Tax Relief Solutions

Individuals that earned income throughout the tax year have the option to make non-deductible (after-tax) contributions to an IRA and benefit from tax-deferred growth. One of the most common risks that taxpayers take is paying additional taxes when withdrawing their money from their retirement accounts. Before making after-tax contributions to a traditional IRA, it is important for taxpayers to have an understanding of the rules and how to avoid the double tax trap on withdrawals.

There are certain contribution rules and limits that most taxpayers are not aware of with the IRA withdrawal process. Here are the rules taxpayers need to know about when making non-Roth after-tax IRA contributions:

• Individuals are required to have earned an income.
• The deductibility phase-out is determined on the filing status, income, and whether or not an individual is eligible to participate in a retirement plan at work.
• Contribution limits are the lesser of: $6,000 (plus $1,000 if age 50+) or earned income and apply to aggregate additions to IRAs.

Certain financial institutions where an IRA is kept could cause certain issues such as the institution restricting an individual to add more than $6,000 per tax year. Banks also do not track, report, or verify if an individual made a pre-tax or non-deductible IRA contribution. The responsibility is left up to the taxpayer.

For those who choose to make after-tax contributions to an IRA, are required to give the IRS a heads up that they have already paid taxes on those dollars by using Form 8606. Individuals who fail to report, track, and file the form will most likely lose the ability to shield part of their IRA withdrawal from a tax penalty when the money is withdrawn.

Optima Tax Relief provides assistance to individuals struggling with unmanageable IRS tax burdens. To assess your tax situation and determine if you qualify for tax relief, contact us for a free consultation.

Most people require assistance when it comes to preparing and filing a tax return. Some may even find themselves having to provide additional information to the IRS and do not know what it is or where to find it.

Hiring a tax professional could save individuals both time and money when dealing with the IRS. Tax professionals can also prepare tax returns, help file income taxes, and assist taxpayers when it comes to dealing with the IRS, tax notices, tax liabilities, audits, and more.

Types of Tax Professionals

There are various types of tax professionals who specialize in focused areas of tax relief or tax prep and carry specific professional licenses.

• Certified public accountants or CPAs can provide a variety of services such as:
  • Maintaining financial records.
  • Examining financial statements.
  • Providing auditing services.
  • Preparing tax returns.
• Some CPAs specialize in tax planning and preparation such as:
  • Tax audits.
  • Payment and collection issues.
  • Appeals.
• Enrolled agents are trained to find federal tax matters and are licensed by the IRS. Enrolled agents can assist with the following:
  • The preparation of both individual and business tax returns.
  • The representation of clients.
  • Other aspects of being a tax professional.
• A tax attorney is licensed by the state to practice law. Most states require an attorney to have a law degree and pass a test administered by the state (bar exam). Tax attorneys can assist taxpayer with:
  • The preparation of tax returns.
  • Tax planning.
  • Providing advice to clients on long-range strategies for reducing their taxes.
  • Like CPAs and EAs, tax attorneys have unlimited rights to represent a client before the IRS.

Areas of expertise

There are a range of services that tax professionals can provide to taxpayers that can help them understand their taxes better. Based on what service you need, choosing the right tax professional or tax preparer can help you get back on track with your taxes, small business, and much more.

• Enrolled Agents are IRS-authorized tax professionals who work alongside the U.S. Department of the Treasury by providing representation to individuals who need tax assistance.
• Certified Public Accountants (CPAs) have state certifications to practice accounting. These experts can help individuals navigate certain tax situations. CPAs are licensed to represent taxpayers before the IRS.
• Retirement tax professionals can help individuals know how their retirement options will impact their taxes. These types of tax professionals have received advanced training in tax preparations specifically for retirement plan contributions, distributions, and rollovers.
• Small Business/Sole Proprietor tax professionals specialize in working with small businesses’ tax returns and educate their clients on how to properly prepare both their personal and company returns. These types of tax professionals have specialized training in sole proprietors, partnerships, and S corporations.
• Investment Income tax professionals specialize in big or small investments, and gains or losses. These tax professionals also show your current and future tax situations.
• International Taxation tax professionals assist individuals who have lived or worked abroad. These tax professionals are trained in international taxation which includes, claiming foreign earned income exclusions, the foreign tax credit, or treaty benefits for nonresident aliens.

Professional Licenses

Enrolled Agents (EAs) and Certified Public Accountants (CPAs) are both experienced professionals who maintain high ethical standards. The main difference between an EA and CPA is that an EA specializes specifically in taxation. CPAs can provide a wider scope of tax services for individuals.

Working with an EA would be beneficial for those who have IRS issues such as individuals who are in collections or dealing with an audit with the IRS. An EA would be best suited for someone who needs assistance with the IRS to help them with their tax concerns. EAs are also a great option for those who need tax preparation assistance and planning advice for both individuals and businesses.

CPAs specialize in tax preparation that can help individuals identify both their credits and deductions that can help them qualify for an increase in their refund or help lower their tax bill. CPAs are also beneficial if someone needs their tax information compiled, reviewed, or audited. 

When should I hire a Tax Professional?

You should hire a tax professional if you are short on time, are unsure how to file your taxes correctly, or feel overwhelmed by IRS forms with preparing your taxes. Tax professionals can help answer tax questions that you may have and even resolve most tax issues you may have.

The tax code can be very complicated and if you are unsure on how to handle your tax matters, a tax professional can assist. For example, a tax professional can help reduce the risk of any audit and know how to deal with the IRS on your behalf if you do end up being audited. Tax professionals can also help taxpayers avoid making costly mistakes on their tax return such as missed deductions or triggering an IRS letter. Tax professionals can also review previous tax returns to see if there were any errors and needs to be amended.

How to find the right Tax Professional for you

Individuals searching for tax assistance should follow these steps in order to find a tax professional who best fits their needs:

1. Confirm your preparer has a tax identification number (ITIN).
2. Make sure to confirm tax fees to ensure you are not being overcharged.
3. Avoid tax preparers who do not e-file tax returns.
4. Make sure that your tax preparer signs their name and provides their Preparer Tax Identification Number (PTIN) on your tax return.
5. Make sure your tax professional can respond to the IRS. Enrolled agents, CPAs and attorneys that have a PTIN can represent you when it comes to IRS audits, payments, and collection issues.

10 Questions to ask a Tax Professional

1. Do you have an IRS-issued Preparer Tax Identification Number (PTIN)?
2. How do you keep up with the latest tax law? Are you regularly taking education courses?
3. Do you offer a free initial consultation?
4. Will you be the one preparing my return or someone in your office?
5. Do you offer IRS e-file, and will my tax return be submitted to the IRS electronically?
6. Will you keep my records and receipts on file? How long will you keep my records for?
7. When do you require payment?
8. When can I expect to receive my completed tax return?
9. What happens if I get audited?
10. Do you outsource your tax preparation?

Things to look out for when hiring a Tax Professional

Taxpayers should be aware of any red flags they experience when looking to hire a tax relief professional. Here is what individuals should look out for before hiring a tax professional:

• Check the preparer’s qualifications.
• Review the preparer’s history.
• Ask about services and fees.
• Make sure that the preparer offers e-filing.
• Ensure your preparer has open availability if you have additional questions regarding your taxes.
• Never sign a return if your preparer has added their name or PTIN.

How much does it cost to hire a Tax Professional?

The average cost of hiring a tax professional will depend on the complexity of the case that they are working on.

Consequences of not Hiring a Tax Professional

The federal tax penalties you could face by not hiring a tax professional to help you prepare your taxes could far outweigh the cost of soliciting tax help. Here are the repercussions individuals could face if they choose to not hire a tax professional:

• Filing your own taxes could be time-consuming and confusing if you have never filed before.
• You can miss out on tax preparation fees that could have been deductible.
• You could miss out on certain credits or deductions if you are not aware of them.
• If you get audited, you will not have a tax professional that can assist you through the process.
• Filing your own taxes could lead to you making avoidable mistakes that could cause you problems with the IRS down the road.

Tax Relief Services at Optima Tax Relief

Optima Tax Relief offers tax relief services to individuals who are struggling with their IRS or state tax debt. Taxpayers that need assistance with tax preparation, setting up a payment plan with the IRS, getting out of collections, resolving an audit, or are looking to see if they qualify for a possible reduction in their total tax debt, should consider using Optima’s services.

Optima Tax Relief provides assistance to individuals struggling with unmanageable IRS tax burdens. To assess your tax situation and determine if you qualify for tax relief, contact us for a free consultation.

For taxpayers who have been working with the IRS, it is important for them to know that they have a right to finality. Specifically those who have had their tax return(s) audited by the IRS should know that there is a Taxpayer Bill of Rights in place to protect them.

For taxpayers currently in the audit process, here is what you need to know about your right to finality:

• Taxpayers have the right to know
  • The maximum amount of time they have to challenge the IRS’s position.
  • The maximum amount of time the IRS has to audit a tax year or collect a tax debt.
  • When the IRS has finished an audit.

• The IRS typically has three years from the date that a taxpayer files their return to review for an additional tax for the year in question.

• There are very few exceptions when it comes to the three-year rule. An exception would be considered if a taxpayer fails to file a return or files a fraudulent return. In either case, the IRS would have an unlimited amount of time to assess tax for the tax years in question.

• The IRS generally has 10 years from the date of assessment to collect unpaid taxes. It is important for a taxpayer to know that the 10-year period cannot be extended unless a taxpayer enters into a payment plan or the IRS obtains court judgments.

• A 10-year collection period may be suspended when the IRS cannot collect money because a taxpayer has an ongoing bankruptcy or there’s a collection due process proceeding involving the taxpayer.

• A taxpayer will only be subject to one audit per tax year. The IRS has the ability to reopen an audit for a previous tax year if the IRS deems it necessary.

If you need tax help, contact us for a free consultation.

As a taxpayer, one of the most frightening things you could receive in the mail is an IRS letter. Depending on the notice that you receive from the IRS, it can cause anxiety and fear, and you may even feel unsure about what your next move will be or what tax solutions may be available to you. The IRS does have tools available that taxpayers can utilize for IRS tax help, even if they received a notice that makes it unclear what their next steps would be. Below are some of the most common collection notices sent out to taxpayers every year. 

CP501/502

If you’ve received a CP501 notice, it means that the IRS is attempting to notify you of a past balance due. The IRS will request that you take action in order to resolve your outstanding balance. A CP502 notice also doubles as a reminder that the IRS sends about your tax balance. Typically, each notice indicates the interest and penalties that have accrued in addition to what you owe to the IRS. 

If you receive these types of notices, the IRS is letting you know of what the current balance, including interest and penalties, is owed. Once you confirm that the balance is accurate, you can either pay the balance for the tax year in question or contact the IRS to get set up on a payment plan. 

CP504

A CP504 notice is a secondary notice that the IRS will send to alert you of your tax debt if you owe a tax balance. This notice is to also notify you that they’re preparing to start collection action and to seize any tax refund you may have received. The IRS will continue their collection action against a taxpayer until their balance is paid in full. 

To avoid the IRS sending you into collections, it is important to stay compliant. You can do this by paying off your balance in full with the IRS or asking to be placed on a payment plan. It is also paramount that you continue to monitor your mail to ensure that you don’t receive any further notices from the IRS.

LT11/CP90

An LT11 is a notice to remind a taxpayer that they have an overdue payment for overdue taxes.

The IRS will send a CP90 notice if they have attempted to reach out to a taxpayer multiple times about their tax balance and have yet to receive a response. The letter states that the IRS has the intent to seize a taxpayer’s property or rights to their property if they fail to resolve their outstanding balance. 

Both these notices are a warning that the IRS will begin to take collection action against the taxpayer and it is up to the taxpayer to either continue to stay in collections with the IRS or settle their debt and get compliant. At this point in time, it is vital that you attempt to rectify the situation and get help with IRS debt by contacting them immediately to resolve your liability in addition to any interest and penalties that you have accrued.

Regardless of what notice you have received, it is important to review the notice and resolve the situation if needed. The IRS typically sends written communication to taxpayers to notify them of their tax balance and to reconcile their liability as soon as possible. If you need tax help and don’t know the first step to resolving your balance with the IRS, a tax relief company may be your best bet. A tax relief company will work with the IRS on your behalf to address your tax issues so you can be compliant moving forward.    

Optima Tax Relief provides assistance to individuals struggling with unmanageable IRS tax burdens. To assess your tax situation and determine if you qualify for tax relief, contact us for a free consultation.

If you’ve been hit with an assessment from the IRS, for instance, as the result of an audit and you disagree with the results, you are entitled to present your case in Tax Court. However, an IRS administrative appeal may produce desirable results without the need to go to court. As a taxpayer, you are entitled to dispute the results of an IRS assessment through the administrative appeal process for any reason other than religious, moral or political, conscientious objections. The professionals at Optima Tax Relief can determine whether an administrative appeal is the right course for your situation.

IRS Administrative Appeal Categories

The IRS Appeals division operates as a separate entity from IRS offices that conduct investigations. The two types of administrative appeals available are Collections Appeal Process (CAP) or Collections Due Process (CDP) hearings. Administrative appeal hearings may be conducted by mail, telephone or in person. You may represent yourself or be represented by an accountant, attorney or individual enrolled to practice before the IRS. If your tax return was prepared by a third party who is not enrolled with the IRS, he or she may be a witness, but may not represent you.

Submitting Your Request for Administrative Review

For assessments resulting from an audit of less than $2,500, you may approach the auditor directly or submit your request through the appeals system. Protests involving assessments of less than $25,000 may be submitted as a Small Case Request. Use Form 12203 – Request for Appeals Review, available from the IRS website, or the form referenced by your assessment. You may substitute a written statement including the items to which you disagree and your reasons for disagreement. Assessments of $25,000 or more require a Formal Written Protest including all of the following items.

• Your name, address, and a daytime telephone number.
• A statement of intent to appeal the IRS findings to the Office of Appeals.
• A copy of the letter showing the proposed assessment.
• The tax period(s) or year(s) involved.
• A detailed description of each item with which you disagree.
• The reason(s) for your disagreement for each item.
• Facts supporting your position for each item.
• Any law or legal authority that supports your position on each item.
• The following penalties of perjury statement stated exactly: “Under the penalties of perjury, I declare that the facts stated in this protest and any accompanying documents are true, correct, and complete to the best of my knowledge and belief.”
• Your signature beneath the penalties of perjury statement.

If your request for appeal is prepared by your representative, he or she must substitute the declaration for penalties of perjury statement for individual taxpayers with a statement that includes each of the following elements:

• An affirmation that he or she submitted the protest and any accompanying documents, AND
• A statement of personal knowledge of stated facts in the protest and accompanying documents and a declaration that the facts are true and correct.

Collections Appeal Process

CAP generally produces faster decisions than a CDP. A CAP filed to protest a wrongful levy may be filed either before or after property has been seized, but must be filed before the property is sold. Filing a request for CAP within 30 days of the rejection or termination of an installment agreement prevents the IRS from issuing or executing a levy until the appeal has been settled. However, you cannot dispute owing additional taxes through a CAP. You are also barred from proceeding to Tax Court if you disagree with the conclusions of the CAP. You must file Form 9423 – Collection Appeal Request to initiate a CAP review. CAP can be used to address the following IRS actions:

• Prior to or after the filing of a Notice of Federal Tax Lien
• Prior to or after levy or seizure of property by the IRS
• Proposed or actual termination of an installment agreement
• Rejection or modification of an installment agreement
• Rejection of proposed trust fund recovery
• Denial of a trust fund recovery penalty claim
• Denial of abatement request for late payment, late filing or deposit penalties
• Rejection of an Offer in Compromise

Collection Due Process

Unlike the CAP, a CDP hearing allows you to proceed to Tax Court if you disagree with its findings. You must file Form 12153 – Request for a Collection Due Process or Equivalent Hearing, available for download from the IRS website, or a letter containing the same information as Form 12153 to request a CDP hearing. You generally have 30 days from the date you receive your assessment or audit examination report to submit your CDP appeal. After 30 days, you may request an Equivalent Hearing, but collection activities will not be suspended. You will also not be able to request a judicial review of the results of an Equivalent Hearing; you cannot appeal the results in Tax Court. You may request a CDP or Equivalent Hearing to request a review relating to any of the processes listed below:

• Collection proposals (e.g. installment agreements or Offers in Compromise)
• Lien subordination (relinquishing priority claim)
• Withdrawal of Notice of Federal Tax Lien
• Innocent Spouse defense claims
• Existence or amount of additional tax assessment ( ONLY if there was no notice of deficiency or other opportunity to dispute tax liability)
• Claim of economic or other hardship resulting from collection of tax liability

The Administrative Hearing Process

After submitting your request for administrative review, you generally have at least 60 days to prepare for the hearing. Draft a rough outline of the information you wish to include in your presentation. Categorize any other relevant information in spreadsheets or in visual displays, with separate folders for each item.

It’s wise to request a copy of the auditor’s file under the Freedom of Information Act (FOIA) immediately; FOIA requests can take at least a month to process. The letter should cover all relevant tax years and provide an offer to cover copying costs. Send the letter by certified mail or other traceable means.

The hearing itself will be fairly informal. You are entitled to take notes or record the hearing if you wish. Be prepared for requests for further information. If that happens, don’t hesitate to ask for more time.

If you reach a verbal settlement during the hearing, the settlement will be transcribed onto IRS Form 870 – Waiver of Restrictions on Assessment and Collection of Deficiency in Tax and Acceptance of Overassessment, which can require months to show up in the mail. Double check all the figures and do not sign the form unless you understand and agree with everything contained within it. The professionals at Optima Tax Relief can address any questions you may have regarding this process.

Likewise, do not sign the form if you’ve found other mistakes by the auditor or appeals officer. Once you sign the form, you are barred from making further appeal to the Tax Court.

It’s Worth the Effort

The administrative review process can be daunting, but the odds of winning your case are very good. Investopedia reports that according to at least one edition of the book Stand Up to the IRS, published by legal portal Nolo, claims that taxpayers who appeal their audits have their assessments reduced by an average of 40 percent. With Optima Tax Relief on your side, you have a good chance of achieving favorable results, too.

Earlier this year, the Internal Revenue Service (IRS) rolled out its Fresh Start Initiative, aimed at helping struggling taxpayers. The initiative allows qualified taxpayers to avoid the IRS Failure to File penalty. This penalty is usually placed on unpaid tax balances, with accrued interest. Qualified individuals can request a six-month payment extension in which no penalties will accrue. Late payment penalties will be charged if the balance is not paid by October 15. Secondly, Fresh Start provides a different installment structure, allowing taxpayers to avoid financial reviews and Federal liens.

Recognizing the need for tax relief, IRS Commissioner Doug Shulman said, “This new approach makes sense for taxpayers and for the nation’s tax system, and it’s part of a wider effort we have underway to help struggling taxpayers.” Do I Qualify for the IRS Fresh Start Initiative? is the logical question being asked by many taxpayers. Consider the qualifications below.

• You must have been unemployed for a minimum of 30 consecutive days during 2011 or before April 15 2012.
• Married couples filing jointly need to have only one spouse that meets the qualifications.
• Individuals who are self-employed need to be able to show at least a 25 percent drop in their net income.
• Taxpayers must not earn more than $200,000 per year for married couples or $100,000 per year for individuals.
• Fresh Start is also limited to taxpayers whose tax balance was not more than $50,000 at the end of 2011.
• Taxpayers must file Form 1127A, which is not available electronically.