as an employer, you should prepare to amend your income tax returns before the IRS catches up to you.

Avoiding handling this matter could put you in a worse financial situation, or even lead to prosecution.

Payroll Tax Debt

If you are currently in unaffordable tax debt, Optima’s team of tax professionals may be able to aid your case. Give us a call at (800) 536-0734  for a free consultation today.

Received an IRS notice that you’re confused about? Download the Optima Tax App to understand the implications of your notice, and the next steps to resolving your tax issue.

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New IRS Voice Bot Options Shortens Wait Time

voice bot irs

Many taxpayers are hesitant about calling the IRS for several reasons, including the long wait time to speak with a representative. A phone call could take hours that you may not have to spare in your day to get answers to simple questions. The IRS launched what they believe to be the answer to this problem: voice bot options.

How the IRS Voice Bot Works

Generally, voice bots are artificial intelligence that allow callers to interact using verbal responses. Taxpayers with simple questions about payments, notices and other tax related inquiries can now avoid waiting for a live person to become available.

The voice bot offers services in both English and Spanish, aiding a large percentage of Americans.

Which Lines Have a Voice Bot?

While the IRS states that numerous lines now have voice bot options, it seems this feature will best be suited for Automated Collection System toll-free lines, Accounts Management, discussing payment plan options, and frequently asked questions.

So far, the voice bot has answered over 3 million calls. The IRS continues to add functions to help more taxpayers resolve their issues quickly.

Future Voice Bot Enhancements

Upcoming 2022 enhancements for the automated feature includes:

  • Account and return transcripts
  • Payment history
  • Current balance owed

The Economic Impact Payment line will also have responses for frequently asked questions.

Need more assistance?

Optima’s tax professionals may be able to assist you with your tax debt and help you reach IRS compliance. Give us a call at (800) 536-0734 for your free consultation today.

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How the Economy and Inflation Affect Your Taxes

inflation taxes

With the rise of gas prices and the decline of the housing market, it’s no secret that the United States is experiencing inflation. Inflation doesn’t stop at gas and housing, though, as the state of the economy also impacts your taxes.

The IRS updates certain tax provisions annually to account for inflation, so your tax and investment plans should change accordingly.

Inflation and Standard Deductions

Standard deductions rise during inflated tax years. For 2022, the deduction for joint filers is expected to rise to $25,900; an $800 difference.

Single filers and married taxpayers filing separately now have a standard deduction of $12,950. This is a $400 difference from last year.

Heads of households now have a standard deduction of $19,400 for 2022, which is a $600 difference.

The 401(k) limit has been increased as well, making it $20,500.

Marginal Rates During Inflation

The marginal rates (based on income level) are as follows:

  • Incomes greater than $539,900 ($647,850 for joint filing) have a rate of 37%
  • Incomes greater than $215,950 ($431,900 for joint filing) have a rate of 35%
  • Incomes greater than $170,050 ($340,100 for joint filing) have a rate of 32%
  • Incomes greater than $89,075 ($178,150 for joint filing) have a rate of 24%
  • Incomes greater than $41,775 ($83,550 for joint filing) have a rate of 22%
  • Incomes greater than $10,275 ($20,550 for joint filing) have a rate of 12%
  • Incomes of $10,275 or less ($20,550 or less if filing jointly) have a rate of 10%

Alternative Minimum Tax During Inflation

The AMT tax exemption for the 2022 tax year has also increased due to the economy. It is now $75,900 and begins to phase out when your income reaches $539,900. Married couples filing jointly have a minimum of $118,100 and begins to phase out at $1,079,800.

What You Can Expect

Although the IRS has made some inflation adjustments, several provisions of the tax code have yet to be amended. This means that taxpayers will pay more for the 2022 tax year.

You should review your spending and update your financial plans and investment accounts to avoid problems with the IRS in the future. Not all taxpayers may be affected by the inflation, but some state and federal provisions have not been updated to reflect the times.

A tax professional can help you plan according to your state provisions and your current income level.

For Assistance with Tax Debt During Inflation

Give Optima a call at (800) 536-0734 for a free consultation. Our tax professionals will review your case and inform you on how to move forward in your debt relief journey.

Current clients also have access to Optima’s Protection Plan services, to keep your account compliant with the IRS throughout this difficult year.

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Tips for Choosing a Tax Professional

tax professional

There is no shame in needing professional help during tax season. In fact, if you’re able to afford tax assistance or find community resources, you’ll have a better likelihood of accurate returns. Getting your return completed correctly the first time means fewer delays and getting your refund faster. Choosing the wrong tax professional, however, could hurt you in the long run.

The IRS has shared several tips that could save you a lot of trouble while searching for a tax professional.

Tax Professional Qualifications

You should make sure the tax pro that you choose meets all of the necessary requirements. The IRS has a Directory of Federal Tax Return Preparers with Credentials and Select Qualifications. Enrolled Agents should be licensed by the IRS and must pass a three-part Special Enrollment Examination.

Certified public accountants are licensed by state boards of accountancy in the District of Columbia and U.S. territories. They must pass the Uniform CPA Examination and have completed a study in accounting at a college level. To maintain an active CPA license, it is required that a CPA completes specified levels of continued education.

Tax attorneys are licensed by state courts, the District of Columbia, or designees such as the state bar. If you’re considering hiring an attorney specializing in tax prep, they should still have a degree in law and passed a bar exam.

Tax Professional History

Conducting your own research is crucial to choosing a tax professional. Sources such as the Better Business Bureau can give you some history on the professional that you’re considering. Notable things in their background would be disciplinary actions and the status of their license. The State Board of Accountancy is used for CPAs, the State Bar Association for attorneys, and the IRS verifies enrolled agent status here.

Service Fees for Tax Professionals

The goal of the tax preparer should not be larger refunds than their competitors. Tax preparers that charge by taking a percentage of your refund may not have your best interest in mind. More money sounds great at first, but compliance with the IRS is the ultimate goal. You want to be sure that the tax pro is not using deductions you don’t qualify for, or other means to increase your refund and make more money.

There is never a reason to show your personal documents or Social Security number to a tax preparer when you’re asking about a quote.

Book a Tax Professional Early

You don’t want to wait until the last minute to find a tax professional. As soon as the tax season ends, it’s a good idea to contact a tax preparer for next year. Fly-by-night preparers are high risk investments.

Providing Documentation

Keep records and receipts handy for filing season. This will make the tax preparer’s job a lot easier, and increase the likelihood of accuracy for your return. A good tax preparer should ask questions to figure out your total income and tax deductions, or credits.

Blank Tax Returns, Signing, and Filing

You should never sign a blank tax form, even if the preparer sent it to you. Always review your return thoroughly and ask questions if you’re confused. This is important, you want to make sure the refund is going directly to you, and not through the preparer. They should also provide you with a copy of the completed return.

You also want to make sure that your tax professional e-files your return. Filing electronically and choosing direct deposit is the quickest way for you to get your refund.

Preparer Tax Identification Number

All paid tax preparers must sign returns and include their PTIN, or Preparer Tax Identification Number by law. If your preparer does not have a PTIN, do not move forward with their paid services.

Optima’s Tax Services

Optima specializes in tax debt relief, and provides tax prep and filing services to our clients. If you are in need of assistance with IRS compliance, give us a call for a free consultation at (800) 536-0734.

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Common IRS Tax Forms

Save yourself some time next tax season by learning about the IRS tax forms you’ll need to file. Use this page as a guide to help you understand the most common tax return forms.

Form W-2, Wage and Tax Statement

The W-2 is one of the most common IRS tax forms for employed taxpayers. This form tracks how much you paid in taxes throughout the year, and how much you’ve earned. Employers withholding income for Medicare and Social Security are expected to issue a W-2 by the start of tax season (no later than January 31).

Form W-4, Employee’s Withholding Certificate

You’ll receive Form W-4 to determine how much an employer should withhold from your paycheck for federal income tax. You should update this form as major life changes occur that will affect your filing status (such as marriage).

Form 1099-MISC, Miscellaneous Income

The miscellaneous income form is applicable to taxpayers that earn money from rent, royalties, and other income that involve large payments from individuals or entities. The IRS will provide Form 1099-MISC.

Form 1040, U.S. Individual Income Tax Return

This form allows you to declare your filing status, apply standard deductions, claim credits, and most importantly, determines how much you owe the IRS.

Form 1040-SR, U.S. Tax Return for Seniors

This alternative option to the 1040 is simplified with enhanced readability for senior citizens. Ideally, seniors will be able to document their sources of income such as IRA distributions, Social Security, investment income and annuities, with much more ease.

Form 1099-G, Certain Government Payments

This form is most common for filers that receive unemployment benefits. Unemployment is taxable income and must be reported in your annual tax return. Other government payments included in this form are taxable grants and payments from the Department of Agriculture.

Form 1098-T, Tuition Statement

College students will receive Form 1098-T for paying tuition expenses. As a student, you could qualify for tax credits and deductions when you file.

For More Assistance with IRS Tax Forms and Tax Debt

Optima’s tax professionals help a variety of cases with IRS compliance and tax debt relief. Clients are also able to enroll in our protection plan for account monitoring and filing services.

Give us a call at (800) 536-0734 for a free tax debt relief consultation today.

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What if I Can’t Pay My Installment Agreement?

CEO David King and Lead Tax Attorney Phil Hwang reconvene to continue the discussion on IRS installment agreements. In this episode of The Tax Show for People Who Owe, the hosts discuss solutions to unaffordable payment plans. What should you do if you can’t make a payment? Tune in for suggestions.

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The Consequences of Tax Debt

tax debt

Owing the IRS can be a scary and confusing time, especially if you don’t know what to expect. The IRS has protocols and collection activity that it’s known for to collect past due balances. Being aware of such consequences may inspire you to take care of your tax debt sooner than later.

Interest and Penalties

Interest is added to your tax liability daily until paid; with a 25% maximum penalty. In April 2022, the IRS raised its interest rates for the quarter for quarterly taxpayers, such as businesses and self-employed filers.

Penalties include:

  • Failure to file – same due date as your return or extended return.
  • Failure to pay – due on the date you receive a notice, or the IRS assess the penalty.
  • Accuracy-related – same due date as your return or extended return.

IRS Wage Garnishment

The IRS has the ability to garnish your wages when you have an unpaid balance. This means that your income can be seized and applied to your tax liability. Garnishments can be taken out of paychecks, commissions, and bonuses. By paying the balance in full, or setting up a payment plan, you can stop garnishments.

IRS Levy

You would receive a notice prior to the IRS levying the balance. This consequence is for delinquent taxpayers and involves the IRS legally seizing your bank accounts, wages, or property to settle the tax debt. To stop a levy, contact the IRS directly. If you can prove that you’re in hardship, they may release the levy. You can also pay the balance in full to release a levy sooner.

IRS Lien

Liens are placed on physical assets, such as homes or vehicles, to satisfy tax debt. This means that the IRS takes possession of your assets, or collects a portion of what you make for selling them. You can avoid a lien by paying your balance in full, on time, or by contacting the IRS for a payment plan.

IRS Passport Denial

Major tax debt can result in the denial of acquiring a passport. State Departments can also revoke an existing passport if you’re delinquent. The IRS is allowed to deny citizens the right to travel internationally. If you receive a notice while overseas, you may receive a temporary passport to return to the US.

You can reverse passport denial by changing your status (no longer seriously delinquent), if the debt becomes legally unenforceable, or by satisfying the tax debt.

Unaffordable Tax Debt

If your tax debt has gotten out of hand, give us a call for a free consultation at (800) 536-0734. One of our associates can help you understand your options for tax debt relief.

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