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A Guide to the IRS Fresh Start Program

A Guide to the IRS Fresh Start Program

Debt relief

Taxpayers who owe a significant amount of money to the IRS often look for different ways to offset or defer their debt. Or even better, discover ways to give them enough debt relief so they won’t have to feel like the debt is continuously weighing on them. The good news is the IRS Fresh Start program was implemented in 2011 to provide different options to taxpayers who owe taxes to the IRS. This quick guide can help you determine whether the IRS Fresh Start program is right for you. 

Tax Penalty Relief

One of the most notable details about the IRS Fresh Start program is providing tax relief from the IRS penalties. The penalties for paying your tax bill late, or not paying at all, can be significant and put taxpayers in a challenging position. By merely reducing or even eliminating some of the tax penalties, the IRS could be saving certain taxpayers thousands of dollars and provide them with instant relief in the process. 

Streamlined Installment Agreements

Through the IRS Fresh Start program, installment agreements can be made to allow taxpayers to make an IRS payment periodically to pay off their debt over time. The IRS recently added to the program installment agreements to make it even more streamlined. The taxpayer and the IRS will agree on a particular payment amount, and the taxpayer is given 72 months to pay the bill in full. An exception would be if the Collection Statute Expiration date occurs first. Specific standards and requirements must be met to enter into this agreement, but it is a great way for people to slowly pay off their debt without putting a significant dent in their bank account at one time.

Raised Thresholds On Tax Liens

If a taxpayer owes $25,000 or less in taxes, they can ask the IRS to remove any property liens. However, this might only be granted if the taxpayer agrees to an installment plan where an IRS payment is withdrawn monthly and automatically from their bank account. The $25,000 threshold is higher than the previous amount of $5,000, so taxpayers have a little more breathing room to avoid having a lien put on their property.

Get Debt Relief And Settle For Less Than What You Owe

Part of the IRS Fresh Start program also allows taxpayers to take advantage of an Offer in Compromise (OIC). With an OIC, taxpayers provide the IRS with a reasonable amount they can expect to pay in taxes before the Collection Expiration date. Usually, it must be proven that a taxpayer won’t be able to pay off their taxes through installment agreements or other means before an OIC is accepted. 

Rocket Tax Relief provides a full range of services to help you get as much tax relief as possible. While complete debt relief isn’t always reasonable, we help our clients find ways to breathe a little easier, knowing they don’t have as big of tax bills as they thought initially. If you need a fresh start with your taxes, contact us today, and we will review your situation thoroughly and provide the best options for you to consider.

When Can You Claim a Health Insurance Deduction?

When Can You Claim a Health Insurance Deduction?

tax relief

Not too many people enjoy paying for health insurance, but it’s nice to have it when you need it most. The problem is health insurance is very expensive today and can be a great financial burden for individuals and families. When you look at the tax deductions list, there are some qualifications you may meet to receive a health insurance deduction. These deductions can help increase your tax refund or potentially reduce your tax liability significantly. We’ve explained how you can qualify and help you to understand when health insurance may not be deductible depending on your situation.

Health Insurance And Self-Employment

Paying for health insurance while self-employed can be a major financial burden. The good news is if you are not eligible for a health plan through your spouse’s employer, then you can deduct some of the premiums paid on your tax return. The amount you deduct just can’t exceed the amount of income earned in any given year. Most of the time, people who are self-employed have to pay health insurance premiums with after-tax dollars. In those cases, the premiums paid are tax-deductible since you’ve already paid taxes on the income earned.

Know What Health Insurance Is Not Tax-Deductible

Even though health insurance premiums are tax-deductible, you can’t deduct the costs if your employer pays all of it. However, if the employer only pays a portion of the premiums for you, then you can deduct the premiums you paid directly. The catch is you likely pay your insurance premiums with pre-tax dollars if it gets taken directly out of your paycheck. In those instances, the premiums are not tax-deductible since they were paid with dollars free of income tax. Your tax professional can help you sort out these complications and help you maximize the amount you can deduct on your taxes.

Understanding Limitations And Qualifications

With the cost of health insurance being so high, it’s understandable people want to explore every possible option to get some tax relief. To deduct health insurance from your taxes, you have to itemize your deductions and the health-related expenses have to be more than 7.5% of the adjusted gross income you earned. However, if you’re self-employed, then you don’t have to meet the 7.5% requirement since the premiums are considered to be a self-employment income adjustment rather than an actual tax deduction.

Americans have enough responsibilities without needing to know specific tax laws. You deserve to get the most tax relief possible and Rocket Tax Relief is here to help. Health insurance is always a hot, and sometimes controversial, topic and we keep up with all of the latest laws and qualifications for tax purposes. The global pandemic has also impacted health insurance deductions, so you may qualify for even more tax relief if you have been directly impacted financially. Let us do a lot of the work for you when it comes to tax preparation and contact us today to see how we can help.

Common Tax Deductions Available for Self-Employed Individuals

Common Tax Deductions Available for Self-Employed Individuals

Tax deductions list

Self-employed individuals have a lot of flexibility in their day-to-day lives, but that flexibility also brings some different rules regarding taxes. Earnings on self-employment income are not taxed upfront like they are for people who receive a W-2 for their income. This requires individuals to plan their income accordingly since they typically have to pay more taxes either quarterly or annually. Self-employed people can experience some tax relief by looking at the tax deductions list and reducing their liability by deducting certain expenses. These are the common tax deductions self-employed individuals should not overlook.

Phones

Your cell phone or home phone can be deducted as part of your business. However, you need to be able to prove that the usage is for business purposes. Mixing business with your personal life can be problematic and too many deductions could raise red flags for a potential tax audit. If you use your phones for both business and personal use, keep records of how often you use them for each and you can deduct just the portion used for business from your taxes.

Vehicle Or Travel Expenses

Any travel expenses incurred directly for your business can be deducted. And 50% of expenses from meals and entertainment can be deducted as well. If you drive your vehicle for business, the gas, repairs, maintenance, toll bills and other expenses can be considered tax deductions. But like with the phones, it’s important to distinguish and keep accurate records of how often the vehicle is used for business purposes versus personal purposes.

Home Office Space And Office Supplies

When you have a home office space dedicated to your business, you can deduct some of your household expenses needed to run your business. This can include the internet, electricity and even the exact square footage of the room. Office supplies are also on the tax deductions list, including computers, printers, software, pens, paper and more. And if you have to pay any monthly or annual fees for subscriptions or memberships related to your business, don’t forget to deduct them also.

Health Insurance

A big tax deduction self-employed individuals can take advantage of is health insurance premiums. As long as you aren’t eligible for a health plan through your spouse’s employer, you should qualify to be able to write-off any health insurance premiums you pay. With the high cost of health insurance today, it’s worth looking into whether you can deduct the premiums paid.

Rocket Tax Relief can help you identify every possible tax deduction you qualify for. Being self-employed is a great accomplishment, but it also means you may not have the time to do things like search through the tax deductions list to see what qualifies as a deduction. When you contact us, we will work with you to fully understand your story and your business and take the appropriate measures to ensure you get as much tax relief as possible through deductions.

Red Flags that May Cause a Tax Audit

Red Flags that May Cause a Tax Audit

Tax audit

When it comes to the IRS and tax audits, no one knows exactly what causes them to audit a particular tax return. However, some of the triggers or red flags are obvious and will bring a higher likelihood of starting a tax audit. Getting audited is one of the most common fears taxpayers have. The best way to avoid one is to proofread your return before filing and even have a professional tax preparer look at your return to identify any potential red flags. Here are some of the red flags that bring a higher probability of getting audited.

Suspiciously High Number And Amount Of Deductions

Claiming too many tax deductions that don’t match up with your income level or past tax returns is going to look suspicious to the IRS. Assuming your income has remained steady over the past couple of years, suddenly making a higher amount of charitable contributions this year to boost your tax refund is sure to raise some eyebrows. Rental property expenses and other similar expenses that are out of the ordinary could prompt a tax audit as well. If these deductions are legitimate, be sure to keep all documentation to prove to the IRS that they are accurate and you shouldn’t have any problems.

Too Many Dependent Exemptions Claimed

When you’re filing as the head of household and have an unusually high number of dependent exemptions, you’re more likely to be audited. This is especially true if your income is in a lower tax bracket. Your dependent exemptions are some of the easiest to prove, so as long as the information on your IRS forms are accurate, then the audit should be a simple one.

No Expenses On Self-Employment Income

If you claim the Earned Income Tax Credit, but don’t have any expenses on your self-employment income, the IRS may wonder why that’s true. Every source of self-employment income is unique so it’s possible you may not have any expenses in a particular tax year. You may just have to answer some questions from the IRS, but the audit process should not be extensive.

A Large Number Of Business Losses

Business losses will happen at some point, but a significantly higher number from year-to-year will create a red flag. Other similar events include a large amount of income from a foreign source or non-taxable investment income. Again, while these create red flags for a potential tax audit, as long as you have proof of the legitimacy there should be no major issues or penalties.

Rocket Tax Relief is here to help you fill out your IRS forms accurately so you don’t inadvertently prompt a tax audit. Many audits can be handled and resolved quickly just by providing the IRS with more information. It’s always important to contact a tax preparer who helps with audit representation as well, and that’s exactly what we are here for. Contact us today if you’re preparing your taxes and want to reduce the chances of getting audited or if you’ve already received a notice from the IRS and need assistance responding.

3 Tips for a Quick and Easy Tax File

3 Tips for a Quick and Easy Tax File

Tax refund

It always seems like tax day sneaks up on us quickly. With the busy lives we all have, it’s tough to find the time to dedicate to prepare and file our tax returns. Filing taxes is a necessary part of life, though, and there are some tips and strategies to help get your tax refund in your bank account quicker. Follow these tips and your tax preparation and filing will be seamless, quick and easy.

Gather And Organize All Documents

Before you make an appointment with a tax professional or tax preparer, gather and organize your documents the best you can. These documents include any 1099 forms, W-2s, mortgage interest statements, expense records, property tax documents, real estate documents, tuition statements and more. Also, include any medical expenses and charitable contributions that could help your tax refund. If you’re unsure whether a particular document can be filed with your tax return, bring it into your tax appointment and mark it as questionable so the preparer knows what to look for. It can be difficult to go off of memory when it comes to the required documents, so you can always look at your tax return from the previous year as a starting point.

Identify Any Credits And Deductions

Another reason why it’s valuable to look at your previous year’s tax return is so you can compare last year to this year. If you got married, had a child, started taking care of a loved one, bought a house or experienced other life-changing events, you may be eligible for a tax credit or deduction. Child care costs may also give your tax refund a boost, so don’t forget those. Tax credits and deductions vary among households and individual situations, especially if someone is self-employed. Gather the documents you know for sure are deductible and ask your tax professional or preparer about any questionable ones.

File Your Tax Return Electronically

Nowadays most people file their tax return electronically because it’s quicker, easier, more accurate and provides an electronic receipt instantly so you know your return has been filed. This is particularly a good strategy if you tend to wait until the deadline to file your taxes. It’s still valuable to bring your documents into a tax preparer, where you can have peace of mind knowing you have everything in order. Plus, you can look at a tax estimator so there are no surprises as to what you owe or what amount your tax refund will be.

Rocket Tax Relief wants to help make filing your tax returns as easy and seamless as possible. We are a full-service tax company offering tax relief, tax preparation and even audit representation. We understand everyone has busy lives and may not know exactly how to prepare taxes in the best manner possible. When you contact us to schedule an appointment, we will help you identify the documents you need to make the entire process quick so you can get your tax refund and move forward with your life.