Posted on

If I Got an IRS Notice CP90, What Now?

When the IRS sends you a notification, it can stir up feelings of unease, particularly concerning significant issues such as potential tax collections. Among these notices is the IRS Notice CP90. Knowing how to interpret and react to this notice is essential. Here is a detailed manual on the steps to take upon receiving IRS Notice CP90.

What’s IRS Notice CP90?

Upon receipt of IRS Notice CP90, also referred to as the Final Notice of Intent to Levy and Notice of Your Right to a Hearing, individuals are informed by the IRS that there are outstanding tax liabilities that need to be addressed.

In this letter, it is brought to your attention that the IRS is issuing a last cautionary message declaring their plans to seize your assets, including income, financial accounts, and other possessions, to settle your outstanding tax obligations. Additionally, you are being formally notified of your entitlement to initiate a Collection Due Process (CDP)

IRS Notice CP90

What Is IRS Notice CP90 For?

Upon receiving IRS Notice CP90, it signals that there is an outstanding tax debt that has not been resolved despite previous collection efforts. This particular notice is issued following a series of previous notifications urging payment, and it serves as a warning that more forceful collection measures, such as levies, are on the horizon unless prompt action is taken.

Steps to Takes When I Receive IRS Notice CP90

Thoroughly Understand My IRS Notice CP90 

Before doing anything else, carefully review the notice provided. It is crucial to go through it comprehensively to grasp its information. The notice will outline the outstanding balance, the specific tax periods under review, and the date by which a response is required. It is imperative to note the deadlines and carefully follow any guidelines outlined in the notice.

Verify the Details

Before proceeding, it is important to confirm the accuracy of the information provided. Take the time to carefully review all details in the notice to make sure there are no discrepancies. Check that the specified tax amount is correct and that the notice is indeed intended for your attention. Should you identify any inaccuracies, feel free to reach out to the IRS promptly to resolve any issues.

What Are My Options

What Are My Choices?

After verifying the correctness of the notification, take some time to explore the possible ways to settle the outstanding debt.

Pay the Amount Owed.

To settle the outstanding balance, it is advisable to remit the entire sum specified in the notification promptly to prevent additional charges and accruing interest. Payment options include settling the debt through the IRS online platform, over the phone, or by sending a check or money order through the mail.

Set Up a Payment Plan

Establishing a payment arrangement if you are unable to cover the entire sum owed, contemplate arranging a payment schedule with the IRS. By doing so, you can conveniently make regular payments to settle your tax obligations gradually.

Offer in Compromise

For individuals facing financial constraints in meeting their tax obligations, an alternative solution is an Offer in Compromise (OIC). This specialized program provides the opportunity to resolve tax debts for a reduced amount if certain qualifying criteria are met, offering relief to those unable to pay the full sum or arrange a payment plan.

Request a Collection Due Process (CDP) Hearing

To initiate a Collection Due Process (CDP) Hearing, you are entitled to request the hearing within 30 days of being served with Notice CP90. This opportunity enables you to discuss your situation with an IRS representative and consider different options for resolving the levy.

Request a CDP Hearing

To initiate a CDP Hearing, submitting your request within 30 days of receiving the notice is essential. Fill out the Tax Form 12153, also known as the Request for a Collection Due Process or Equivalent Hearing, and forward it to the specified address on your notification. Once a timely CDP hearing request is made, the levy process will be temporarily paused until the hearing is held and a determination is reached.

Consult a Dedicated Tax Professional

For professional assistance regarding IRS Notice CP90, it is essential to seek tax advice from an dedicated tax professional. The implications of receiving this notice are significant, and dealing with the associated procedures can be challenging. To effectively address this matter, it is advisable to engage a tax professional like a certified public accountant (CPA) or a tax attorney. They possess the expertise to clarify your choices, assist with documentation, and advocate for you in discussions with the IRS.

Do Not Delay

Act promptly without delay. It is crucial to promptly address the notice, no matter which path you decide to take. Disregarding the IRS Notice CP90 could lead to serious outcomes, such as the confiscation of your belongings and additional monetary fines.

Save My Tax Documentation

Ensuring thorough documentation is essential in managing interactions with the IRS. It is important to retain duplicates of all communication exchanged with the IRS, encompassing official letters, payment records, and any completed forms. The significance of maintaining accurate documentation cannot be overstated, especially when needing to challenge assertions or address potential concerns down the line.

What Happens If I Don’t Respond?

Neglecting to address IRS Notice CP90 can result in serious repercussions. The IRS has the authority to take action by garnishing your wages and seizing your assets. This could involve the IRS deducting a percentage of your earnings directly from your employer in order to settle your outstanding tax obligations.

Should individuals fail to settle their tax debts, the IRS may resort to freezing and confiscating funds from their bank accounts. In more severe instances, the IRS has the authority to seize tangible assets such as properties or vehicles to offset the outstanding amount. Disregarding such notifications will not alleviate the debt, potentially leading to adverse financial consequences.

Tax Help for Those Who Received IRS Notice CP90

When faced with an IRS Notice CP90, it’s natural to feel overwhelmed, but it’s important to approach the situation with a clear mind and a proactive attitude. Exploring the available solutions, enlisting expert support, and swiftly responding can empower you to tackle the notice head-on and progress in managing your tax obligations.

By taking the initiative now, you can avoid exacerbating financial troubles and take charge of your financial well-being. Dedicated tax professionals at RapidTax are committed to assisting you in tackling and resolving any tax issues you may have encountered.

Posted on

Tax Tips for Resident and Non-Resident Aliens

Suppose you find yourself residing within the borders of the United States or frequently staying in the country without being a citizen. In that case, you are still required to fulfill U.S. income tax obligations irrespective of your citizenship status. The IRS employs a combination of evaluations known as the green card test and the substantial presence test to determine your alien status. Meeting the criteria of one category will establish you as a resident alien for income tax purposes, while failing to do so will classify you as a non-resident alien. In order to comply with tax regulations in the United States, both legal residents and citizens are required to report their annual income on tax returns. This includes income earned in any country. Non-resident Aliens, on the other hand, are only taxed by the IRS on income that is linked to the U.S.

Non-Resident Aliens

Determining Resident or Non-Resident Alien

When determining your alien status for tax purposes, the IRS employs two criteria: the green card test and the substantial presence test. Meeting the criteria of either test results in being classified as a resident or non-resident alien for tax purposes; failing to meet the criteria will lead to classification as a non-resident alien.

In the event that you are a visitor from another planet and possess a green card which signifies approval from the U.S. Citizenship and Immigration Service to live lawfully within the nation, you would be classified as a resident alien.

In the event that an individual doesn’t possess a green card and stays in the United States for a minimum of 31 days in the present tax year, along with a combined total of 183 days throughout the past three tax years (which include the current one), they typically fulfill the physical presence requirement and are considered a resident alien.

Counting 183 Days for Non-Resident Aliens

In determining the total days spent in the United States over a three-year span, it is important to exclude certain days from the count. Only a portion of the days within two out of the three years should be considered. For instance, if you need to ascertain your residency status for the tax year of 2025 based on having resided in the U.S. for 60 days, this calculation method will be useful.

In calculating your presence in the U.S. over a three-year period, consider 50 days for 2025, one-third of the days in 2024, and one-sixth of the days in 2023. For instance, if you spent 150 days in the U.S. in 2024 and 240 days in 2023, your count should be adjusted to include only 50 days for 2024 and 40 days for 2023. The total for the three years is 140 days, in which you pay income tax as a non-resident alien.

If you’re questioning whether you qualify as a resident or non-resident for tax purposes, our team of skilled tax experts at RapidTax is here to help. We will assess your residency status and promptly prepare your non-resident tax return.

Non-Resident Aliens Tax

When it comes to non-residents, they are required to pay income taxes to the IRS only on the earnings that can be linked to the United States. This typically covers the income generated while physically present in the U.S. Notably, the IRS lacks the jurisdiction to levy taxes on the income non-residents make in their native lands or any foreign nation.

Upon completion of your U.S. tax filing, Form 1040NR will be your go-to document. It is essential to note that only income originating from the U.S. will be included in your report, irrespective of the form utilized. Similar to how resident aliens and American citizens operate, there are opportunities for tax deductions and tax credits that can lower your taxable income.

Transitioning Dual-Status Taxpayer

During the phase when you are transitioning from being a non-resident to a resident for tax purposes, you are typically classified as a Dual-Status Taxpayer. As a Dual-Status Taxpayer, you will need to submit two separate tax returns for the year—one for the period in which you were categorized as a non-resident and another for the period in which you were classified as a resident. There are instances where a taxpayer has the option to choose to be considered a full-year resident during the transition year in order to prevent the need to submit two distinct tax returns.

Experience the convenience of RapidTax Live Full Service, where a skilled Tax Professional tailor-made to handle your specific tax needs will take care of your taxes from beginning to end. Alternatively, receive boundless support and guidance from tax specialists as you navigate your taxes alongside a dedicated Tax Professional through RapidTax.

Posted on

More taxes,  Less Tax Credit after 2025

As the clock strikes midnight on December 31, 2025, a deluge of tax adjustments will cascade upon the majority of Americans with the conclusion of the Trump tax reductions after 2025.

Once the clock strikes midnight on the Tax Cuts and Jobs Act of 2017 (TCJA), its major provisions will fade into the shadows unless Congress takes action to prolong them. An array of tax aspects, from brackets and rates to credits and deductions, are at stake. Should these TCJA elements sunset, their repercussions will be felt far and wide by individuals and families alike.

In light of potential upcoming changes, RapidTax dedicated tax professionals emphasize the importance of being proactive and taking necessary measures to avoid unexpected tax implications in the future.

It is undeniable that alterations in tax deductions and tax credits will impact individuals in varied ways. Higher tax rates will be uniform across the board, affecting everyone.

tax after 2025

Why Are Higher Taxes After 2025?

Implemented under the leadership of President Donald Trump, the Tax Cuts and Jobs Act (TCJA) reduced tax rates for all income levels and altered the boundaries of various tax brackets. While the extent of tax reductions varied among individuals, experts in taxation noted that nearly everyone experienced some level of financial benefit from the changes.

Consider this scenario: In 2017, a married couple with a total income after deductions of $250,000 faced a 33% tax rate, which decreased to 24% by 2024. Similarly, an individual earning $39,000 in taxable income in 2017 had a top tax rate of 25%, which then dropped to 12% in 2024. Those in the highest tax bracket saw their rate decrease from 39.

Taxes May Revert to Rates Before the 2017 TCJA Taxes.

One way Americans can reduce their tax burden is by capitalizing on the current lower tax rates. A strategic approach could involve accelerating income into the upcoming years of 2024 and 2025. Retirees, for instance, may find it beneficial to withdraw a bit more than their mandated minimum distributions during these specific years.

According to him, some individuals might view a Roth conversion as a strategy to reduce costs by taking advantage of current lower tax rates and avoiding taxes upon withdrawing from Roth accounts.

If you foresee a potential increase in your tax rate, it may be advantageous to reassess the timing of deductions. Postpone claiming deductions such as charitable donations and retirement contributions to reduce your taxable income in the coming years, particularly from 2026 onwards.

Less Child Tax Credit After 2025

In light of recent tax reforms, the TCJA ended the personal exemption previously granted for every dependent under the age of 17. However, it also doubled the child tax credit to $2,000 per individual.

Should Congress fail to take action before 2025 concludes, the child tax credit will return to its previous amount of $1,000 for each child under the age of 16. The credit would be both refundable and gradually introduced, with the initial threshold being $3,000 in earned income.

In the recent legislative session, the House approved a bill to enhance the child tax credit under Republican leadership. The proposed changes involved a gradual rise in the refundable segment throughout 2023 to 2025, along with provisions to align the tax credit with inflation from 2024 onwards.

In light of the proposed changes, work obligations will still apply. Yet, families with limited income who are exempt from paying income taxes could now receive a refund of up to $1,800 from the $2,000 per child tax credit, a notable increase from the existing $1,600. This refund amount is anticipated to increase to $1,900 by 2024 and ultimately reach $2,000 by 2025. 

Regrettably, the bill never faced a vote in the Senate, resulting in a standstill for the proposed legislation.

Itemize Your Expenses

Following the implementation of Trump’s tax cuts, there was a significant increase in the standard deduction, effectively lowering individuals’ taxable income and enabling more people to take advantage of it instead of itemizing their tax deductions.

In addition to raising the standard deduction, the TCJA made the decision to remove the personal exemption of $4,050 per individual. Although the elimination of personal exemptions somewhat balanced out the benefits of the higher standard deduction, overall, the Tax Policy Center noted that this change resulted in a rise in the taxable income threshold for 2018, ultimately benefiting taxpayers.

If this provision expires, the standard deduction will be reduced, personal exemptions will be reintroduced, and individuals will be more likely to opt for itemizing their tax returns once again.

Andrew Lautz, associate director of the Economic Policy Program at the Bipartisan Policy Center, emphasized that Americans will swiftly notice the impact of increased tax rates and reduced standard deductions in 2026 in their paychecks.

Calculating withholding amounts involves predicting your income and applying the tax rate to that income. This calculation assumes you will opt for the standard deduction, the value of which may decrease if the YCJA legislation lapses.