Top Workplaces 2019: Optima Tax Relief finds ways to ease dealing with the IRS – for clients and staff

What better way to celebrate the end of the tax season than to heave a bowling ball and knock over as many pins as possible?

That’s how employees of Optima Tax Relief in Santa Ana, on a company-sponsored trip to a bowling alley, shed some of their stress from dealing with the Internal Revenue Service and the California Franchise Tax Board this year.

But the work Optima does on behalf of individuals and businesses that owe significant money to the government — anywhere from $10,000 to more than $1 million — goes on year-round.

Optima specializes in tax debt resolution, a complicated and contentious process that typically involves a three-year commitment to a client. And they are good at it: This year the company exceeded the $1 billion mark in tax debt resolution since its start in 2011.

Optima continued to see growth in demand for its services, thanks in part to the sweeping Tax Cuts and Jobs Act that took effect in 2018.

“What we had found was record numbers of folks who extended and didn’t file on time,” said Optima CEO David King. “At the high level, more and more people are moving to non-compliance and choosing not to participate in the tax administration.”

More demand for services meant more people had to be hired at both the Orange County headquarters and a satellite office in Arizona. King estimated Optima added about 120 employees in Santa Ana since last year and projected another 100 local hires over the next 12 months. Most of staff churn, he said, involves entry-level employees.

Optima nurtures staff with company-wide events — such as festive offsite meetings at a movie theater and annual company picnic and visit to Knott’s Berry Farm — and a budget for department heads to treat their teams to a quarterly outing. Charitable giving is encouraged with paid time off to volunteer and fundraisers for causes each department chooses to support.

“We find it’s therapeutic for them to give relief to others,” King said. “It really translates well when they’re on the phone and somebody is extremely stressed out with their tax case.”

King told The Register more about how Optima goes about doing its business.

Q: This is Optima’s fifth year in a row as an Orange County Register Top Workplace. What’s your secret?

A: We’re in a difficult space. We stay with the client, unlike other financial services, for a period of three years almost because the IRS is extremely slow and somewhat archaic in their processing of files. They’re not very innovative or technology forward.

So we really need to instill a culture of care here. That resonates right through to the clients. It’s really out of necessity. But more importantly, it’s just who we are. The people we hire generally have that backbone of caring and wanting to provide relief to others and really helping out.

Q: How did you get your employees up to speed on the new tax law?

A: We really doubled down on training.

We have two specific training wings. One is on the career development side, to invest in our people and encourage them to grow. It helps with retention, of course, but also we think it really helps create new leadership from within. That’s a must in this job climate.

Also, we have department-level training. We provide certifications and an iterative process to help our team grow and become more efficient on the phone and better prepared to handle any client’s needs.

We need more licensed staff to handle the amount of clients that are coming our way and the growth. So we promoted becoming what’s called an enrolled agent – a licensed tax professional. We’ve been able to create more enrolled agents from within.

The beauty of this is that (someone) can be hired at the $16 an hour mark and quickly ascend through our org chart and be earning over $100,000 in essentially months.

Even better, we pay for all that education.

Q: In a way, the new tax law was fortunate for your company?

A: You could say that. If they’re collecting and enforcing the tax laws, then more and more people are moved to call Optima. We see a quick uptick in business if the IRS sends out a big wave of collection letters.

One thing they did in 2018, for the first time in Optima’s existence, they actually increased in their overall revenue collection through enforcement. It had been on a downward spiral. They set a record of revenue collection.

Q: Do you have any worries right now about the economy slowing or possible recession?

A: You’ve heard the saying about death and taxes. When there is a recession, it doesn’t really impact this business because there are still going to be taxes owed and the IRS is still going to try to collect them.

One thing that will happen is that more and more people will qualify for hardship programs that the IRS offers. It’s actually a good thing for us in a lot of ways because we are able to help more people if they are struggling to pay.

5 Optima Tax Relief

Founded: 2011

Industry: Tax resolution

U.S. headquarters: Santa Ana

OC locations: 1

OC employees: 598

Website: optimataxrelief.com/

Years named a Top Workplace: 5

Quote: “One thing we’ve done really well is create that culture of care. We really doubled down on our charitable giving efforts and making our presence felt in the community as well. We’ve found that our staff loves to give back.”  David King, CEO of Optima Tax Relief

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Working but still poor? Earned Income Tax Credit eases, but doesn’t solve, that problem

Patricia Lara, 39, makes $35,000 a year as an administrative assistant for an Orange property manager. With four teenagers to support, she says, “my income can’t keep us afloat.”

But at a recent free tax preparation fair at the Brookhurst Community Center, Lara got some good news. Not only doesn’t she owe any income tax, but the Internal Revenue Service will send her $2,783 in the form of what’s known as an “Earned Income Tax Credit.”

The money is welcome but no windfall. “My grocery bill is about $2,000 a month,” Lara said, adding that she pays $500 in monthly rent, plus utilities, to share a home with her parents and a brother. 

Lara is among some 27 million U.S. wage earners who last year benefit from the Earned Income Tax Credit. The 43-year-old federal program, which paid out $65 billion in cash subsidies in 2017, is the one anti-poverty policy that sparks little controversy.

At an Anaheim free tax preparation fair, Patricia Lara and her son, Joseph Ducret, get help with their returns from IRS-trained volunteer Stan Manley (Photo by David Kawashima/ Orange County United Way)
At an Anaheim free tax preparation fair, Patricia Lara and her son, Joseph Ducret, get help with their returns from IRS-trained volunteer Stan Manley (Photo by David Kawashima/ Orange County United Way)

“Inequality is worse as the wages of the low-skilled have fallen way behind the wages of the higher-skilled,” said UC Irvine economist David Neumark who has authored more than a half-dozen studies on the tax credit.

“Democrats like the EITC because it redistributes wealth. Republicans like it because instead of giving you money like welfare, it only applies to those who work.”

Three years ago, confronting the fact that one in four residents live below or close to the federal poverty line, California became the 26th state to offer its own supplemental tax credit for workers. Last year, eligibility for the state program was extended to the self-employed.

But there’s one big problem: some low-income workers earn too little to be required to file taxes, even though they could qualify for the extra money if they did.

Unclaimed billions

In California, where 2.9 million beneficiaries collected $6.8 billion in federal EITC payments last year, one of four eligible workers fails to claim the credit.

That leaves some $2 billion a year on the table, according to a recent study  That’s money not only for workers to pay rent and feed their children, it is also unspent revenue for local businesses.

“A lot of people don’t know about the credit,” said Joseph Sanberg, a Los Angeles entrepreneur who founded CalEITC4Me, a non-profit advocacy group. “California’s poverty is not about a lack of jobs. It’s about jobs not paying enough. People work two and three jobs and still can’t afford basic needs.”

At an Anaheim tax preparation fair, table signs encouraged workers to claim up to $6000 in earned income tax credits. EITCs offer cash-back refunds to low and moderate income workers. (Photo by Margot Roosevelt/SCNG Orange County Register)
At an Anaheim tax preparation fair, table signs encouraged workers to claim up to $6,000 in earned income tax credits. EITCs offer cash-back refunds to low and moderate income workers. (Photo by Margot Roosevelt/SCNG Orange County Register)

Last year, CalEITC4me texted 70,000 low-income Californians prompting them to call legislators, urging an expansion of the state program. The resulting law more than doubled the number of eligible families to 1.5 million this year.

The group runs a digital platform with information in English, Spanish, Mandarin and Vietnamese. It also offers free tax preparation in the Inland Empire and partners elsewhere with groups such as Orange County United Way.

At the Brookhurst Community Center event, the United Way served a free taco and quesadilla lunch as IRS-trained volunteers helped Lara and other workers file returns. Signs reading “What Would you do with an extra $6000?” adorned tables and brochures urged, “It’s your money: Get it!”

In Orange County alone, United Way recruits 500 volunteers to help low-income filers in 24 locations including colleges, churches and government agencies. “I just like to crunch numbers,” said Stan Manley, a 75-year-old retired sales manager who helped Lara with her return.

Cash-back amounts vary according to some 20 different criteria including levels of income and number of children.

Federal EITC credits can range from $510 to $6,318. Even individuals with incomes well above the poverty line, up to $53,900, are eligible for modest amounts, depending on their family size.

Last year, California’s program paid out $205 million to 386,000 recipients.  This year, workers with children earning up to $22,300 can get a CalEITC credit, with amounts ranging from $223 to $2,775.

At an Anaheim tax preparation fair, table signs encourage workers to claim earned income tax credits. EITCs offer cash back to minimum wage workers even when they earn too little to pay income tax. (Photo by David Kawashima/Orange County United Way)
At an Anaheim tax preparation fair, table signs encourage workers to claim earned income tax credits. EITCs offer cash back to minimum wage workers even when they earn too little to pay income tax. (Photo by David Kawashima/Orange County United Way)

Economists see earned income credits as an incentive to work because, unlike some social programs, the more one works the more money one gets—up to various thresholds.

“This is a generous program that may affect how intensely you look for work,” Neumark said. “If a job pays $12 an hour, and you have to pay child care, maybe (the job) is not worth it. But the EITC means your effective wage might be a lot more than your employer pays.”

Earned income credits are successful in lifting single mothers out of poverty, studies show, and 60 percent of poor children live in female-headed households. According to a Neumark paper, the effect is long term, and recipients of earned income credits often build skills that lead to higher future earnings.

A report by the California Budget & Policy Priorities, a Sacramento think tank, notes the federal EITC compensates for the fact that low and moderate income families pay higher state and local taxes as a share of their income than do wealthy households. According to the organization’s analysis, the lowest earning non-elderly households pay 10.8 percent of their income in total state and local taxes, while the top one percent pays just 5.4 percent.

Do earned income tax credits relieve pressure on employers to pay workers a living wage? It is a question viewed through different prisms by conservatives and progressives.

Neumark, director of UCI’s Economic Self Sufficiency Policy Research Institute, funded by conservative financiers, says, “The firm pays you, and the government kicks in a lot more. Some may call it corporate welfare, but you end up with more people employed.

“I don’t know any law that says a company is responsible for paying a living wage.”

Sanberg, a liberal Democrat, sees EITCs as just one tool to alleviate poverty.

“If the minimum wage had grown with productivity since 1960, it would now be about $22.50 an hour,” he said. “A disproportionate amount of income growth has gone to CEOs.  For workers to prosper, we need a higher EITC, single-payer health care and a higher minimum wage.”

Paying for a funeral

At the Brookhurst fair, Eduardo Farfan, a 27-year-old Saddleback College student, was helping Yolanda Gentile with her return.

At an Anaheim free tax preparation fair, Eduardo Farfan, an IRS-trained volunteer, helps Yolanda Gentile, a customer service representative, with her return in January 2018. (Photo by David Kawashima/Orange County United Way)
At an Anaheim free tax preparation fair, Eduardo Farfan, an IRS-trained volunteer, helps Yolanda Gentile, a customer service representative, with her return in January 2018. (Photo by<br />David Kawashima/Orange County United Way)

Gentile, 51, is blind in one eye and half-blind in the other from a domestic violence incident. She works 20 hours a week as a customer service representative for Stater Bros.

“I still have hands,” she said. “I still have arms. I can still work.”

On her 2017 income of $5,100, Farfan told her, she would be paid $392 under the federal credit program and $118 by CalEITC—modest amounts since she has no dependent children.

“I’ll use it on my $5,000 credit card bill,” she said. “My daughter died last year, and I’m trying to catch up after paying her funeral.”

As for Lara, the Orange administrative assistant, her EITC credits have dropped since her oldest child, 18, no longer qualifies as a dependent. Next year, another son will turn 18 “and I’ll have only two dependents on my taxes, even though they live with me.”

Lara’s last raise was 15 years ago, she said, and, with or without the extra EITC, her financial life will remain a struggle. “Everything is going up,” she said. “We are treading water.”


How many got credits?

Low and moderate income Southern Californians are claiming record numbers of federal and state earned income tax credits (EITCs), a program only available to those who work.

Federal EITC credits worth $6.8 billion were awarded to 2.9 million Californians in 2015, with an average payout of $2,379.

County Number of claims Total Amount
Los Angeles 992,250 $2.3 billion
San Bernardino 229,850 $608 million
Riverside 221,500 $571 million
Orange 220,530 $480 million

State EITC credits worth $205 million were awarded to 385,910 Californians in 2016, with an average payout of $531.

County Number of claims Total Amount
Los Angeles 103,260 $47 million
San Bernardino 26,876 $16 million
Riverside 23,855 $14 million
Orange 23,472 $10 million

Sources: Internal Revenue Service, California Franchise Tax Board

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Where can you get free tax return help?

Free tax preparation for most households earning less than $60,000 a year is available at dozens of community centers, churches and government agencies across Orange County.  Volunteers are trained by the IRS.

Site locations and hours are listed by zip code through the IRS website at https://irs.treasury.gov/freetaxprep/

Taxpayers can also call 1-800-906-9887 to obtain location information in English or Spanish.

Two networks have partnered with the IRS to sponsor tax preparation across Orange County.

The OC Free Tax Prep campaign, led by Orange County United Way, offers free software for do-it-yourselfers at www.OCFreeTaxPrep.com, along with information on 24 locations where residents can get help.

The AARP, with locations at 28 Orange County senior and community centers, helps low and moderate income residents. Its sites are listed at: https://www.aarp.org/money/taxes/aarp_taxaide/

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One gas-tax repeal effort gains steam, another is fading

The Buzz is the Register’s weekly political news column.

Assemblyman and gubernatorial candidate Travis Allen was the first to prepare a ballot measure calling for the repeal the state’s new gas tax, but a second proposal is gaining momentum while Allen’s is poised to die.

The Huntington Beach Republican submitted his plan to state elections officials in June, but has since been engaged in legally wrangling over the title given the measure by Attorney General Xavier Becerra.

The 12-cent per gallon hike effective Nov .1 — along with an increase in the vehicle license fee — is designed to pay for $52 billion in road and transportation improvements over the next decade. Becerra’s title focuses on the improvements and doesn’t mention the tax.

While Allen succeeded in winning a Superior Court ruling to have the title include the words “repeals gas tax,” Becerra prevailed on appeal and on Wednesday the state Supreme Court announced it would allow the appeals court ruling to stand.

Becerra’s title: “Eliminates Recently Enacted Road Repair and Transportation Funding by Repealing Revenues Dedicated for Those Purposes. Initiative Statute.”

Allen, who called the Supreme Court decision a “mockery of justice,” had been counting on a high-court victory that would reset the six-month window for collecting signatures.

Instead, the original deadline of Jan. 8 will apparently stand, making it unlikely Allen will be gather the 365,880 signatures required. As of last week, he had not begun collecting signatures.

In the meantime, a coalition behind a separate ballot measure to eliminate the new tax submitted paperwork in October and notified elections officials on Dec. 15 it had gathered 25 percent of the 585,407 signatures needed. The higher signature threshold is because the coalition’s measure calls for an amendment to the state Constitution while Allen’s did not. The group has until May 21 to collect the signatures needed to qualify for the November ballot.

While opponents to the gas tax say the state should make need improvements with existing funds, proponents of say using existing money would require cuts in other areas. Gov. Jerry Brown say the increases — which include a vehicle license fee hike of about $50 for the average car owner — are overdue and bring the taxes and fees into line with those 30 years when adjusted for inflation.

The measure received the two-thirds state legislative vote required for new taxes on a party-line vote, with just one Republican supporting the plan. However, it has been endorsed by many in the business community who typically align with the GOP, including Orange County Business Council and the Los Angeles Chamber of Commerce.

The coalition behind the repeal measure already gathering signatures includes the Howard Jarvis Taxpayers Association, GOP gubernatorial candidate John Cox and San Diego talk radio host Carl DeMaio. A UC Berkeley poll released Friday found that likely voters favored repealing the gas tax, 52 percent to 43 percent.

Like Allen’s measure, the coalition proposal received a Becerra title that does not mention a repeal of the gas tax. Jon Coupal, president of the Howard Jarvis Taxpayers Association, said that while the group is proceeding with signature-gathering with the current title, it may sue to try to have a different title appear on the November ballot.

Becerra’s title for that one: “Eliminates Recently Enacted Road Repair and Transportation Funding by Repealing Revenues Dedicated for those Purposes. Requires any Measure to Enact Certain Vehicle Fuel Taxes and Vehicle Fees be Submitted to and Approved by the Electorate. Initiative Constitutional Amendment.”

The coalition prefers a constitutional amendment to Allen’s proposed repeal because the constitutional approach will require a voter approval before any gas tax can be increased in the future. Allen’s measure would only address the current plan, and would do nothing to prevent the Legislature from passing the same plan again.

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