Through the Coronavirus Aid, Relief, and Economic Security (CARES) Act, American taxpayers continue to benefit from stimulus checks mailed or deposited into their bank accounts. This monetary relief is meant to thwart the economic implications of the COVID-19 crisis, as many Americans lost their jobs and income sources.

The IRS considers Americans’ wages earned in 2019 or 2018 to determine eligibility. Those who made an adjusted gross income of $99,000 or less receive the full amount of the stimulus check at $1,200. Those who are married and filed jointly receive the full amount of $2,400, as long as their adjusted gross income did not exceed $198,000. For each dependent under the age of 17, Americans receive an additional $500 per child.

Determining whether you’re eligible to receive a stimulus check seems straightforward enough, but specific circumstances convolute determining the final amount. If you’re wondering whether the IRS or a private company can seize your economic stimulus check, consider the following points.

There are generally very few reasons that the IRS or private company may seize or garnish your stimulus check. Grounds that would grant the IRS permission to confiscate your check include if you owe back child support or have significant debt in collections. The following provides further details on reasons the IRS may seize your stimulus check:

Debt collectors may garnish money from your bank account if you have an outstanding debt. Private companies may also garnish your funds if you have a court judgment against you. If you have debt in collections, it’s worth exploring possible workarounds, such as requesting a paper check instead of direct deposit.

If your bank account is overdrawn and you request a direct deposit for your stimulus check, nothing prevents the bank from taking out the amount necessary to put your account back in good standing. Whether it’s overdraft fees, monthly maintenance fees, or anything else that puts your account in the red, these bank fees will be deducted from your payment.

The stimulus payment is meant to help Americans financially through these unprecedented times. Very few grounds, like the ones mentioned previously, will permit the IRS to seize your check. The IRS will not take your stimulus payment for any of the following reasons:

The IRS will not seize or offset your stimulus check if you owe taxes to the United States government. Keep in mind that if you do have tax debt from income made in 2019, the deadline was pushed back to July 15. Taxpayers in California who owe state taxes also have until July 15 to make the payment.

The $500 you receive for your child dependent in 2019 will remain in your bank account, even if it is his or her 17th birthday in 2020. At the same time, if you have a baby in 2020, you should be able to claim that $500 when you file your taxes for 2020.

Student borrowers have no need to worry if their loans have defaulted. The IRS will not seize stimulus checks as repayments on student loan obligations. Moreover, the CARES Act supports federal student loan borrowers by pausing payments until September 30.

There is often a considerable amount of confusion regarding taxes and laws the state and IRS must follow. If you’re facing tax debt or have questions concerning problems with the IRS or state, you could greatly benefit from contacting an experienced tax debt attorney.

Morgan Sebastian Law, PC, is a tax debt law firm in Orange, California, representing taxpayers before the IRS in all 50 states. Attorney Becky Rose Sebastian has extensive experience negotiating with Federal and State tax agencies on behalf of her clients. She works tirelessly to provide her clients with the best possible tax resolution available. To schedule a free consultation with and speak with Becky about your tax debt, complete a contact form or call today at (877) 223-6605.

Due to the COVID-19 crisis, the IRS pushed back the deadline for filing taxes to July 15 so that Americans struggling to keep their lives in order could have more time to prepare them. Most states, including California, did the same, pushing back the state tax deadline to the same date, and some even later.

Compared to previous years, IRS audits are noticeably down. In the fiscal year 2019, the IRS audited an estimated 0.5% of individual tax returns. In 2010, almost double that rate of tax returns was scrutinized in an IRS audit. Despite audit rates currently being low, people make mistakes when filing their taxes that often result in a review or a delayed return. To avoid this stressful ordeal, residents in Orange, California, take head and learn from these top 10 mistakes people make when filing their taxes.

What Are the Most Frequent Tax Filing Mistakes in California?

According to the IRS website, there are several common errors tax filers make each year during tax season. These errors vary in complexity from simple oversights to significant miscalculations. Some of these mistakes might appear easy to prevent, but they occur frequently enough to warrant a mention by the IRS.

These are the most common tax filing mistakes:

1. Failing to Make a Copy of Signed Tax Returns

Many types of loans, including mortgages and student loans, require copies of signed tax returns and other past tax information. Failing to keep a signed copy of a previous tax return delays the loan process and becomes costly, acquiring necessary copies. While the IRS can send copies of the prior year’s signed tax returns, each one costs $50. Having copies of your signed tax returns will also be helpful in the event of an audit.

2. Providing Incorrect Routing and Bank Account Numbers

This may be one of the more obvious mistakes, but inputting the incorrect bank account information happens reasonably often. When taxpayers don’t provide the correct routing and bank account numbers, the IRS may not be able to issue your tax refund through direct deposit, and your return could be delayed for months. If you owe the IRS, they can’t get paid with a faulty bank account number, so you may face penalties down the road.

3. Sending Your Tax Return to the Wrong IRS Office

Multiple IRS addresses serve different regions in the U.S., along with different kinds of tax documents. That can be confusing for many taxpayers, as this is a commonly-made mistake every year. If you accidentally mail your tax return to the incorrect office, your refund will likely be delayed.

4. Arranging Tax Documents Erroneously

Tax documents must be arranged in a particular order. Something as simple as unsuccessfully preparing documents out of order can result in a delayed refund. Make sure to keep the exact order and use the sequence numbers when submitting tax return documents.

5. Failing to Include All W-2 Forms

No matter how many jobs a person has each year, the IRS requires a W-2 that documents wages to be submitted for each employer. Taxpayers must provide all wages and withholdings combined from each form and report the total on tax returns each year. Failure to report wages and income can result in an audit.

6. Incorrectly Calculating Credits and Deductions

Taxpayers can reduce their taxable income with tax deductions, such as charitable donations. Tax credits, on the other hand, decreases the amount of taxes owed. Failing to calculate these correctly can result in overpaying or paying too little to the IRS.

7. Failing to Declare Exemptions Accurately

There are certain tax benefits from spousal and dependence exceptions that the IRS grants taxpayers in the U.S. However, to receive these benefits, you must provide exact information that details both you and your spouse's gross income amounts and date of birth. To receive benefits for dependents, you must report your relationship to the dependent along with how much financial support you provided.

8. Selecting the Wrong Filing Status

To file your tax return, you must choose a filing status used to establish specified requirements, credit eligibility, and deductions. American taxpayers have five statuses to choose from that include:

  • Single

  • Married filing jointly

  • Married filing separately

  • Head of household

  • Qualifying widow(er) with dependent child or children

9. Failing to List All Dependents Properly

To claim dependents on your tax return, you must list all names and taxpayer identification numbers for each one. When using social security numbers, all names must be spelled exactly the same as they appear on the social security card.

10. Neglecting to Sign and Date Return

The IRS will never accept a tax return that's not signed and dated. Neglecting to make this step while filing or failing to have your spouse sign and date if filing jointly will result in your tax return being sent back.

While many of these mistakes can be avoided by filing electronically, some can still occur if you aren't careful. When it comes to filing your taxes, it's critical to take your time if filing on your own to avoid these mistakes or seek the help of an accountant to avoid any tax audit or delay.

Experienced Tax Debt Lawyer in Orange, California

Receiving anything in the mail from the IRS is never a pleasant experience. If you're getting intimidating letters from the IRS concerning unsettled tax debt or other issues, don't delay in seeking legal counsel from an accomplished legal firm experienced in tax debt, like Morgan & Sebastian Law, PC. To schedule a free consultation with an experienced tax debt lawyer today, call (877) 223-6605 or complete a contact form.

More than 20 million jobs were cut this year due to the COVID-19 crisis and the nation hit the highest level of unemployment since the Great Depression, skyrocketing to a rate of 14.7%. Millions of Americans have had to seek unemployment benefits for the first time to make ends meet, and many are questioning whether they need to pay taxes on those benefits.

Who is Eligible to Receive Unemployment Benefits?

A reported estimate of 4.7 million Californians filed for jobless benefits between March and May. The U.S. Labor Department allows people to file for unemployment benefits if they lose their job through no fault of their own. While each state has its own requirements for eligibility, California residents must have worked in the past 12 to 18 months and have earned at least a minimum wage to receive unemployment benefits. You must also be able and available to work each week that you’re claiming benefits.

Californians can receive unemployment benefits for up to 26 weeks in 12 months. Unfortunately, that means some residents who received benefits less than one year before the COVID-19 crisis began will not be eligible to apply.

Do I Need to Pay Taxes for Unemployment Benefits?

Yes, the IRS considers unemployment benefits to be taxable income. In the same way as regular earnings, Californians will be taxed at their ordinary income tax rate on unemployment compensation from the state and federal government. By January 2021, residents will receive a Form-1099-G from the state that details the amount of unemployment benefits that they received and the amount of taxes being withheld. When filing your 2020 tax return, you may have to pay additional state and federal taxes on these benefits, depending on how you received them.

How Do I Pay Taxes on Unemployment Benefits in California?

You can pay taxes on unemployment benefits through several methods. They include:

  • Have the tax automatically withheld before receiving benefits

  • Make estimated tax payments to the IRS

  • Pay your taxes when you file your 2020 tax return

Depending on your financial situation, you can choose the option that best fits your needs. The following explains how each of these payment options works for paying unemployment taxes in California.

Taxes Automatically Withheld

If the thought of your taxes adding up and paying them back later gives you anxiety, you can have your taxes withheld automatically the same as you would a paycheck. All you have to do is file a Form W-4V (Voluntary Withholding Request) to have your federal and state income taxes be withheld before you receive your payment each week.

When you file your taxes next spring, this option will reduce your tax bill by a significant amount. However, if you need a more substantial weekly payment upfront during the COVID-19 crisis, this would not be the best option as your weekly payments will be lower.

Estimated Tax Payments

You can pay income taxes on the unemployment benefits you receive quarterly by submitting a payment every three months to the IRS. That way, you can pay taxes as you receive them, so when you file your 2020 tax return, you will already be caught up on your unemployment taxes.

The only disadvantage of going this route is you’re responsible for totaling your benefits and estimating the amount of state and federal taxes you owe for your quarterly payments. You may pay a little more or a little less, but it will balance out when you file your tax return.

Pay Taxes Later

If you need to maximize your unemployment benefits to pay for living expenses, you can receive your benefits tax-free and pay them back later when you file your tax return. The advantage of this is you can set money aside for tax season each month to pay so you’re not facing a substantial tax bill come next spring, while still having a rainy day fund that you can use in case of an emergency.

The downside is you will owe a relatively large income tax bill when you file the following year. As long as you don’t spend all of your benefits, this can be a useful option during difficult times.

Experienced Tax Attorney Ready to Help in Orange, California

If you’re experiencing trouble paying back taxes or have received intimidating notices from the IRS or the state, contact experienced tax attorneys immediately for help. Morgan Sebastian Law, PC can help you resolve your state and federal tax issues so that you can move forward with peace of mind.

To schedule a free consultation with a knowledgeable tax attorney, complete our contact form or call (877) 223-6605.

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