When you get your first paycheck from a new job you might be surprised to see how many different deductions reduced your earnings.
You’ll see deductions for Federal income tax, state income tax if your state charges it, and a whole host of acronyms of other taxes.
One of those taxes is social security tax.
We’ve all heard of it, but what exactly is Social Security tax?
Everyone that wants to be audited, please raise your hand.
No one?
Simply mention the phrase “home office tax deduction” and most people instantly think of an audit.
To say there is quite the stigma surrounding taking a home office tax deduction would be an understatement. On one hand, many individuals assume if they claim deductions for using part of their home for business purposes that they will automatically incur the wrath of an IRS audit. On the other hand, being able to write off a bunch of legitimate costs is extremely tempting and could save business owners and their employees a lot of money at tax time.
So should you use the tax deduction from running your business out of your home? What can you claim and what are the risks?
Warren Buffett has publicly stated many times that he thinks the richest individuals in the United States don’t pay enough in income tax.
He consistently gives the example that he pays a smaller percentage of his overall income in tax than his secretary does.
He’s been so adamant that the Obama administration picked up the baton and ran with it, dubbing a new proposal the “Buffett Tax Rule”.
So what exactly is the Buffet tax rule?
The administration’s proposal would set a floor of a 30% income tax on those with incomes over $1,000,000 in a given year. The goal is that no middle income taxpayer would pay a larger share of his or her income than someone making millions of dollars.
A Roth IRA can be a great way to build up retirement savings.
One of the great advantages is that since you are putting money in after it’s taxed you get to take the money out, in retirement, tax-free. And that includes the money’s growth over the years as well.
Another great advantage to the Roth IRA is that you can take out the contributions you put in without any penalties. This is due to the fact that you have already paid taxes on that money (opposed to a traditional IRA where you put pre-tax money in and get the tax break now).
As wonderful as the Roth IRA can be you can only put so much into it each year and there are limits to how much you can make as well.
Congress is always tinkering with the tax code and making changes nearly every year and in nearly all categories, and that includes Roth IRA contribution and income limits.
Below are the Roth IRA contribution limits for 2012.
The Federal Income Tax brackets and marginal tax rates for 2012 are out, and we’ll take a look at how the changes affect single taxpayers, those who are married filing jointly, those married filing separately, and head of household.
The changes from 2011 to 2012 are fairly small but they can have an impact for those who are at or over a threshold.
By knowing what bracket and marginal rate you may fall in, you can tax plan to lower your taxable income.
Every year the Internal Revenue Service, or IRS, uses inflation data to revise the bracket amounts. Congress sets the marginal rate percentages with changes in the law.
Note the marginal tax rates are remaining the same in 2012 as they were in 2011. It’s the dollar amount of the tax brackets that’s changing.
Before we jump into the changes I want to let you know that a qualifying widow(er) follows the same rates as married filing jointly.
You’ve been earning rewards for signing up for a credit card or using it to earn airline miles.
Are those miles now considered taxable income?
You would think not, but some Citibank customers received a 1099-MISC for airline miles they were awarded for signing up for an account in 2011. These customers are understandably upset as there was no clear documentation as to the impact of accepting the extra miles.
The Internal Revenue Service hasn’t been clear on how they treat airline miles, either.
Some reports say taxpayers who fail to include the reported 1099-MISC income will not be pursued by the IRS, but do you really want to chance an audit over 20,000 airline miles?
You got a few extra days this year to take care of your taxes.
Did you get them in or are you still procrastinating?
If you are really one of those last minute folks then you better make sure your return is in either electronically by day’s end or post-marked by the end of the day on April 15th (expect the post office to be crowded).
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When it comes to your taxes, there are few things scarier than the prospect of a tax audit.
The good news is that most people aren’t audited.
Further, most audits are actually taken care of through the mail. Many audits are routine, and require only that you send in a piece of missing documentation.
However, most people still prefer not to be audited at all.
So often we look at our property tax bills and decide—based on the whole bill—that our taxes are too high.
I know I do.
The problem with that view though is that property taxes are never a single number, but a combination of several.
Most of us tend to think our property taxes are too high, but then we get a bit hung up on the components. We may want a lower tax bill, but at the same time we might support high spending levels in certain areas, or even just one in particular.
There are constituencies behind each category of our property taxes, which is why it’s so hard to get lower taxes overall.
Withdrawing money from your retirement account is something you only really want to do in retirement.
That’s obvious.
What is also obvious is there are definitely times in life when you find yourself with a significant cash crunch and that nest egg looks ripe for the harvest.
Unfortunately for a majority of your retirement account options any early withdrawals are disastrous.
You get hit with fees and taxes; your overall withdrawal can easily be reduced by 25-40%… which means you just have to withdraw even more money to get to the amount that you actually need to use.
It’s a lose-lose situation: you’re paying a lot in fees and taxes while also losing out on potential growth of the account in the future.
…unless you’re using a Roth IRA.
