With all the talk of the new electric vehicle (EV) tax credits, it’s a good time to remind you that you can also claim tax credits by making some energy efficient upgrades to your home. The Energy Efficient Home Improvement Credit and the Residential Clean Energy Credit are up for grabs if you recently made qualified updates to your home that help conserve energy. Here’s a breakdown of two home energy tax credits, who qualifies for them, and how to claim them.
Energy Efficient Home Improvement Credit
Beginning in 2023, taxpayers can claim up to $3,200 in improvements made during the year. Specifically, this is thanks to the Inflation Reduction Act. Improvements made to upgrade energy efficiency are qualified expenses, including:
Exterior doors, windows, skylights
Insulation
Central air conditioners
Water heaters
Furnaces and hot water boilers
Heat pumps
Biomass stoves and boilers
Home energy audits of a primary residence
Renters and homeowners of primary residences and second homes may also claim the tax credit as long as the property is used as a residence. Conversely, landlords cannot claim the tax credit. The residence must be existing or for an addition or renovation to an existing home. Qualified taxpayers may claim up to $1,200 for energy property costs and some home improvements that upgrade energy efficiency. In addition, upto $2,000 may be claimed per year for qualified heat pumps, biomass stoves or biomass boilers. This tax credit may not be carried to future tax years and is nonrefundable. In other words, your savings cannot exceed the amount of tax you owe.
Residential Clean Energy Credit
The Residential Clean Energy Credit can be claimed for 30% of the expenses of new, qualified clean energy improvements in your home, as long is it was installed between 2022 and 2033. Basically, these qualified expenses include:
Solar electric panels
Solar water heaters (must be certified by the Solar Rating Certification Corporation or comparable organization)
Geothermal heat pumps (must meet Energy Star requirements)
Wind turbines
Fuel cells
Battery storage technology (must have capacity of at least 3 kilowatt hours)
You may claim this tax credit if the upgrades were made to an existing home or to a newly constructed home. However, the credit must be claimed in the tax year that the improvements were installed and not just purchased. This credit is nonrefundable, meaning your savings cannot exceed the amount of tax you owe. Additionally, there is no annual or lifetime limit on the amount credited to you, except for improvements made to fuel cells, as this provision will begin to phase out in 2033. Some of the expenses listed above only qualify if the home is used as your primary residence. Lastly, you should confirm with a qualified tax preparer about the limitations of this credit.
How to Claim the Energy Efficient Home Improvement and Residential Clean Energy Credits
Both green tax credits can be claimed using IRS Tax Form 5695, Residential Energy Credits. Part I allows you to claim the Residential Clean Energy Credit while Part II of the form allows you to claim the Energy Efficient home Improvement Credit. The most important thing when claiming any tax credit is to confirm you are eligible to claim it. Once you confirm your eligibility, be prepared to keep adequate records of any purchases and expenditures to substantiate your claim. Claiming a tax credit that you are not eligible for can result in receiving an IRS notice. If you have received an IRS notice, Optima Tax Relief can help.
Payroll fraud is an unfortunate reality that continues to haunt businesses, causing significant financial losses and harming their reputation. This fraudulent act occurs when an individual manipulates the payroll system to get money or benefits to which they are not entitled. Payroll fraud can threaten any company, from small firms to large multinational corporations. Here’s an overview of what payroll fraud is and how to avoid it.
What is payroll fraud?
Payroll fraud includes a wide range of fraudulent actions, such as ghost employees, faked overtime claims, unlawful salary rises, commission manipulation, and unauthorized perks. Employees, management, or even outside parties who exploit payroll process flaws can be liable. Here are some of the most common types of payroll fraud.
Ghost Employees: A ghost employee is someone who is added to your payroll in order to collect a salary even though they are not employed by your organization. While this can be done accidentally, more often than not it’s done fraudulently to collect a paycheck for a nonexistent employee.
Timesheet and Overtime Fraud: Another prevalent type of payroll fraud is inflating hours worked or claiming overtime when it is not due. Employees that are dishonest may conspire with superiors or coworkers to alter time records, resulting in excessive payouts.
Wage Manipulation: Unauthorized raises, bonuses, or commissions can be exploited by dishonest personnel with payroll system access. They fraudulently raise their own pay by changing salary figures.
Misclassifying Employees: Employers are required by the IRS to correctly classify their personnel. Some employers illegally categorize W-2 employees as 1099 employees in order to avoid paying taxes or providing health care coverage.
Expense Fraud: In some cases, employees may be authorized to be reimbursed for expenses, and take advantage. Inflated, false, duplicate or personal reimbursement claims all contribute to payroll fraud.
How do I avoid payroll fraud?
Payroll fraud is difficult to eliminate entirely. This is because sometimes it occurs unintentionally. However, with strict policies, it can be limited and detected early. Some ways to avoid payroll fraud include:
Having strict internal controls: Payroll is not an area in the company in which many people should have a hand in. While there should be multiple personnel involved in the payroll process, their roles and duties should be clearly defined and audited on a regular basis to ensure a healthy checks and balances system.
Having regular and surprise audits: Audit payroll records on a regular basis to identify any inconsistencies or discrepancies. Inconsistencies, such as duplicate entries, unapproved changes or excessive overtime claims, should be prevented.
Using a modernized payroll system: Use current payroll software that has fraud detection tools. Advanced systems can detect unusual trends, duplicate entries, or abrupt changes in employee data, providing useful insights for further research.
Hiring trustworthy employees: When employing new personnel, do extensive background checks and verification procedures. Confirm their identification, job history, and qualifications to lessen the risk of recruiting individuals who have a history of fraud.
Payroll fraud is a major source of fraud within companies. In fact, most financial loss in organizations comes from within rather than from outside third parties. If you have a business, it’s important to avoid payroll fraud at all costs, as it can result in financial hardship as well as punishment by the IRS. Optima Tax Relief has over a decade of experience helping taxpayers with tough tax situations, whether they are individuals or businesses.
The Inflation Reduction Act of 2022 has equipped the IRS with more than $80 billion in funding. That means more audits and more enforcement. CEO David King and Lead Tax Attorney Philip Hwang provide helpful tips on what you can expect from the IRS moving forward and how you can resolve your tax burden.
When dealing with the IRS, it’s easy to feel outnumbered and helpless. However, it is important to know that you have fundamental rights when it comes to tax issues. The Taxpayer Bill of Rights, which was created to guarantee justice, openness, and accountability in the tax system, outlines these rights. So, here we’ll examine each of your rights listed in the Taxpayer Bill of Rights.
The Right to Be Informed
You have a right to information about the laws that are relevant to you and your tax obligations. The procedure for filing taxes, possible credits and deductions, and any changes to tax laws that may have an impact on you must all be explained in detail by the IRS. Additionally, you have the right to request written explanations for any IRS actions related to your tax accounts as well as the chance to contest or appeal them.
The Right to Quality Service
The IRS is required by law to provide you with timely, courteous, and expert help. This includes the right to communicate with an informed IRS representative, have your inquiries correctly addressed, and have your issues promptly taken care of. You have the right to be spoken to in a way that is easy to understand. On the other hand, you have the right to file a complaint if you feel that the service was insufficient.
The Right to Pay No More than the Correct Amount of Tax
You have the right to pay only the tax debt that is legitimately owed by you. This includes any interest and penalties applied to your tax account.
The Right to Challenge the IRS’s Position and Be Heard
You have the right to object, provide further information, and challenge any judgments the IRS makes. You have the right to expect that the IRS will consider your objections and documentation promptly and fairly.
The Right to Appeal an IRS Decision in an Independent Forum
You have the right to an impartial and fair administrative appeals procedure. Accordingly, this may include the ability to file a lawsuit. The IRS must take into account your arguments and respond in writing with a justification of their choice.
The Right to Finality
You have the right to be aware of the maximum length of time you have to contest the IRS’s claims and to anticipate that once that period of time expires, the IRS won’t pursue further collection efforts. Any deadlines for submitting an appeal or taking other actions must be communicated to you by the IRS as well.
The Right to Privacy
You have the right to anticipate that the IRS will keep your information private and use it solely for legal tax purposes. Except in some limited instances, the IRS is not permitted to disclose your tax information to unapproved people or businesses without your approval.
The Right to Confidentiality
You have the right to assume that the IRS won’t share any information you give them. That is unless you give permission, or it’s required by law. You have the right to anticipate that anybody using or disclosing your return information improperly, including workers, return preparers, and others, will face the appropriate consequences.
The Right to Retain Representation
You have the right to appoint a qualified representative to act on your behalf when interacting with the IRS. This might be an enrolled agent, CPA or tax attorney. Your representative can present your case, advocate on your behalf, and assist in making sure that your rights are upheld.
The Right to a Fair and Just Tax System
You are entitled to a just and equitable tax system that takes into account all pertinent information. This includes the freedom to contest the IRS’s application of the tax laws and to ask the Taxpayer Advocate Service, an impartial division of the IRS that aids people in resolving disputes with the agency, for support.
All in all, the Taxpayer Bill of Rights is a crucial document that gives taxpayers power and guarantees that the IRS will treat them fairly. You can navigate the tax system with confidence and hold the IRS accountable by being aware of and defending your rights. Lastly, consult with a knowledgeable tax expert if you’re having problems or think your rights have been infringed. Optima Tax Relief is the nation’s leading tax resolution firm with over a decade of experience helping taxpayers.
While it is not unusual, getting a notice from the Internal Revenue Service (IRS) can be a stressful event. Every year, the IRS sends notices to millions of Americans. While some of these notices can be purely informational, others might call for prompt action. Each IRS notice has a code assigned to it. It’s usually located on the top or bottom right-hand corner of the written notice. Here are some of the most common IRS notices and letters, what they mean, and how to respond.
IRS Notice CP2000
IRS Notice CP2000 is sent to taxpayers when the income or payment information the IRS received from third parties does not match what is reported on the taxpayer’s tax return. This is important because it can result in an increase or decrease in the amount of taxes owed. If you get a CP2000 notice, you should respond as soon as possible. The notice will include a response deadline and directions on how to respond. In general, you have 30 days from the notice’s date to reply.
You have two choices when responding to the notice: accept or deny the suggested changes. You can sign the response form and send it to the IRS along with any additional taxes due if you accept the suggested changes. If you disagree with the changes that have been suggested, you can back up your arguments with evidence and explain why you think the changes are inaccurate. Remember that additional taxes, interest, and penalties may apply if you don’t respond to the CP2000 notice.
IRS Notice CP90
IRS Notice CP90 is a formal notice of the intent to levy along with a notice of your right to an appeal. The IRS will send you one final notice before beginning collection efforts against you. The notice advises the taxpayer that the IRS plans to seize their assets, such as bank accounts, property, wages, and other sources of income, in order to pay the back taxes owed.
It is crucial that you act immediately if you receive a CP90 notice. After receiving the letter, you have 30 days to contact the IRS. You can choose to pay the tax debt in full, set up an installment agreement with the IRS, or request a Collection Due Process (CDP) hearing.
IRS Notice CP523
IRS Notice CP523 is a notification of default on an installment agreement by missing one or more monthly payments. The notice will also warn of a potential seizure of your assets because of your default.
If you receive this notice, you should contact the IRS within 30 days of the date of the notice. You can also restore the installment agreement by making the missed payments, but you may be required to pay a reinstatement fee. If you are unable to make the current payments, you can ask for a modification to the payment plan. This could entail increasing the payment duration or decreasing the monthly payment amount.
IRS Notice CP14
IRS Notice CP14 a letter from the IRS informing you that you have unpaid taxes on your federal income tax return. The notice will include the amount of tax owed, plus any penalties and interest that have accrued. If the details in the notice are accurate, you need to repay the debt as quickly as possible. Instructions on how to make the payment, including online payment choices, payment plans, and other payment methods, will be included in the notice.
You might be able to ask the IRS for a payment plan if you are unable to make the full payment. The notice will outline how to submit a payment plan request. Additionally, you can contest the notice if you think it is incorrect by formally protesting it to the IRS. To substantiate your argument, you must present supporting evidence.
IRS LTR3172
IRS Letter 3172 is a notice of federal tax lien filing (NFTL). The IRS files this public document to inform creditors that the government has a claim to your interests in any current and future property and assets. Although NFTLs are no longer included in credit reports, they may still have an impact on your ability to receive credit if a potential creditor finds out about them from other sources, like public databases.
This letter advises you of your right to appeal the filing of the NFTL. You have 30 days from the letter’s delivery date to ask for a hearing to contest the lien. Alternately, you could also use the “Collections Appeals Program,” which enables you to challenge the lien. Although this approach can be quicker than the Due Process hearing, you are only able to contest the manner of collection rather than the underlying causes of the taxes owing.
What To Do If You Receive an IRS Notice
Receiving an IRS notice or letter in the mail can lead you to scramble in worry. However, the most important thing to do when receiving a notice is to check for its validity. Phony letters and notices are sometimes sent to innocent taxpayers in order to obtain personal information or payments. If you receive a suspicious letter or notice claiming to be from the IRS, you should confirm it is not fraudulent by contacting the IRS directly. If the notice turns out to be credible, you should understand the severity of the situation but also know you have options and you do not have to tackle your tax issues alone. Optima Tax Relief is the nation’s leading tax resolution firm with over a decade of experience helping taxpayers with tough tax situations.
