Alexis Hernandez, Author at Optima Tax Relief

Your Financial Diet for the New Year

With each new year inevitably comes the new year resolutions. For most, this is the time of the year we aspire to make big changes in our lives and create new goals to reach by year’s end. One of the most common resolutions that people make is about money: spend less and save more. Giving your finances a fresh start and taking a break from frivolous spending can be very beneficial to you – and give some breathing room to your bank account. This article details how to make your money a priority by starting towards new goals, making a budget and cutting out impractical spending that could affect the way that you save money.

Set goals

One of the first things you should do is to create goals for yourself for the new year. A good way to start is by writing down goals that are realistic and attainable for the year. Make sure that your goals are measurable so that you’re able to track your progress every month to ensure you’re staying on track to meet your objectives.

Create a budget

Once you have decided what financial goals you want to focus on, it’s time to create a budget. This will help to give yourself a visual representation of how you’re spending your money. You should start by figuring out how much income you make on a month-to-month basis. If you aren’t salaried or if you receive a commission as part of your compensation, and therefore don’t see a flat rate of pay each month, a good approach is to average out your income from the months prior to seeing what you earn on average.

The next step is to determine what your spending habits are. Some expenses are the same every month, such as your mortgage/rent or car payment, while other expenses vary month to month such as your utilities or groceries; you can take the average from your prior months to determine how much you can expect to spend.

Get rid of the excess spending

After you’ve created a budget, it’s time to take a look at what you’re spending every month – and figuring out what expenses you can do without. A great way to look at where your money is going is by checking your bank statements. It may surprise you, but once you review your expenses, you’ll begin to realize how many times you’ve gone out to eat, went shopping for clothes or splurged a little extra at your favorite coffee shop. Once you are able to identify your impractical expenses, you can be more mindful of them so you can focus on putting more money in your savings.

The new year allows you to press the restart button on any bad habits that you had previously and this includes how you are spending your money. If you’re looking to refresh your finances, make sure to make attainable money goals, make a budget to ensure that you stay on track and review your expenses regularly to avoid overspending.

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.

By Alexis Hernandez|My Money, Savings, Tax Returns|Comments Off

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.

By Alexis Hernandez|IRS Collections, My Money, Tax Returns|Comments Off

Now that the holidays are over, it’s time to start preparing for the next season. This can be a very stressful time for most taxpayers because of the fear they will owe the IRS or they will not receive as big of a refund as they had received for the previous years. There are ways to ensure that you are more than ready for tax season so you don’t have to scramble to be prepared for whatever your CPA asks you for. Some of the most important things you can do to get ready to file your tax return are having the appropriate information for your return to be filed, knowing what deductions you qualify for, and understanding which filing status you’re going to pick.

Gather your personal information

Most CPAs will ask that you bring your previous tax return and any forms such as W2s, 1099s, rental income, or any other source of income you have received. You should also bring your social security card or tax ID card as well as your driver’s license to ensure your tax return is filed properly. Ensuring that you bring all the applicable items is vital for your return to be filed accurately. Some additional items you may need to bring if applicable:

Dependent information
Childcare payment records
Death certificates
Alimony payments

Make note of any deductions

Any deduction applied to your tax return is considered a reduction in your income and in turn, could potentially reduce the total amount of income tax you would have owed after filing your tax return. If you are looking to itemize your deductions, it is important to keep a record of all the expenses you may have. Deductions can range from:

Self-employed
Rental homes
Investments
Real estate
Property taxes
Charitable donations
Medical expenses

Figure out how you want to file

If you just got married, how you typically file your tax return will change. Your filing status is typically based on what will result in lowering what you owe in taxes; your marital status or family situation. If you’re married, you have the choice to either file jointly with your spouse or separately. If you file head of household, it is required that you are not married, a qualifying person has lived with you for more than half the year and that you’ve paid more than half the cost of keeping up a home for the year.

Getting a head start on the most stressful time of the year, tax season can be extremely beneficial for you. Understanding what you want to be placed on your tax return is important and dependent on how much of a refund or how much you will owe at the end of the year. If you are having difficulty understanding what you can and can’t place on your tax return, talk to a CPA to see what is allowable to ensure that your tax return is filed properly.

By Alexis Hernandez|IRS Collections, My Money, Tax, Tax Planning, Tax Returns|Comments Off

The new year is the one time of year when everyone reevaluates their life goals and vow to make big changes in their lives. Typically, you’ll see people going back to the gym to reach their goal weight or decide that this is going to be the year that they’re going to travel the world. While any aspiration you set for yourself is a great start, some of the best resolutions are the ones with objectives that will help you move up into the dream position that you’ve always wanted or even buy that house you’ve had your eye on for a while. Here are a few simple tips to get you on the right track for both advancing your career opportunities and saving more money in the bank.

Look for growth opportunities

More and more companies are looking to create growth for employees internally. If you’re looking for a way to earn more money and gain a new set of skills, you may not have to look too far. You can start by looking at job listings that your company is hiring for, if you see something that interests you and you feel you’re more than capable of handling the position, talk to your recruiting team or even the manager of the department that you are interested in. Alternatively, you can also look at positions at other companies and apply.

Create a budget

With the new year comes new ambitions, which means it may be time to economize your budget for the year. Creating a budget means that you set limits on how much you are spending every month to ensure that you don’t overspend and cut into your savings goals. Typically, a budget requires you limit what your spending on necessary items you need throughout the month. For example, if you are going grocery shopping, stick to the basics that you will need; don’t spend frivolously on snacks and sweets just because you’re craving them at that moment. Avoid eating out consistently throughout the month and save it more for a special occasion. If you are looking to splurge, you can always allot a certain amount of money to spending on personal items throughout the month.

Build your savings

Having a cushion to land on if you fall onto hard times, or if you need cash right away in order to respond to an unexpected emergency, is exactly the reason millions of Americans open up a saving’s account. If you don’t have one yet, then the new year is the perfect time to start. Whether you’re building your savings to invest in a house, vehicle, school, etc., it’s vital to have a savings account as a backup to ensure that you’re able to get out of a financial bind quickly.

Cancel old subscriptions

Make sure to review your monthly bank statements; you may be surprised to find you are paying for services that you no longer use or thought you had canceled long ago. Be on the lookout for subscriptions or gym services that are automatically being deducted from your bank account. You could potentially save yourself some money.

You don’t have to get a financial rut in the new year, with just a few simple changes you can get off to the right start and reach your financial goals. Looking for career opportunities, starting a budget, opening up a savings account or getting rid of old subscriptions could help you move in the right direction and provide you with a better outlook on your financial future.

By Alexis Hernandez|My Money, Savings|Comments Off

The holidays can be a very expensive time for everyone, especially when it comes to purchasing gifts for family and friends. In order to make ends meet, this may mean that you might pick up some extra shifts at your job, change your withholding status so less is taxed from each paycheck, or perhaps you did so well at your job that you even received a holiday bonus. Regardless of what helps you make more money this holiday season, be cautious of any tax implications it may cause when filing your next tax return.

Work more overtime

With the holidays around the corner, you can expect that most employers will ask that you work overtime. This is an easy way to make more money in exchange for working more hours. It is important to keep in mind that overtime will be considered part of your adjusted gross income for the year and if you work enough overtime throughout the year, this could move you into the next tax bracket – which could lead you to owe. If you do end up owing, you will only pay the higher tax rate on the portion of your income that exceeds the income threshold for the next highest tax bracket.

Going Exempt

Some taxpayers will choose to go exempt for the holidays, meaning they stop withholding to the government and State in order to receive a bigger paycheck back from their employer. Although you’ll be receiving more money back in the short term, it is important to not stay at exempt for too long, as it could potentially lead to you owing the IRS next filing season. If you’re looking for a way to pay fewer taxes on your holiday bonus, consider maximizing your year-end contribution with your 401(k), IRA or a qualifying charitable organization to get a tax deduction.

You received a bonus

Employers giving their employees extra cash is common around the holidays and can help pay for presents. If you do receive a bonus, this will be considered a supplemental wage, meaning it will also be considered income when it comes time for filing your tax return. Additional types of pay that could be considered income is severance pay, vacation pay, bonuses, moving expenses, overtime and any commission that is received.

Always be aware of how working overtime, changing your withholdings and receiving a bonus will affect you when it comes time for filing your taxes. Working more hours this holiday season will mean that you most likely get a bigger paycheck and it will also mean that it could move you into a higher tax bracket. Even if you choose to go exempt this holiday season to have more money in your pocketbook, it may lead to you owing at the end of the year. Finally, if you receive a bonus at the end of the year, it will be considered an additional income and will be reported on your tax return.

By Alexis Hernandez|Tax Returns|Comments Off

This holiday season is all about giving back to family and friends. It can become very expensive with all the gifts and food that you’re purchasing during this time, leaving both you and your wallet financially exhausted. Before you start becoming concerned about how you’ll get through the holidays, keep in mind that there are ways to prepare yourself mentally and financially. Below are a few ways to start preparing for the next holiday season without breaking the bank.

Start saving ahead of time

Not saving for the holidays can wreak havoc on your bank account and leave you in financial hardship. There are ways to prepare for the holiday season ahead of time to help you avoid going broke. One
way you can prepare is by saving up your change from the entire year. Believe it or not, your change will add up and could potentially cover the cost for several gifts you plan on purchasing.

If you’re not the type to carry cash in your pocket that could give you change, you can always sell unwanted items that you’ve been holding on to. You can hold a garage sale, or you even sell your items on an eCommerce marketplace like eBay. This is an easy way to make money and clean out your home at the same time!

Look for Black Friday deals

With the holidays around the corner, nearly all department stores are preparing to put their products on sale. Typically stores will release their Black Friday deals in advance so you can review what items you want to purchase at a bargain price. Waiting for items to go on a discount is the best way to get some of the newest products for cheap.

If you have a really tight budget, you can also make homemade gifts. This will seem more like a personal gesture to someone as opposed to just purchasing a gift card and it will seem much more refreshing since everyone will be shopping for the latest tech on the market.

Take on a seasonal job

If you plan on making the holidays an extravagant affair by buying the latest gifts for friends and family but don’t want to put a dent in your savings, consider taking a part-time seasonal job. This could help boost your holiday budget and give you the ability to spend more money on gifts. Seasonal jobs are typically flexible with the hours they assign so they can work around your schedule. This means that you can request to work just a few hours or ask for more hours so you can build a larger budget for yourself.

With the holidays approaching, it can become very easy to get caught up in all the holiday shopping and spending. You don’t have to go broke buying presents for friends and family and there are solutions to getting everything on everyone’s wish list and not having to deplete your savings. To avoid curbing your spending, you can start saving in advance as well as look at what deals or sales will be coming up so you can save some cash while buying the most current item. Finally, if you’re wanting to splurge this holiday season but don’t have the cash on hand to do so, consider taking up a seasonal job for the holidays. All the money you earn can go towards the gifts you’ve been wanting to buy all year.

By Alexis Hernandez|My Money, Savings|Comments Off

For some, it can be a terrifying ordeal to file your tax return, especially if you forget to include vital information when filing. It is important for taxpayers to double-check whatever they have placed on their return in order to avoid the IRS further looking into your tax return. The IRS will flag a taxpayer’s return if they notice that the income reported in inaccurate, if there are too many credits and deductions placed on the return, or if a taxpayer has not filed a required tax return. Although the IRS does not pursue many tax evasion cases, it is the taxpayer’s responsibility to ensure they are filing correctly to avoid the IRS investigating them – and finding something that can send them to jail. If you still have questions on what should be included in your tax return and how to properly file, here are some ways to avoid the IRS coming after you.

The IRS will usually start off with an audit process rather than taking immediate action against a taxpayer. During the audit process, the IRS will review the tax return(s) filed by a taxpayer to see what errors were knowingly made. If the IRS sees that a taxpayer has repeatedly made the same mistakes on several of their tax returns, such as not fully disclosing large amounts of income they had been receiving throughout multiple years, it could be seen as tax evasion. If a taxpayer continuously makes false statements and hides records like bank statements from an IRS auditor, it could potentially lead to criminal prosecution.

To avoid running into trouble with the IRS, specifically avoiding an audit, or being charged with tax evasion it is important to understand what you should include on your tax return. Whatever income you are earning needs to be included on your tax return. This means that if you have a full-time job as well as a side job, you must report both sources of income. If you also meet the filing requirements, you must file your tax return with the IRS. Avoiding filing a return for multiple years could be considered tax evasion by the IRS. This could also lead to the IRS looking further into the unfiled years and file a tax return on your behalf, which could cause any owed liability to increase on top of the penalties and interest you accrue for not filing in the first place.

Understanding the IRS as well as their rules will help you navigate the tax filing system put into place. It is up to every taxpayer to keep themselves informed on any tax changes that may occur throughout the year and to also be transparent on their tax return by disclosing any information that may be vital for the IRS to know. If you are unsure of how to file and need further assistance, you can ask the advice of a tax attorney or a tax relief company that can provide you with the necessary assistance you need in order to get compliant with the IRS.

By Alexis Hernandez|IRS Collections, My Money, Savings, Tax Planning, Tax Relief Solutions, Tax Returns|Comments Off

With the holiday season around the corner, things can start to get expensive. It can be overwhelming shelling out a bunch of cash on presents and food every year, especially if you don’t have a set spending limit. So, what can you do to cut costs but still make the most of your time with friends and family? Setting a budget for yourself is one of the best ways you can have an amazing holiday that won’t hurt your wallet. Below are a few tips and tricks to make sure you get to overeat without overspending this Thanksgiving.

Create a budget

Making an honest budget that sets parameters for how much you can comfortably spend will give you a better idea of how much wiggle room you actually have when buying food and presents for your friends and loved ones. Recycling decor from previous holidays and searching for the best sales going on at your local grocery store can help save you money but will still give you the Thanksgiving that everyone will be raving about for years to come.

Create a shopping list and stick to it

When we think about the holidays, many of us picture ourselves eating an exorbitant amount of food. If you’re hosting a holiday dinner, or even just attending one, don’t go overboard while shopping for groceries. Create a shopping list of what you want to purchase and then make sure you stick to it. Try looking for sales a store is having, specifically on non-perishable items and bread. Typically, items that are in season will either be on sale or cheaper, so try picking up these types of items so you won’t have to pay for food items that may currently be valued at a higher, out-of-season price.

Prioritize what’s important

Making your menu from scratch may end up saving you more money than buying something that was pre-made. You can even check to see what’s in your kitchen cabinets, as most recipes call for ingredients that you already have. There seems to be a stigma about cooking a meal where people feel that it will take them hours. If you’re not a fan of cooking or don’t feel very experienced at it, then you can stick to cooking easy side dishes that will complement the main courses. If you’re on a really tight budget, you may want to consider cutting out the cost of alcohol since it is on the pricier side. If you would like to have wine with your meal, you can always ask friends and family to bring a bottle or two. You can also alleviate some of the costs by hosting a potluck-style Thanksgiving and asking your friends and family to bring their favorite dish.

Thanksgiving can still be fun even if you have a budget in place. While it can be expensive trying to buy food for the whole family during the holidays, being mindful of how much money you will be spending this November is essential to avoiding a different kind of holiday hangover – a financial one. And don’t forget that the most important part of Thanksgiving isn’t about all the food you eat, it’s about spending time with loved ones.

By Alexis Hernandez|Tax Returns|Comments Off

A thriving economy is something all taxpayers rely on in order to purchase goods and provide for their families. That is, until the economy takes a turn and it slides into a recession. When a recession hits, it can leave taxpayers scrambling as they try to pick up the pieces of their lives and figure out what options they have for their next move. For many, a recession is the worst thing that could happen to them, as it could put your job is at risk, lower your wages and bring your employment growth to an abrupt stop. With current talks of a possible recession, it is a scary time for many Americans who do not know what the future holds. Here are a few tips to help prepare for a recession in order to protect yourself.

Make sure you have emergency savings

We can’t emphasize this enough! Having emergency savings can give you the cushion you need if the economy takes a downturn or if you lose your job. However, we all know accruing a large sum of money in a savings account is easier said than done. If you want to beef up your savings, there are options available to you, and getting a side gig such as driving for companies like Uber or Lyft can also help boost your savings.

Pay down your debt

If you have credit card debt, vehicle loans, student loans, or other kinds of debt, it is important that you focus on paying this down. The faster you pay it off, the less you will have to pay in additional interest, which could prolong the amount of time you are holding onto your debt obligation. Lowering your total debt will allow you to have much more disposable income which could be placed in your savings that can be used in times of emergency or hardship.

Live within your means

The holiday season is in our midst, which means family gatherings and plenty of food. Everyone also looks forward to the holidays because of all the shopping that gets done! With Black Friday and Cyber Monday just around the corner, everyone is getting ready to spend big on presents for both themselves and their family. It is important to remind yourself that you don’t want to bleed your wallet dry. Instead, try to be cautious of the frivolous spending that is often done during this time. Regardless if you are celebrating a holiday or not, it is recommended that you set up a budget for yourself to ensure that you’re not overspending. Just doing this can help save people money – and prevent them from going further in debt.

With just a few simple adjustments to your spending habits, you can have more money in your pocket in case the economy turns south. It is important to have a savings plan in mind to prepare for worst-case scenario situations. Whether you are worried about a recession or not, you should always put money aside and these several tips will help you build a solid financial foundation regardless of how the economy is doing.

By Alexis Hernandez|Tax Returns|Comments Off

On December 15, 2017, the Tax Cuts and Jobs Act (TCJA) was filed. The act promised to reduce taxes on average for all income groups in 2018 and 2025, specifically the middle class. According to the Tax Policy Center, those who lived in higher-income households would receive a higher average tax cut, with the biggest portion of tax cuts going to taxpayers in the 95th and 99th percentile of the income distribution. In comparison to our current law, taxes would fall for all income groups in 2018, which would increase the overall average after-tax income by 2.2 percent. Just recently, President Trump has announced that he will further assist taxpayers by cutting taxes for the middle class as a bid for his reelection. With TCJA in place and a promise of further tax cuts, it brings up the question of whether or not the TCJA is effective, and if the passing of a new tax law that allows even more tax cuts would be effective for a higher percentage of American taxpayers.

The TCJA was meant to reduce taxes on average for all income groups in both 2018 and 2025. For most, the tax cuts are hardly even noticeable. It is estimated that the federal tax savings for the extremely wealthy are seeing savings of around $51,000 versus the rest of taxpayers that are seeing less than $1,000.

One of the reasons why most taxpayers are not seeing as big of a refund is because they did not change their withholdings. If you did change your withholdings when the TCJA was implemented, you would see that the tax changes increased your standard deduction; specifically, the limit on the deductibility of state and local taxes. If you chose not to withhold the proper amount, your tax refund would appear to be smaller than what you probably expected.

Another reason why most taxpayers did not feel the effects of the TCJA is because it benefitted those in a higher income bracket. The decrease in corporate taxes increased corporations’ profits which caused a higher earned income for wealthy households. Those who benefitted from the TCJA have been corporations and taxpayer’s income that is a result of corporate profits. With Trump’s tax cuts largely benefitting the wealthiest class in America, it has not caused an imbalance between average households and those earning a corporate profit.

For most, it can be difficult to understand this 200-page act as it does extensively change the previous tax code. There are some important key takeaways that taxpayers should know before filing again:

The TCJA will impact tax filing up to 2025.
It changes the tax code for institutions and taxpayers. The new act focuses on cutting individual, corporate and estate tax rates.
Nearly everyone has been affected by the TCJA.

If you are a taxpayer that has not felt the benefits of the TCJA, it is important to understand the new tax laws and how it may affect your personal circumstances and help mitigate uncertainty in future tax planning and filing. If you are having difficulty understanding the current tax changes, you can always consult with a tax professional to assist you with your tax filings.

By Alexis Hernandez|Tax Returns|Comments Off

12 Next

Your Financial Diet for the New Year

You Received an IRS Notice, Now What?

Out with the Old, in With the New: How to Prepare for Tax Season

Setting Financial Goals for the New Year

Don’t Let the Grinch Steal Your Holiday Pay: Tax Tips to Survive the Season

What to do if you need more money for the Holiday Season

What is Tax Evasion and How can it Affect You?

Planning Thanksgiving on a Budget

How to Prepare for a Recession

Has the Tax Cuts and Jobs Act Benefited You?