Taxes & Your Savings

For most taxpayers, the worst thing that can happen after filing their taxes is having the IRS notify them that their tax return is being audited. What most people do not realize is that there is a time frame for how long the IRS can audit an individual and that taxpayers have a right to dispute an audit if they have proper substantiation. Here is everything you need to know if you are going through an audit.

Typically, the IRS has about three years from the date that a tax return was filed to charge you or assess additional taxes. The three-year timeframe is called the assessment statute of limitations. Tax returns that are flagged typically end up going into audit or the individual will receive notification from the IRS stating that some information on their return was underreported. This notice is called a CP2000.

The IRS procedural policy states that an IRS agent will be required to open and close an audit within 26 months after a tax return has been filed. The IRS strictly adheres to its guidelines to ensure that the audit and other processing needs are complete within the three-year timeframe.

For audits that start a few months after a return is filed, the IRS will typically freeze any refunds. The IRS will have to pay interest on refunds that are sent out late, which is why the IRS will attempt to resolve its audit quickly. Once a taxpayer answers the questions regarding their tax return with accuracy, then their refund will be released and sent out.

Audits that happen immediately after filing a tax return typically contain tax credits, earned income tax credits, and the child tax credit. The IRS usually wants to verify the filing status, dependents, and other return items before sending your refund.

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.

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.

Going green has tax benefits that could potentially reduce your total tax bill when filing your taxes. More taxpayers are taking advantage of these tax incentives by buying alternative vehicles, using Energy Star products or installing energy equipment in their home. Here are the top green tax credits you should be claiming.

1. Clean energy vehicle savings

Although tax credits for most hybrid vehicles have expired, there are still ways that taxpayers can take advantage of having an alternative vehicle. 

There are certain vehicles that could qualify under the Alternative Motor Vehicle Tax Credit. The amount of the credits vary based on the make, model and year of the vehicle that a taxpayer is attempting to claim. Additional requirements to be aware of before claiming the tax credit are:

• The car was purchased before 2017.
• You are the original owner of the vehicle.
• You drive your car primarily in the U.S.

For those who purchased a plug-in electric vehicle, you could be eligible for the Qualified Plug-In Electric Drive Motor Vehicle Credit. The credit applies to new electric vehicles bought after December 31, 2009. In order to qualify for the credit you will need the following:

• The vehicle must have been purchased new.
• The vehicle must have been made by an eligible manufacturer under the Clean Air Act.
• Have at least four wheels.
• Have the ability to be driven on highways and public streets.
• Have a weight rating of less than 14,000 pounds.
• Purchased an electric motor that uses a rechargeable battery to generate at least 5 kilowatt hours of capacity.

Tax credits for both of these can range from $2,500 to $7,500 based on the vehicle’s battery capacity and the overall size of the vehicle.

• Make a donation for a smaller tax bill

Taxpayers who make charitable contributions such as cellphones, game consoles, computers or any other qualifying electronic donation, can write it off based on the fair market value. In order to be eligible for the tax credit, you must have the following:

• A donation that is valued at less than $500, no forms will be required to be filled out.
• Charitable deductions exceeding $500 must be submitted with Form 8283, which lists the name of the organizations and types of donations made with your tax return. 
• Keep a receipt for your files.

• Use Energy Star products

The Energy Star program of the U.S. Environment Protection Agency and the U.S. Department of Energy helps taxpayers save money when they go green. Taxpayers should be advised that not all Energy Star products qualify for the incentive and some tax breaks for energy expired in 2011. There are still a few credits available through 2021 for certain energy programs that have been mentioned above.

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

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’re debating whether or not to donate to charity, it’s important to understand the tax benefits and tax-saving opportunities that could be available to you. Here’s a breakdown of what you need to know when understanding what you could qualify for when it comes to charitable donations.

Some donations may not be eligible for deductions. In order to make a donation, it must be to a charity with a tax-exempt status determined by the IRS. This means that charitable donations cannot be made to friends, relatives, or groups that do not fall under the tax exempt status. The list of approved organizations are the following:

1. A community chest, corporation, trust, fund, or foundation, organized or created in the United States or its possessions, or under the laws of the United States, any state, the District of Columbia or any possession of the United States, and organized and operated exclusively for charitable, religious, educational, scientific, or literary purposes, or for the prevention of cruelty to children or animals.
2. A church, synagogue, or other religious organization.
3. A war veterans’ organization or its post, auxiliary, trust, or foundation organized in the United States or its possessions.
4. A nonprofit volunteer fire company.
5. A civil defense organization created under federal, state, or local law (this includes unreimbursed expenses of civil defense volunteers that are directly connected with and solely attributable to their volunteer services).
6. A domestic fraternal society, operating under the lodge system, but only if the contribution is to be used exclusively for charitable purposes.
7. A nonprofit cemetery company if the funds are irrevocably dedicated to the perpetual care of the cemetery as a whole and not a particular lot or mausoleum crypt.

Some contributions may lead to only a partial credit. For particular donations, a taxpayer will only receive a portion of a credit. For example, if you purchase a shirt that is a part of a charitable cause, the entire price of the shirt is not deductible. The fair market value must be determined and subtracted from the cost of your purchase in order to determine the amount of your donation.

When determining how much of a charitable donation you would like to make, it is important to know there is a limit on all donations you make throughout the tax year. Total charitable contributions are generally limited to no more than 50% of your adjusted gross income. 

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