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How Much Do I Owe the IRS? 

How Much Do I Owe the IRS? 

Discovering that you owe back taxes to the IRS can be a stressful and overwhelming experience. Whether due to oversight, financial hardship, or other circumstances, it’s essential to address this issue promptly and accurately. However, determining the exact amount of back taxes owed can be complex. In this article, we’ll outline steps and resources to help you navigate the process of finding out how much you owe the IRS in back taxes. 

View Your IRS Online Account 

The IRS offers taxpayers access to their own IRS online account where they can view information related to their tax obligations. One of the key things you can access here is your tax balance. If you haven’t already done so, you can visit the IRS website and create an account. You’ll need to provide personal information to verify your identity and create login credentials. While the actual process of creating an IRS online account might seem tedious, the IRS takes extra precautions to safeguard your identity.  

Upon logging in, you’ll see the total amount owed and balance details. Here, you should be able to see the total amount you owe the IRS, including any penalties and interest that may have accrued. Your balance is broken down by tax year for added convenience.  Depending on your tax situation and the amount owed, the IRS online account portal may also provide information about payment options. This could include setting up a payment plan, making a one-time payment, or exploring other payment arrangements. 

Call the IRS 

The IRS has dedicated phone lines and representatives available to assist taxpayers with inquiries about their tax accounts, including outstanding tax liabilities. Before calling the IRS, gather any relevant documents, such as tax returns, notices, or correspondence from the IRS. Having this information on hand will help the representative accurately assess your tax situation. If you’re calling on behalf of someone else, you’ll need authorization to discuss their account plus their personal information.  

IRS phone wait times can be long, especially during tax time. It’s recommended to contact the IRS via your online account if possible. The IRS can be reached via telephone Monday through Friday from 7am to 7pm local time. Residents of Alaska and Hawaii should follow Pacific time. Residents of Puerto Rico may call from 8am to 8pm local time. Here are the phone numbers: 

  • Individuals: 800-829-1040 
  • Businesses: 800-829-4933  

There are also a few phone lines with their own specific hours. 

  • Non-Profits: 877-829-5500 from 8am to 5pm local time 
  • Estates and Gift Taxes: 866-699-4083 from 10am to 2pm Eastern time 
  • Excise Taxes: 866-699-4096 from 8am to 6pm Eastern time 
  • Hearing Impaired: TTY/TDD 800-829-4059 

Tax Help for Those Who Owe 

Once you’ve determined the amount of back taxes owed, it’s crucial to develop a plan to address your tax debt and prevent further penalties and interest accrual. Depending on your financial situation, you may consider setting up an installment agreement, making an offer in compromise, or exploring other options available through the IRS. For individuals with complex tax situations or those who need assistance navigating the process of resolving back taxes, hiring a tax professional may be beneficial. Tax professionals, such as enrolled agents or tax attorneys, can provide personalized guidance, negotiate with the IRS on your behalf, and help develop a plan to address your tax debt effectively. Optima Tax Relief is the nation’s leading tax resolution firm with over $1 billion in resolved tax liabilities.  

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

Top 5 Tips to Avoid an IRS Audit

Top 5 tips to avoid an irs audit

The Senate recently approved nearly $80 billion in IRS funding, with $45.6 billion specifically for enforcement. This new funding is expected to result in more tax audits. There is no sure way to avoid an IRS audit. However, there are some things that the IRS has generally viewed as “red flags.” These could increase the chances of an audit for taxpayers. Here are our top five tips to avoid an IRS audit.  

File Your Tax Return 

Currently, you must file a tax return if your gross income meets certain thresholds based on your age and filing status. If you meet the minimum income requirement and you do not file a federal income tax return, or file late. In 2024, you can be penalized 5% of your unpaid tax liability for each month your return is late. However, the penalty will not exceed 25% for your total tax balance. Additionally, you will incur a 0.5% per month for failure to pay penalty, up to 25%.

While both penalties have a cap, interest will continue to accrue until the balance is paid off. It is compounded daily at the federal short-term rate, plus an additional 3% for individuals. In 2024, the underpayment penalty is 8% for individual taxpayers. In addition, the IRS may prepare a substitute for return (SFR) on your behalf. They do this by using your W2 and 1099 forms for that tax year and even your bank account records. The SFR will likely result in a larger tax bill, since tax credits and deductions will not be claimed. In short, choosing to not file a return each year will not excuse you from paying taxes.  

Report All Income 

Underreporting income is one of the most common reasons taxpayers get audited. Remember, the IRS receives copies of all your W-2 and 1099 forms for the year. If incomes do not match up, they will investigate your tax situation. The IRS could then give you the IRS negligence penalty. This can cost you an additional 20% of the underpaid amount in penalties. That said, it’s always best to report all earnings the first time around. 

Use Common Sense with Business Expenses 

The IRS reminds taxpayers that business expenses should be “ordinary and necessary” to produce income for your specific trade or business. In other words, items like office equipment and advertising costs are fine, but you should not try to deduct your daily lunch expenses. You should always avoid comingling personal and business expenses. 

Keep Good Records 

Keeping good records that support your reported income is critical. This can include invoices, canceled checks, mileage logs, and other documents. The IRS recommends keeping records for three years after filing. Bookkeeping can be a tedious process, so it may be best to hire a professional if you are not up to the task. 

Know How to Report Losses 

The IRS will likely audit individuals and businesses that report multiple or consecutive losses. If your business claims a loss for several years, the IRS may classify it as a hobby instead of a for-profit business. Once this happens, you will not be allowed to claim a loss related to the business and you will have to prove that your “business” has an acceptable motive to earn a profit. 

Tax Relief for Taxpayers 

Odds of an audit increase when the IRS notices any red flags. The audit process can be tedious and taxing. Failing an audit can result in a huge, unforeseen tax bill. It’s best to seek assistance from experts who can help you avoid an IRS audit. Optima Tax Relief is the nation’s leading tax resolution firm with over a decade of experience helping taxpayers with tough tax situations.  

Contact Us Today for a No-Obligation Free Consultation 

** Optima Tax Relief is a tax resolution firm independent of the IRS** 

The IRS is Restarting Collections in 2024 

The IRS is Restarting Collections in 2024

In a significant development, the IRS has announced the resumption of collections in 2024. This marks a crucial phase in the aftermath of the global economic challenges posed by the COVID-19 pandemic. This decision has implications for taxpayers across the United States, as the IRS seeks to address the mounting financial pressures faced by the government. However, the IRS is providing penalty relief to nearly 5 million taxpayers. In this article, we’ll discuss the details of IRS collections in 2024 and tax relief options available for those with tough tax situations. 


The temporary halt on IRS collections was initiated in February 2022 as a response to the economic downturn caused by the pandemic. It provided relief to countless individuals and businesses struggling to meet their tax obligations. The suspension aimed to alleviate immediate financial burdens and stimulate economic recovery. Although taxpayers should note that the failure-to-pay penalty continues to accrue during nonpayment. However, as the nation slowly recovers, the IRS has deemed it necessary to reinstate collections to ensure the sustained functioning of essential government services. 

Key Changes in IRS Collections 

The IRS will send out collection notices again beginning in January 2024. The IRS is focusing on taxpayers with taxes bills for tax years before 2022. They will also send notices to businesses, tax-exempt organizations, trusts, and estates with tax bills from before 2023. The specific IRS notice being sent out will be IRS LT38, which is a notice of resumption. Taxpayers who receive this letter should contact the IRS about payments or other options available to them. If action is not taken, the next notice they receive will involve more serious action leading to IRS collections.  

As collections resume, the IRS will also ramp up its enforcement efforts to address outstanding tax debts. This may involve increased audits, investigations, and legal actions against non-compliant taxpayers. It is crucial for individuals and businesses to ensure compliance with tax obligations to avoid potential legal consequences. 

IRS Penalty Relief 

To ease the new collections process, the IRS is offering penalty relief to nearly 5 million taxpayers, including businesses and tax-exempt organizations. The IRS did not send these taxpayers automated notices during the pandemic. The relief will come in the form of waivers for failure-to-pay penalties, adding up to $1 billion. Eligible taxpayers will automatically receive penalty abatement in their online accounts with no further action needed. If the taxpayer already paid their penalties for tax years 2020 and 2021, they would receive a refund. Alternatively, the IRS may credit the payment towards another tax bill. Refunds and credits will be sent out beginning in January 2024. More information can be found in IRS Notice 2024-7 on their website.  

To be eligible for penalty relief, taxpayers must have a tax balance of less than $100,000 for each return and each entity. They also must have received an initial balance due notice between February 5, 2022, and December 7, 2023. The IRS will resume the failure-to-pay penalty for eligible taxpayers on April 1, 2024. 

Preparing for IRS Collections Resumption 

As the IRS gears up to resume collections, taxpayers are encouraged to take proactive steps to manage their tax liabilities effectively: 

  1. Review Financial Situation: Assess your current financial situation and evaluate your ability to meet tax obligations. Understanding your financial standing will help you make informed decisions and explore available options. 
  1. Explore Payment Plans: Investigate installment plans and other payment options offered by the IRS. Engage with the agency to negotiate a plan that aligns with your financial capacity. 
  1. Seek Professional Guidance: Consult with tax professionals or financial advisors to navigate the complexities of tax obligations. They can provide valuable insights into available options and help you make informed decisions. 
  1. Stay Informed: Stay updated on IRS communications and guidelines regarding the resumption of collections. The IRS website and official announcements will be valuable sources of information during this period. 

More Relief Options for Taxpayers Who Owe 

The IRS resuming collections in 2024 marks a pivotal moment for taxpayers in the United States. While it signifies a return to normalcy for government revenue collection, the penalty relief demonstrates a commitment to supporting individuals and businesses still recovering from the economic impact of the pandemic. By staying informed and proactively managing their tax obligations, taxpayers can navigate the challenges posed by the resumption of collections and work towards financial stability. Optima Tax Relief is the nation’s leading tax resolution firm with over a decade of experience helping taxpayers with tough tax situations. 

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

5 Tax Issues Gig Workers Run Into & How to Avoid Them

tax issues gig workers run into

In the dynamic landscape of the gig economy, where flexibility and independence are highly valued, many workers find themselves navigating the complex terrain of self-employment taxes. While the gig economy offers opportunities for individuals to earn income on their own terms, it also comes with a set of responsibilities, particularly when it comes to filing taxes. Here are the top five tax issues gig workers run into with their taxes and how to avoid them. 

Failure to Set Aside Money for Taxes 

One common pitfall for gig workers is not setting aside a portion of their earnings for taxes throughout the year. Unlike traditional employees who have taxes automatically withheld from their paychecks, gig workers are responsible for managing their own tax obligations. Failing to set aside money regularly can lead to a significant financial burden come tax season. 

To avoid this mistake, gig workers should establish a dedicated savings account and consistently allocate a percentage of their income for taxes. A solid rule of thumb is to set aside 30% of your business income for taxes. Be sure you know every tax you are responsible for. For example, gig workers will need to pay self-employment taxes while regular W-2 workers do not.  

Underreporting Income 

Some gig workers inadvertently underreport their income, either due to a lack of understanding or an attempt to reduce their tax liability. This mistake can have serious consequences, including penalties and interest on unpaid taxes. Remember, now more than ever is a bad time to owe the IRS. Inflation has caused higher than normal IRS penalties and interest rates.  

To avoid this error, gig workers should maintain accurate records of all their income, including earnings from various platforms and any cash transactions. You should receive IRS Form 1099-K from these platforms. Utilizing accounting software or hiring a professional can help ensure that all income is properly accounted for. 

Overlooking Deductions and Credits 

Gig workers often miss out on valuable deductions and credits that can help reduce their tax liability. Common deductible expenses for gig workers may include mileage, home office expenses, and equipment costs. Additionally, they may be eligible for the Qualified Business Income (QBI) deduction and other tax credits. Failing to take advantage of these opportunities means potentially paying more in taxes than necessary. 

Gig workers should stay informed about tax laws and work with a tax professional to identify and claim all eligible deductions and credits. For example, as previously mentioned, gig workers must pay self-employment taxes. However, they may deduct half of the 15.3 percent self-employment tax during tax time. Do your research on what you can deduct but be careful not to deduct things you are not eligible for.  

Neglecting Estimated Tax Payments 

Unlike traditional employees, gig workers typically don’t have taxes withheld from their earnings throughout the year. Instead, they are responsible for making quarterly estimated tax payments. Neglecting these payments can result in underpayment penalties. Currently, underpayment penalties are 0.5% of the tax owed and it is due each month that the tax goes unpaid, for a maximum of 25% of the total balance. 

To avoid this mistake, gig workers should calculate their estimated tax liability and make timely payments to the IRS. Keeping track of income and expenses throughout the year can help with accurate estimations. The IRS offers a helpful online estimated tax payment calculator to make this step easy for gig workers.  

Misclassification of Employment Status 

Gig workers must correctly classify their employment status, whether they are considered independent contractors or employees. Misclassification can lead to tax issues and potential legal consequences. Some platforms may incorrectly categorize workers, so it’s crucial for gig workers to understand the criteria used by the IRS to determine their status. If uncertain, seeking professional advice or consulting IRS guidelines can help ensure proper classification and compliance with tax regulations. 

Tax Help for Gig Workers 

Navigating the tax responsibilities of gig work requires diligence and proactive financial management. By avoiding these common tax issues, gig workers can ensure a smoother tax-filing process and potentially reduce their overall tax liability. Seeking professional guidance and staying informed about tax laws are crucial steps toward financial success in the gig economy. Optima Tax Relief is the nation’s leading tax resolution firm with over a decade of experience helping taxpayers with tough tax situations. 

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

I Received an IRS Notice: Now What?

IRS notice, now what?

Receiving an IRS notice in the mail can be scary, but the situation can be less daunting if you know what to do. First, it’s important to note that not all IRS notices are negative as some are only informational. In any case, taxpayers should know what steps to take upon receiving an IRS notice. 

Do Review Your IRS Notice 

The IRS will send notices for many reasons, from notifying you of a balance due to informing you of a delay in processing your return. From inquiring whether your return is missing a schedule or form required for processing to informing you of a potential audit. Carefully review your notice for important information. If you’re unsure of what the notice means, you can look up the CP or LTR number, located on the top or bottom right-hand corner of the notice.

It also shows the date and time the IRS expects you to respond. In the best case scenario, the IRS is pursuing a correspondence audit covering one or two items of a single year’s tax return. Correspondence audits are conducted entirely by mail and makeup 75 to 80 percent of all audits. An in-person interview audit takes place at your local IRS office. A field audit is scheduled for a particular date and time but takes place in your home or office. It is considered the most comprehensive type of audit. 

Do Not Panic

Understand what auditors are seeking. While each audit is different, all audits focus on three basic questions: 

  1. Is your business truly a business – or just a hobby? 
  2. Are your deductions legitimate? 
  3. Did you report all your income? 

If you can answer these three questions to the satisfaction of the auditor, you stand a good chance of emerging from an audit relatively unscathed. 

Do Gather Your Documentation

Once you have determined what information the IRS is seeking, it’s time to begin gathering your paperwork. If the IRS is challenging a particular deduction or tax credit that you claimed, gather whatever documentation you have to support your claim. This can include bank statements, receipts, and invoices. Provide as much information as possible concerning the inquiries the IRS has made. Also, make photocopies of everything that you intend to provide to the IRS. Never give up your original documents. If you must report in person for an office audit or prepare your home or office for a field audit, ensure that your paperwork – and your representative – will be available and ready.

Do Respond to the IRS Notice in a Timely Manner  

If the information on the notice looks inaccurate, you should respond with a written dispute. Doing so in a timely manner can help minimize interest and penalty fees. Be sure to include any information and supplemental documentation to support your case. However, do not volunteer information the IRS has not specifically requested.  Typically, the IRS should respond to disputes within 30 days.  

Do Check for Scams 

Remember that the IRS will never contact you via text message or social media. In fact, initial contact from the IRS is usually via mail. If the IRS notice does not appear credible, you can always check your online tax account on the IRS website to confirm balances due, communication preferences, and more. 

The IRS will notify a taxpayer if they believe that there may be fraudulent activity occurring on their tax return. The IRS will send a letter to you inquiring about a suspicious tax return that you may have not filed. They will request that you do not e-file your return because of the duplicate social security number that was used. Act quickly should you receive this letter from the IRS to avoid further fraudulent activity with your personal information.  

Do Not Ignore the IRS Notice 

Some IRS notices are purely informational and require no additional action. However, do not assume this is always the case and ignore the notice. Simple mistakes made on your return or underreporting income can result in the IRS requesting action from you. A notice can also be a notification that you owe taxes and will give instructions on how to pay the balance by the due date.  

Do Not Reply to the IRS Notice Unless Instructed To Do So

Typically, a response to an IRS notice is not needed. Once you confirm a response is not required, you can proceed with other actions. Even if the notice informs you of a balance due, there is no need to contact the IRS unless you do not agree with the information on the notice.  

Do Learn from the Experience 

Use the situation as an opportunity to learn more about tax regulations and ensure that your future tax filings are accurate and complete. Consider consulting with a tax professional for ongoing guidance. 

Tax Help for Those Who Received an IRS Notice 

Even if you prepare your own returns, having a professional from Optima Tax Relief check out your response before you return it to the IRS may save you from making a costly error. The IRS allows you to be accompanied by a representative if you have been contacted for an in-person interview audit or a field audit. Take advantage of this opportunity. You’ll likely be nervous during the procedure and may share information that might prompt the IRS agent to probe beyond the original scope of inquiry. Not only that, most IRS agents prefer dealing with a professional. 

The best thing to do to avoid receiving warnings from the IRS is to always ensure that you remain compliant with tax law. However, if you find yourself in a situation where you owe the IRS, tax relief is always an option. Optima Tax Relief is the nation’s leading tax resolution firm with over $1 billion in resolved tax liabilities. 

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