Tax Relief Solutions

Don’t get Taxed twice when making Non-Deductible IRA Contributions

IRA Contributions

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the form will most likely lose the ability to shield part of their IRA withdrawal from a tax penalty when the money is withdrawn.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.

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The Complete Guide to Tax Relief for Small Businesses

If you own a small business, you are entitled to claim tax credits that will help reduce the total amount of taxes you may owe to the government.

Tax season for small businesses can be a confusing time for many business owners, especially if they do not know what they qualify for. Optima Tax Relief helps break down everything small businesses need to know when it comes to filing their taxes or seeking tax relief.

How much Tax does a Small Business pay?

Taxes can be complicated, which is why many small businesses struggle come tax time to understand why they have a tax liability. Some business owners may not even know the corporate income tax rate or what tax cuts they may be eligible for. In addition to income taxes, businesses are also responsible for paying their payroll taxes, unemployment taxes and many others.

According to the Small Business Administration, small businesses are expected to pay an average of 19.8% in taxes based on the type of small business they have. Small businesses with one owner can expect to pay a 13.3% tax rate on average while small businesses with more than one owner will pay an average of 23.6%. Small business corporations, such as small S corporations, will pay an average of 26.9%.

Small Business or Self Employed?

The terms “small business” and “independent contractor” are both commonly used to define a self-employed individual. These two terms are often confused with each other; here is how to tell the differences.

A small business ownership is defined by having others who work for you either as independent contractors or employees. If your business does have employees, you oversee their taxes and are responsible for obtaining Workers’ Compensation Insurance in order to meet your state’s requirements.

Self-employed individuals are responsible for filing a self-employed tax return and paying quarterly estimated taxes if they are expected to owe at the end of the tax year. Self-employment taxes are made up of Social Security and Medicare taxes that are typically withheld from a full-time employee’s paycheck. As a self-employed worker, you can claim a deduction for the equivalent of your employer’s portion of your Social Security and Medicare taxes through Schedule C or Schedule C-EZ. 

Savvy self-employed workers might file their taxes quarterly to avoid penalties and a larger tax bill at the end of the year. For those who are in a self-employed partnership, taxes are typically paid by each member of the partnership based on their income or losses.

If you own a business or are self-employed, you can reach out to a licensed bookkeeper or accountant for guidance to get the most out of filing your taxes and to avoid ending up with a potentially avoidable large tax bill.

Top Small Business Tax Deductions

  • Advertising and promotion costs are considered miscellaneous expenses and if they are ordinary and reasonable, they can be deducted on a small business tax return.
  • Business meals can be deducted both individually and in groups with some limitations.
  • Business insurance expenses can generally be deducted for the ordinary and necessary cost of insurance if it is for your trade, business, or profession.
  • Bank fees can be deducted and any additional charges for a business bank account and credit card.
  • Car or Truck Expenses can be deducted if you own a business or are self-employed and use your vehicle for business-related purposes.
  • Depreciation can be deducted in order to reduce the value of an asset over time due to its age, wear and tear, or decay.
  • Education can be deducted if it maintains or improves skills required for your current job. Tuitions, books, supplies, lab fees, and similar items can also be deducted.
  • Employee Benefit Programs and Qualified Retirement Plans can mostly be deducted but are subject to limits on contributions that are to a retirement plan.
  • Home office expenses can be deducted if you use your residence regularly and exclusively as a principal place of business or a place to meet customer or clients.
  • Interest can be deducted on a business loans and credit as long as you are using your loaned funds for business purposes.
  • Legal and tax professional fees that are related to running your business are considered deductible. This includes fees charged by lawyers, accountants, bookkeepers, tax preparers and online bookkeeping services.
  • Moving expenses directly related to the moving of business equipment, supplies, and inventory from one business location to another can be deductible.
  • Rent expenses can be deducted if the rent expense is for property solely used for business.
  • Salaries and benefits paid to an employee are tax-deductible expenses if they are deemed to be ordinary and necessary.
  • Supplies and technology for the offices such as printers, paper, pens, computers, and work-related software programs can be deducted to make it easier for entrepreneurs and small business owners to operate through Schedule C or Schedule C-EZ.
  • Travel expenses such as the standard mileage rate, as well as business-related tolls and parking fees can be deducted for your vehicle. Lodging and non-entertainment-related meals can also be considered deductible.
  • Utilities such as real estate taxes, repairs, maintenance, and other related business expenses can be deducted.

How do LLCs Avoid Taxes?

Having a limited liability company, otherwise known as an LLC, is a legal entity that allows individuals to own and operate a business. LLCs are popular because they offer the same limited liability as a corporation but are much simpler and less expensive to run.

An LLC provides income tax flexibility compared to a sole proprietorship, partnership, and many other popular forms of business organizations. The taxation of an LLC is defined as a pass-through. This means that LLC’s earnings can be passed straight through to the owner or owners without having to pay corporate federal income taxes first.

The IRS also allows an LLC to determine which way their business will be taxes. Owners can choose to be taxed as a sole proprietor, a partnership, an S corporation, or a C corporation.

How can a Small Business Avoid Paying Taxes?

Here are six ways to reduce your taxable income on your small business:

  1. Employ a family member. The IRS allows a variety of options when deciding whether or not you want to employ a family member, all with the potential benefit of sheltering income from taxes. For example, if you have a sole proprietorship, you do not need to pay social security, Medicare and Federal Unemployment Tax if you are employing your children.
  2. Start a retirement plan. If you own your business, then you give up the 401(k) match that is matched by an employer. However, as a small business owner there are multiple retirement account options that can maximize retirement saving and allow you an individual to rake in the benefits.
  3. Change your business structure. Small business owners should consider a Limited Liability Company (LLC). Small business owners may be able to eliminate or decrease the employer-half of taxes for Social Security and Medicare taxes.
  4. Deduct travel expenses and capital expenditures. Costs for equipment to maintain your operations can be substantial, whether your business requires heavy equipment for its daily operations or you’re a road warrior with a laptop, tablet, and smartphone. Section 179 Deductions (personal property that is put into service) and Bonus Depreciation Deductions (qualified property, which includes furnishings, machinery, computers, software bought off the shelf, or land improvements) allow for upfront deductions. You may be able to reduce your taxes if your job requires that you travel a lot. Although business travel is deductible, it is important to keep in mind that personal travel cannot be added to your business tax return.
  5. Save money for healthcare. The best way to reduce small business taxes is to put aside money for healthcare needs. Small business owners can accomplish this by using a Health Savings Account (HSA) if you have an eligible high-deductible health plan. For self-employed individuals without health coverage, you can face much bigger penalties, as much as $695 per adult. If you are uninsured, look into obtaining a qualified coverage to avoid penalties.
  6. Claim tax deductions on losses. Deadbeat customers and thieves can wreak havoc on your bottom line. As a silver lining to what are often very dark clouds, the IRS allows self-employed workers and small business owners to write off bad debts, theft, and other qualified losses. If you had a bad year and suffered a net loss, you may be able to leverage the loss to offset income and revenue, thereby lowering your overall tax bill. Consult with a tax professional to properly claim tax deductions from losses.

Hire a Tax Professional from Optima Tax Relief

Optima Tax Relief is a tax resolution firm with more than 25 years of experience that specializes in providing tax relief to individuals and small business owners that are struggling with IRS or State tax issues. Small businesses that need assistance with filing their taxes or getting out of collections should consider using Optima’s services to get compliant with the IRS.

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The Complete Guide to Hiring a Tax Professional

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.

The Benefits of Hiring a Tax Professional

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.

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What Taxpayers need to know about Their Right to Finality

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.

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How to Find a Good Tax Lawyer

When looking for tax relief, how to find a good tax lawyer is critical.

Tax law is complicated and highly technical. In the legal world, the field of tax law is considered one of the more demanding specialties. Tax lawyers deal with a wide range of situations and the rules and laws are continually changing. Not only does a tax lawyer need to have superlative legal skills to succeed, they also need certain personality traits. Find a good tax attorney to help you with tax relief and avoid dealing with the IRS directly.

What qualities make a good attorney?

Consider these academic and professional guidelines for tax attorneys when looking for tax relief.

  • A good tax attorney has specific experience in the field of taxation. For example, are your tax issues related to a real estate transaction? Or are you running a business and need assistance with a sales tax challenge? Or with filing your income tax? A good tax lawyer will concentrate within certain fields and will be familiar with the laws and the protocols needed to address those particular areas of tax relief.
  • Being associated with an office that is exclusively focused on tax related matters is another important quality for a tax attorney.
  • Having an LLM (Masters Legal Degree in Law) in taxation is a sign that your attorney is serious about his profession and is academically qualified to work within the field of tax law.
  • A good tax lawyer has firsthand experience working with the IRS.
  • Successful tax attorneys are continually refreshing their knowledge and keeping up with the continually changing nature of tax law.
  • Tax lawyers should be in good standing with the Better Business Bureau and their local state bar.
  • Good tax attorneys keep their clients informed and up-to-date during the tax relief process.

Skills of a Good Tax Lawyer

Tax attorneys also need to have certain personal skills and abilities to succeed in the area of tax relief. Consider these skills when finding a tax lawyer.

  • A good tax lawyer has high level oral communication skills. They are the intermediary between you and the tax authorities. They need to be able to explain complicated issues and represent your case in a clear manner.
  • Above average written communication skills are another important qualification of a good tax attorney. Tax lawyers write complaints, documents and lawsuit responses.
  • Critical thinking skills are necessary when your attorney is working on a tax relief case. A good tax lawyer can take a look at a case, pick up on any weaknesses, and choose which course of action to take based on the specifics of the case.
  • Having an analytical and organized personality is highly important for a tax attorney. Tax relief cases are usually very complicated and involve numbers and specific, detailed information. A good tax attorney will be able to stay on top of all the elements of the case.
  • Good interpersonal skills are critical for a tax attorney to work effectively with a client in a tax relief case. They need to be able to communicate effectively with both the client and with the tax authorities.
  • Having a committed and persevering personality are necessary qualities for the person who will be representing your tax relief case.

Taxes are complicated and the laws are constantly changing. Your financial future is often at stake in a legal situation involving taxes. Getting appropriate representation for tax relief is very important and knowing what makes a good tax lawyer is a very important first step in getting a resolution.

Need some tax relief? Solutions start here. Learn about tax reduction strategies with Optima Tax Relief. Contact us for a tax consultation today.

Your IRS Letter Explained: What to Do

man late at work

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.

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IRS Fresh Start Program: How It Can Help with Your Tax Problems

The IRS Fresh Start Program Initiative, first announced, February, 2011, has had one goal: to make it easier for individuals and businesses to pay their back taxes and penalties. The Initiative has been expanded since then, but still holds true to its original purpose. How exactly will it affect you if you’re struggling to pay taxes? Here are the four components that Fresh Start Program has changed for your benefit.

What Is the IRS Fresh Start Program?

The IRS Fresh Start Program is a tax relief program that is designed to allow taxpayers to pay off substantial tax debts affordably over time.

Back in the bad old days, the image of the IRS was one of intimidation. Whether deliberately cultivated or not, the IRS did little to dispel this perception. In recent years, the IRS has sought to reboot the way it interacts with taxpayers, with agents receiving training and instruction in how to assist taxpayers who are in arrears rather than torment them. The IRS Fresh Start program combines penalty relief, installment payments; lien releases and a program known as Offer in Compromise that allows some taxpayers to settle their federal tax debts for less than what they actually owe.

How the IRS Fresh Start Program help waive Tax penalties

Originally, when paying and filing your taxes, missing the tax filing deadline meant immediate interest charges and penalties. But with the Fresh Start Initiative, qualifying unemployed taxpayers can apply to have Failure-to-Pay penalties waived for six months. This means that individuals have until October 15th, 2020 to pay their 2019 taxes.

How do you qualify for the IRS Fresh Start Program?

To qualify for the Fresh Start Program, you must:

  • Have been unemployed or seen a decrease in income
  • Earn less than $100,000 a year individually
  • Earn less than $200,000 a year as a couple
  • Not have a large tax balance from the previous tax year
  • The IRS Fresh Start Tax Relief program was launched in 2012 to help taxpayers who were struggling from the effects of the ongoing financial crisis. The first aspect of the program provided some unemployed taxpayers with exemption from the failure-to-pay penalty. Under this initial slice of the Fresh Start Initiative, taxpayers received a six-month reprieve from penalties on taxes owed for their 2011 federal tax returns. Although interest was still applied to any unpaid taxes, penalties were suspended from April 17 to October 15, 2012.

    Easy Installment Agreements

    The IRS Fresh Start Program also raised the maximum tax owed for taxpayers from $25,000 to $50,000 to qualify for streamlined repayment plans. Under the streamlined installment payment agreement program, taxpayers may establish payment plans online through the Online Payment Agreement page located on the IRS website. Taxpayers who owe more than $50,000 may still establish installment agreements but must either file a Collection Information Statement (Form 433-A or Form 433-F) or make sufficient payments against their past-due tax balance to bring the total tax owed below the $50,000 threshold.

    How To Withdraw Notice Of Federal Tax Lien

    The Fresh Start Initiative raises the minimum threshold for filing an IRS Notice of Federal Tax Lien on taxes owed from $5,000 to $10,000. The new standard is not retroactive, and the IRS may still impose liens against taxpayers who owe less than $10,000 when the agency deems that circumstances warrant doing so. To request that the IRS withdraw the Notice of Federal Tax Lien against liens that have been released, taxpayers must file Form 12777 – Application for Withdrawal, available on the IRS website. When citing a reason for the request, taxpayers should check the last box which states “the taxpayer, or the Taxpayer Advocate acting on behalf of the taxpayer, believes withdrawal is in the best interest of the taxpayer and the government.”

    How To Make use of ‘Offer in Compromise’ and settle for less Tax

    An Offer in Compromise, according to the IRS Fresh Start Program allows taxpayers to settle their obligations to the IRS for less than the total amount owed. The IRS only allows taxpayers to obtain relief under the Offer in Compromise program in circumstances where requiring repaying the full back taxes owed would constitute an undue burden or in cases where taxpayers demonstrate that they will be unlikely ever to be able to pay the full amount owed. Traditionally, the IRS has been stingy about accepting Offer in Compromise proposals from taxpayers; as a result, very few taxpayers were able to qualify for the program.

    The IRS Fresh Start Initiative has established more flexible standards in evaluating the financial standpoint of taxpayers who request relief under an Offer in Compromise. As a result, more taxpayers may qualify. To be eligible for this IRS tax relief program under the Offer in Compromise program for grounds other than Doubt as to Liability, taxpayers must meet all of the following conditions.

    Requirements to qualify for the Offer In Compromise program:

    • Cannot have an open personal or business bankruptcy petition
    • All required tax forms must have been filed
    • All required tax payments for the current year must be paid
    • Business owners with employees must have made current quarterly tax payments

    An Offer in Compromise may be either for a single lump-sum payment or for installment payments. To request an Offer in Compromise, taxpayers must submit Form 433-A (OIC) for individuals or Form 433-B (OIC) for businesses along with either $205 to cover the application fee and either a payment of 20 percent of the proposed lump-sum payment or an amount equal to the first proposed monthly installment payment. Individuals and sole proprietors who qualify under Low Income Certification guidelines set by the IRS are exempted from paying the application fee.

    New Installment Guidelines according to Fresh Start Program

    Installment agreements allow a person to make monthly payments on their tax debt if they can’t afford to pay the total at once, and/or aren’t eligible for an Offer in Compromise. In the past, once an individual’s tax balance reached $25,000, the IRS began conducting a financial analysis of the person’s income and expenses to determine how much the taxpayer would pay per month. Additionally, a Notice of Federal Tax Liens was filed.

    Under Fresh Start, more taxpayers will be able to avoid this invasive process altogether, as the tax balance threshold has been raised to $50,000. At that point, once the installment agreement process is started, you’ll now have six years to pay the debt off. If you are considering entering an installment agreement, let us know and we’ll make sure you qualify.

    Notice of Federal Tax Liens and the Fresh Start Program

    If an individual fails to pay their tax debt the government can file a claim against that person’s property with a federal tax lien. “Property” includes everything an individual owns, including real estate, vehicles and financial assets. The Notice of Federal Tax Lien alerts creditors that the government has a legal right to a taxpayer’s property. This may limit your ability to get credit.

    Similar to installment agreements, FSI has raised the Notice of Federal Tax Lien filing threshold to $10,000 from $5,000. The IRS might still choose to file at an amount less than $10,000, but it’s not as automatic as before.

    How the IRS Fresh Start Program can help with your Tax problems

    While none of these alternatives represents an easy tax solution, each of them does provide a viable avenue for tax relief. If you have been struggling to pay your federal income tax burden, investigating possible assistance under the IRS Fresh Start Tax Relief program is definitely worth your while, either on your own or with the assistance of a tax professional. You may find that your overall tax burden is significantly reduced.

    Wondering if you’re eligible for the Fresh Start program? Give us a call.

    Do you need tax relief help? If you’re struggling with paying your taxes, don’t know how to fill out an Offer in Compromise or don’t know which forms to file, contact us today. We’ll help you take advantage of the Fresh Start Initiative, and deal with the IRS so you don’t have to.

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    What Is an IRS Administrative Appeal?

    courtroomIf 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.

    ct-irs-tax-audit-mistake-problem-0306-biz-2014-001

    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 Processindex

    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

    IRSThe 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 EffortLeslie Haviland

    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.

    Top 10 benefits of working with a professional tax relief firm

    Having an outstanding tax debt is becoming a growing issue that many Americans face. The number of Federal tax liens and levies filed by the IRS has grown significantly in recent years.  In 2011, nearly 4 million tax levies were served on third parties, a 456% increase when compared to the same IRS reports from 2001. Similarly, the IRS issued over one million Federal tax liens in 2011, up 145% from a decade earlier.

    The IRS is usually relentless in their pursuit of collecting outstanding tax debt. The stress and pressure that is often placed on individuals and families can be overwhelming. Professional tax relief firms can be an incredible source of assistance when it comes to dealing with the IRS (or other State Tax Authorities) regarding back tax amounts owed or a wide range of other tax related challenges. Here are the top 10 benefits of working with one of these organizations.

    1.  You don’t have to face the IRS alone

    One of the major benefits of using a tax relief company is the fact that they have many professionals with different educational backgrounds to help you. By having a wide range of experts who understand how the IRS works (such as attorneys, CPA’s, or other specialists), they are able to put that knowledge to work for you so that you can reach the best possible settlement or solution for your tax problems.  After all, when dealing with the IRS or State Tax Authority, you can never have too many professionals working on your side.

    2.  Reduce the overall balance you owe

    The total amount you owe the IRS is often compounded by additional penalties and interest, and may involve more than one tax period or issue. These penalties and interests are automatically assessed to your account by their computer system; however you may not actually have to pay the additional fees.

    A professional tax relief firm can evaluate your situation, and depending on the circumstances behind why you owe the debt, can oftentimes have these penalties removed from the total balance owed. This applies to the interest accruing on your balance as well, which can really add up over any length of time.

    3. Avoid losing your home or other property from an IRS seizure

    In some extreme cases, people have lost their home or other property because of past due tax debts. Although property seizure is one method that the IRS can use to collect amounts owed, it is usually a last resort for them.

    However the number of IRS property seizures has increased dramatically in the last decade. In 2011, the IRS conducted 776 property seizures (compared to 234 seizures in 2001), resulting in a 230% increase in this form of enforcement in just 10 years. An experienced tax relief organization can help you avoid becoming one of these alarming statistics.

    4. Avoid having your bank account levied

    Similar to a property seizure, the IRS can also implement other actions to collect past due taxes. One more common method used is to levy your bank account. This action will occur after the IRS sends several written notices and warnings, yet still takes many people by surprise when they find out their bank account has been cleared out overnight.

    According to the IRS, over $55 billion dollars was collected as a result of enforcement actions in 2011, up 63.3% from a decade before. Imagine the nightmare of waking up one morning only to find that the IRS followed through with their threat of levying your bank account, and realizing that the money in your account that you were going to use for bills, rent, or other items, is no longer yours to spend.

    But this is just another example of a situation that can be avoided by having a professional tax relief service help you. You should contact them the moment you receive that first threatening letter from the IRS.

    5. Stop or prevent an IRS wage garnishment

    Garnishing your wages is yet another tool the IRS can implement to collect past due amounts owed to them. This adjustment to your paycheck can be financially devastating to your household income, usually taking somewhere between 30-75% of your NET paycheck before it makes it into your hands.

    The IRS legally requires an employer to comply with their collection efforts and the wage order stays in effect until the IRS releases it, usually not until the entire amount owed to them has been collected.

    A skilled tax relief firm can appeal to the IRS on your behalf and have the garnishment of your earnings reduced to a more reasonable amount or oftentimes stopped altogether.

    6. Settle your outstanding tax debt for much less than you actually owe

    Oftentimes the IRS is willing to negotiate with tax payers in regards to outstanding debts that are owed. This is true largely because of the fact that they would rather collect a lesser amount than nothing at all. But entering into a settlement negotiation with the IRS can be risky territory, especially if you are not fully aware of all of your rights or settlement programs that exist to reduce your overall debt.

    This is another area where a company that specializes in tax resolution can assist you. By negotiating with the IRS on your behalf, they can usually reach an agreement that not only significantly lowers the total amount you owe, but also makes the terms of payment simple and for a shorter period of time.

    7. Get caught up on past returns

    It is estimated that 1 in 6 Americans (26 million people) is currently struggling with tax problems. Many people let these problems grow and compound over years and end up failing to file new tax returns, figuring they are already in enough trouble with the IRS as it is. Working with a professional tax relief organization can also offer benefits by helping you get caught up on any back tax returns you may still need to file.

    8. Assistance during audits

    One nightmare than many people fear is being audited by the IRS. A reputable tax relief firm will stand by you through this process and make sure that everything you need to have is covered. The chances of being selected for an audit are relatively low with only around 1% of tax returns being selected for this process each year. Furthermore, of those returns that are audited, only about an additional 1% of them are for individual tax payers. So while the odds of being audited are low, it is nice to know you have someone on your side if you need them.

    9. Avoid dings in your credit score due to unpaid tax issues

    While the IRS is not currently providing information to the 3 major credit bureaus about any unpaid taxes you may owe, it is something they have strongly considered recently. Additionally, if the IRS files a lien because of outstanding debt owed, that information could show up on your credit report since it is considered a judgment, and will remain on your credit report for 7 years after you have repaid it or 10 years if you ignore it. This information can definitely affect your overall credit score and sometimes even potential employment.

    10. Enjoy a little piece of mind again

    The stress and pressure that can be placed on an individual or family because of outstanding tax debt can be so overwhelming and can even cause major problems in the lives of people who are struggling with it. It can seem like the easiest solution is to run and hide from the problem, but let’s face it, the IRS is one powerful and relentless authority and when they want their money, chances are they will find you.

    These issues will not go away on their own. The only way to make them disappear is to face them and address them as they arise. Having an experienced tax relief firm on your side to help with all the complicated policies and procedures can help your overall mental health dramatically.

    Although facing the IRS and State Tax Authorities can be a very scary and intimidating experience for many people, it doesn’t have to be so difficult. There are many options to help reduce or sometimes eliminate the debt you owe, but trying to handle it on your own can be equally challenging. Working with a professional tax relief firm is often your best bet. These knowledgeable and skilled individuals can help you handle everything necessary to get your tax related problems resolved once and for all.

    Do I Qualify for the IRS Fresh Start Initiative?

    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.