Are you worried about your taxes going up next year? They might for some high earners. But some not-quite-rich taxpayers could end up with a surprise tax cut.
If the Bush tax cuts expire for the nation's top earners, people making a pinch less than the wealthiest Americans, who don't quite qualify for the new top two tax brackets, could find themselves in an even lower bracket next year.
The White House says you’re wealthy if you make $250k a year. But what about cost of living?
"We should end up with a sweet spot in the middle of the higher income brackets," said Robert Kerr, senior director of government relations at the National Association of Enrolled Agents. "This is an unintended benefit of the new plan that many people don't realize."
The government is defining the wealthiest Americans as individuals with taxable income of more than $195,550, ($200,000 in adjusted gross income) and joint filers with taxable income over $237,300, ($250,000 in adjusted gross income).
These taxpayers could be hit with higher tax bills next year as the tax rates for the top two brackets return to pre-Bush administration levels of 36% from 33%, and 39.6% from 35%.
But under Obama's tax plan, the 28% income tax bracket would be widened. According to estimates from Congress's Joint Committee on Taxation, if your taxable income is between $171,850 and $195,550, you would fall into this "sweet spot" and be moved from the 33% tax bracket to the 28% bracket and could end up saving more than $1,000 a year.
Does $250,000 make you rich?
Say you're a single filer with a taxable income of $195,550, taking one personal exemption and a basic standard deduction.
In 2010 you fell into the 33% tax bracket and paid $49,648 in income taxes. But if Obama's tax plan is passed, you will drop down to the 28% tax bracket and will owe $48,310, resulting in a $1,338 tax savings.
That goes for joint filers too. Those with income between $209,250 and $237,300 will also move into the 28% bracket. So joint filers making $237,300 will owe $54,399 under Obama's plan, $1,691 less than the $56,090 they owed this year.
As always if you have any questions or comments please email me at rondazaragoza@gmail.com. I will try and reply to your question within 24-48 hours of receipt.
Wednesday, August 18, 2010
Saturday, August 14, 2010
Obama’s Coming Tax Hikes Will Cripple the Economy
Rather than be in the middle of a “recovery summer,” the U.S. economy is still flat on its back. It’s likely to get worse after the first of the year, thanks to the tax hikes the White House is planning.
Americans for Tax Reform, a nonprofit taxpayers’ interest group, reports that the Obama administration, with the support of congressional Democrats, “have said they want to raises taxes in the top two income tax rates in January 2011.” Under their plan, the group says, the current 33 percent rate will automatically rise to 36 percent and the 35 percent rate will increase to 39.6 percent, negatively affecting families and small business owners earning at least $200,000 per year.
The impact of these tax increases will be felt throughout the economy but particularly in the small business sector, where much of the nation’s job creation comes during an economic recovery. The reason for this is:
1. Unlike corporations, small businesses usually don’t pay their own taxes. Rather, business profits flow through to the business owner. The business owner pays taxes on their small business by adding the profits to the personal income tax forms. Therefore, personal income taxes are the same thing as small business taxes.
2. According to the IRS, most small business profits pay taxes in households making more than $200,000 per year. The IRS keeps track of two types of small business income: sole proprietors, and “pass-through” entities like partnerships and S-corporations.
3. Mature small businesses make a majority of the profits and employ a majority of the workers. The Census Bureau reports that the top 3 percent of small businesses employ a majority of everyone who works for a small business. Raising taxes on these most successful of small businesses will cost jobs.
According to a number of estimates, a majority of U.S. small business profits will face a tax rate hike under the Obama plan. Instead of putting profits back into the business in the form of equipment updates, new hires, and expansion, the small businessmen and women who make up the backbone of our economy will be called upon to underwrite, in the name of “raising taxes on the rich,” Washington’s addiction to overspending
As always if you have any questions or comments please email me at rondazaragoza@gmail.com. I will try and reply to your question within 24-48 hours of receipt.
Americans for Tax Reform, a nonprofit taxpayers’ interest group, reports that the Obama administration, with the support of congressional Democrats, “have said they want to raises taxes in the top two income tax rates in January 2011.” Under their plan, the group says, the current 33 percent rate will automatically rise to 36 percent and the 35 percent rate will increase to 39.6 percent, negatively affecting families and small business owners earning at least $200,000 per year.
The impact of these tax increases will be felt throughout the economy but particularly in the small business sector, where much of the nation’s job creation comes during an economic recovery. The reason for this is:
1. Unlike corporations, small businesses usually don’t pay their own taxes. Rather, business profits flow through to the business owner. The business owner pays taxes on their small business by adding the profits to the personal income tax forms. Therefore, personal income taxes are the same thing as small business taxes.
2. According to the IRS, most small business profits pay taxes in households making more than $200,000 per year. The IRS keeps track of two types of small business income: sole proprietors, and “pass-through” entities like partnerships and S-corporations.
3. Mature small businesses make a majority of the profits and employ a majority of the workers. The Census Bureau reports that the top 3 percent of small businesses employ a majority of everyone who works for a small business. Raising taxes on these most successful of small businesses will cost jobs.
According to a number of estimates, a majority of U.S. small business profits will face a tax rate hike under the Obama plan. Instead of putting profits back into the business in the form of equipment updates, new hires, and expansion, the small businessmen and women who make up the backbone of our economy will be called upon to underwrite, in the name of “raising taxes on the rich,” Washington’s addiction to overspending
As always if you have any questions or comments please email me at rondazaragoza@gmail.com. I will try and reply to your question within 24-48 hours of receipt.
Tax preparers regroup after IRS moves to limit refund loans
A decision from the Internal Revenue Service last week is to stop providing taxpayer-debt profiles comes as brick-and-mortar tax preparers already are struggling to hold on to their ground against electronic services, such as TurboTax.
Without the so-called "debt indications" from government data, tax preparers and banks will find it more difficult to front controversial loans known as refund-anticipation loans, or RALs, which are secured by a filer's expected tax refund.
Tax preparers face additional hardship as their banking partners that back the RALs drop out of the business.
Shares of H&R Block Inc. have lost 37% this year, while Jackson Hewitt Tax Services Inc.'s stock is off more than 80%. TurboTax owner Intuit Inc. on the other hand, has seen its shares rise 26% this year.
The long road to recovery
While consumer groups hailed the IRS move earlier this month as a step toward ending a predatory-lending practice, national chains such as H&R Block and Jackson Hewitt won't easily exit the lucrative business and say the effort may even backfire with higher fees, hurting consumers.
In reaction to the decision on the taxpayer-debt profiles, Jackson Hewitt founder John Hewitt said that a portion of the 8 million to 9 million RAL customers will no longer qualify for loans without the government data available.
Those who do qualify will face steeper fees; Hewitt sees tax preparers charging $100 to $110 more, or about a 60% jump, in RAL prices.
What's missing from the IRS announcement is that 40% of RAL recipients don't have bank accounts; only those able to receive direct deposits get refunds back in 10 days.
H&R Block extended 2.1 million RALs in 2010, each with an average amount of $3,000 issued for 10 to 11 days. Each RAL costs about $62, or 2.1% of the loan amount.
Expensive loans
The RAL-related fees siphoned $738 million from 8.4 million American taxpayers in 2008. People who seek such advances are often the working poor who are strapped for cash.
RAL taxpayers receive money on the spot, as opposed to having to wait for a refund check in the mail. But this convenience comes at a hefty price and costs the very taxpayers who need the money in the end. As you notice the companies who offer these types of loans haven’t gone out of business by doing so. Maybe these companies could actually offer these types of loans as a free service to help those very tax payers who have been faithful customers that they have been making several hundred million dollars off of them. Does the president/company actually have to make that much money in one year; couldn’t they not take a pay increase while several hindered thousand taxpayers don’t have that option in today’s economy?
As always if you have any questions or comments please email me at rondazaragoza@gmail.com. I will try and reply to your question within 24-48 hours of receipt.
Without the so-called "debt indications" from government data, tax preparers and banks will find it more difficult to front controversial loans known as refund-anticipation loans, or RALs, which are secured by a filer's expected tax refund.
Tax preparers face additional hardship as their banking partners that back the RALs drop out of the business.
Shares of H&R Block Inc. have lost 37% this year, while Jackson Hewitt Tax Services Inc.'s stock is off more than 80%. TurboTax owner Intuit Inc. on the other hand, has seen its shares rise 26% this year.
The long road to recovery
While consumer groups hailed the IRS move earlier this month as a step toward ending a predatory-lending practice, national chains such as H&R Block and Jackson Hewitt won't easily exit the lucrative business and say the effort may even backfire with higher fees, hurting consumers.
In reaction to the decision on the taxpayer-debt profiles, Jackson Hewitt founder John Hewitt said that a portion of the 8 million to 9 million RAL customers will no longer qualify for loans without the government data available.
Those who do qualify will face steeper fees; Hewitt sees tax preparers charging $100 to $110 more, or about a 60% jump, in RAL prices.
What's missing from the IRS announcement is that 40% of RAL recipients don't have bank accounts; only those able to receive direct deposits get refunds back in 10 days.
H&R Block extended 2.1 million RALs in 2010, each with an average amount of $3,000 issued for 10 to 11 days. Each RAL costs about $62, or 2.1% of the loan amount.
Expensive loans
The RAL-related fees siphoned $738 million from 8.4 million American taxpayers in 2008. People who seek such advances are often the working poor who are strapped for cash.
RAL taxpayers receive money on the spot, as opposed to having to wait for a refund check in the mail. But this convenience comes at a hefty price and costs the very taxpayers who need the money in the end. As you notice the companies who offer these types of loans haven’t gone out of business by doing so. Maybe these companies could actually offer these types of loans as a free service to help those very tax payers who have been faithful customers that they have been making several hundred million dollars off of them. Does the president/company actually have to make that much money in one year; couldn’t they not take a pay increase while several hindered thousand taxpayers don’t have that option in today’s economy?
As always if you have any questions or comments please email me at rondazaragoza@gmail.com. I will try and reply to your question within 24-48 hours of receipt.
Friday, August 13, 2010
Six Tax Tips for Recently Married Taxpayers
Are you or have you gotten married this summer? If you recently got married or are planning a wedding, the last thing on your mind is taxes. However, there are some important steps you need to take to avoid stress at tax time. Here are six tips for newlyweds to keep in mind.
1) Notify the Social Security Administration Report any name change to the Social Security Administration, so your name and Social Security Number will match when you file your next tax return. Informing the SSA of a name change is quite simple.
2) File a Form SS-5, Application for a Social Security Card, at your local SSA office. The form is available on SSA’s website at www.socialsecurity.gov, by calling 800-772-1213 or at local offices.
3) Notify the IRS If you have a new address you should notify the IRS by sending Form 8822, Change of Address. You may download Form 8822 from IRS.gov or order it by calling 800–TAX–FORM (800–829–3676). Or you can always ask myself or your tax professional for assistance.
4) Notify the U.S.Postal Service You should also notify the U.S. Postal Service when you move so it can forward any IRS correspondence.
5) Notify Your Employer Report any name and address changes to your employer(s) to make sure you receive your Form W-2, Wage and Tax Statement, after the end of the year.
6) Check Your Withholding If both you and your spouse work, your combined income may place you in a higher tax bracket. You can use the IRS Withholding Calculator available on IRS.gov to assist you in determining the correct amount of withholding needed for your new filing status. The IRS Withholding Calculator will even provide you with a new Form W-4, Employee's Withholding Allowance Certificate, you can print out and give to your employer so they can withhold the correct amount from your pay.
As always if you have any questions or comments please email me at rondazaragoza@gmail.com. I will try and reply to your question within 24-48 hours of receipt.
1) Notify the Social Security Administration Report any name change to the Social Security Administration, so your name and Social Security Number will match when you file your next tax return. Informing the SSA of a name change is quite simple.
2) File a Form SS-5, Application for a Social Security Card, at your local SSA office. The form is available on SSA’s website at www.socialsecurity.gov, by calling 800-772-1213 or at local offices.
3) Notify the IRS If you have a new address you should notify the IRS by sending Form 8822, Change of Address. You may download Form 8822 from IRS.gov or order it by calling 800–TAX–FORM (800–829–3676). Or you can always ask myself or your tax professional for assistance.
4) Notify the U.S.Postal Service You should also notify the U.S. Postal Service when you move so it can forward any IRS correspondence.
5) Notify Your Employer Report any name and address changes to your employer(s) to make sure you receive your Form W-2, Wage and Tax Statement, after the end of the year.
6) Check Your Withholding If both you and your spouse work, your combined income may place you in a higher tax bracket. You can use the IRS Withholding Calculator available on IRS.gov to assist you in determining the correct amount of withholding needed for your new filing status. The IRS Withholding Calculator will even provide you with a new Form W-4, Employee's Withholding Allowance Certificate, you can print out and give to your employer so they can withhold the correct amount from your pay.
As always if you have any questions or comments please email me at rondazaragoza@gmail.com. I will try and reply to your question within 24-48 hours of receipt.
Is Your Spouse on the Fast Track?
As many of you who know me, I am not one to mix words. The rule in my car is whoever is driving chooses the listening options. So when I am driving I have two staple choices, one is Earth, Wind and Fire and the other is the “Fast Track Networking Secrets” cd’s in the car at all times. Now of course I do have others in the car but those don’t leave the car. Since I don’t fly anywhere, I drive, I have to be at no matter where it is so I have almost memorized that cd’s.
My husband, Tony, also listens to them when we are in the car together and I am driving, as much as he didn’t want to in the beginning. I thought it was ironic since he is a high school football coach and teacher. Its football season now and we have been having two a days for over a week now. Since I am a wife of a football coach I end up volunteering a lot for the team doing different things needed. The other morning at 0430 we were at the field and of course the boys had a melt down and started to complain about having to do the “Wind sprints” again. Before I knew it I heard Ivan Misner’s story come out of Tony’s mouth about how they needed to make a choice about being winners in anything they do in the present and in their future. I thought wow he was listening to the cd’s.
You never know about what you listen to and how it can be used in any different situation you may be in your life or career. Tony told me afterwards that as much as he didn’t want to listen to the cd’s in the beginning; he was glad that we listened to them together because after he repeated Dr. Misner’s story almost exactly that the boys started to practice harder and he hopes they will follow through as the season progresses since the first game is next Friday.
If you have the Fast Track cd’s you may want to have your spouse listen to them also since you never know they may benefit from them also. If you don’t go to www.delfuego.com / and click on the BNI link to order them. Or you can ask me about the success we have seen here in NM with them and growing our businesses.
As always if you have any questions or comments please email me at rondazaragoza@gmail.com. I will try and reply to your question within 24-48 hours of receipt.
My husband, Tony, also listens to them when we are in the car together and I am driving, as much as he didn’t want to in the beginning. I thought it was ironic since he is a high school football coach and teacher. Its football season now and we have been having two a days for over a week now. Since I am a wife of a football coach I end up volunteering a lot for the team doing different things needed. The other morning at 0430 we were at the field and of course the boys had a melt down and started to complain about having to do the “Wind sprints” again. Before I knew it I heard Ivan Misner’s story come out of Tony’s mouth about how they needed to make a choice about being winners in anything they do in the present and in their future. I thought wow he was listening to the cd’s.
You never know about what you listen to and how it can be used in any different situation you may be in your life or career. Tony told me afterwards that as much as he didn’t want to listen to the cd’s in the beginning; he was glad that we listened to them together because after he repeated Dr. Misner’s story almost exactly that the boys started to practice harder and he hopes they will follow through as the season progresses since the first game is next Friday.
If you have the Fast Track cd’s you may want to have your spouse listen to them also since you never know they may benefit from them also. If you don’t go to www.delfuego.com / and click on the BNI link to order them. Or you can ask me about the success we have seen here in NM with them and growing our businesses.
As always if you have any questions or comments please email me at rondazaragoza@gmail.com. I will try and reply to your question within 24-48 hours of receipt.
Thursday, August 12, 2010
FILING CHARACTERISTICS AND EXAMINATION RESULTS FOR SMALL BUSINESS CORPORATE RETURNS
Highlights Final Report Issued on June 11, 2010
Highlights of Reference Number: 2010-30-067 to the Internal Revenue Service Commissioner for the Small Business/Self-Employed Division.
IMPACT ON TAXPAYERS
The Internal Revenue Service (IRS) examines income tax returns to determine whether corporations and other taxpayers have voluntarily complied with tax laws and reported the proper amount of tax. Despite continuing efforts to improve its examination process, Small Business/Self-Employed Division examiners closed almost 1 out of every 3 (32 percent) corporate return examinations in Fiscal Year 2009 without recommending any adjustments. Examinations that result in no change to the tax reported can result in an inefficient use of limited examination resources and place an unnecessary burden on compliant taxpayers.
WHY TIGTA DID THE AUDIT
The overall objectives of this review were to analyze IRS data for Fiscal Years 2005 through 2009 and to identify trends in the filings and audits of conventional small business corporate returns. This audit was part of our Fiscal Year 2010 Annual Audit Plan to highlight the important role a National Research Program study could have in understanding what the filings and audits of corporate returns mean for tax compliance. If approved and implemented, the National Research Program study would evaluate the extent to which corporations and their shareholders comply with the tax laws.
WHAT TIGTA FOUND
Between January 2005 and December 2009, the number of corporate returns processed annually by the IRS fell 7 percent, from almost 2.2 million to approximately 2 million. Despite the decrease in the number of filings, the amount of income taxes reported by corporate returns is significant. In Processing Year 2009, IRS records show that approximately $11 billion in corporate income taxes was reported from about 542,000 corporate returns.
One factor that may be contributing to the modest decline in corporate return filings is the popularity of organizing a business as a partnership or S corporation, which allows the partners and shareholders of these entities to avoid double taxation on business profits. According to the IRS, the number of partnership and S corporation filings is expected to increase by 49 percent and 39 percent, respectively, between 2006 and 2014.
IRS officials told us they are not permitted to set a target for the examination no-change rate. However, in 2003, the IRS reported to Congress that a high no-change rate means a significant amount of resources are being devoted to unproductive examinations, and compliant corporations are being unnecessarily burdened by examinations.
The results of the National Research Program study are expected to improve the IRS examination process by helping ensure the taxes on hundreds of billions of dollars of income earned by United States corporations are reported and paid properly. The statistical validity and comprehensiveness of the study is designed to provide the IRS with updated compliance data needed for deciding which corporate returns should be examined and how best to focus examination resources on the most significant areas of noncompliance.
WHAT TIGTA RECOMMENDED
Although TIGTA did not make any recommendations in this report, IRS officials were provided an opportunity to review the draft report. IRS management did not provide any comments on the draft report.
As always if you have any questions or comments please email me at rondazaragoza@gmail.com. I will try and reply to your question within 24-48 hours of receipt.
Highlights of Reference Number: 2010-30-067 to the Internal Revenue Service Commissioner for the Small Business/Self-Employed Division.
IMPACT ON TAXPAYERS
The Internal Revenue Service (IRS) examines income tax returns to determine whether corporations and other taxpayers have voluntarily complied with tax laws and reported the proper amount of tax. Despite continuing efforts to improve its examination process, Small Business/Self-Employed Division examiners closed almost 1 out of every 3 (32 percent) corporate return examinations in Fiscal Year 2009 without recommending any adjustments. Examinations that result in no change to the tax reported can result in an inefficient use of limited examination resources and place an unnecessary burden on compliant taxpayers.
WHY TIGTA DID THE AUDIT
The overall objectives of this review were to analyze IRS data for Fiscal Years 2005 through 2009 and to identify trends in the filings and audits of conventional small business corporate returns. This audit was part of our Fiscal Year 2010 Annual Audit Plan to highlight the important role a National Research Program study could have in understanding what the filings and audits of corporate returns mean for tax compliance. If approved and implemented, the National Research Program study would evaluate the extent to which corporations and their shareholders comply with the tax laws.
WHAT TIGTA FOUND
Between January 2005 and December 2009, the number of corporate returns processed annually by the IRS fell 7 percent, from almost 2.2 million to approximately 2 million. Despite the decrease in the number of filings, the amount of income taxes reported by corporate returns is significant. In Processing Year 2009, IRS records show that approximately $11 billion in corporate income taxes was reported from about 542,000 corporate returns.
One factor that may be contributing to the modest decline in corporate return filings is the popularity of organizing a business as a partnership or S corporation, which allows the partners and shareholders of these entities to avoid double taxation on business profits. According to the IRS, the number of partnership and S corporation filings is expected to increase by 49 percent and 39 percent, respectively, between 2006 and 2014.
IRS officials told us they are not permitted to set a target for the examination no-change rate. However, in 2003, the IRS reported to Congress that a high no-change rate means a significant amount of resources are being devoted to unproductive examinations, and compliant corporations are being unnecessarily burdened by examinations.
The results of the National Research Program study are expected to improve the IRS examination process by helping ensure the taxes on hundreds of billions of dollars of income earned by United States corporations are reported and paid properly. The statistical validity and comprehensiveness of the study is designed to provide the IRS with updated compliance data needed for deciding which corporate returns should be examined and how best to focus examination resources on the most significant areas of noncompliance.
WHAT TIGTA RECOMMENDED
Although TIGTA did not make any recommendations in this report, IRS officials were provided an opportunity to review the draft report. IRS management did not provide any comments on the draft report.
As always if you have any questions or comments please email me at rondazaragoza@gmail.com. I will try and reply to your question within 24-48 hours of receipt.
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