2012 Federal Income Tax Brackets and Marginal Tax Rates

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.

The 10% tax bracket—the lowest marginal tax rate

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Do You Have to Pay Tax on Airline Miles?

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?

Are Airline Miles Taxable Income?

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6 Audit Red Flags the IRS Uses to Choose Which Returns to Audit

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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.

As you prepare your tax return, consider the following 6 audit red flags that could lead to an increased chance of audit:

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Withdrawing Money From a Roth IRA: How Does It Work and When Can I Do It?

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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.

Withdrawing Money from a Roth IRA

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Did You Get a 1099-K Tax Form This Year?

One of the newest tax forms to be released is the 1099-K.

This new 1099 tax form is designed by the IRS to help catch those who under-report their income from online business transactions.

Concerns that sellers on eBay are not reporting their income, as well as other third-party transactions handled by banks and processors like PayPal, are being overlooked as income, the IRS is hoping that the 1099-K tax form can help them recapture lost revenue.

Who Issues the 1099-K?

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What is the Alternative Minimum Tax (AMT) and How Does It Impact Your Taxes?

There are few things in the world of taxes more terrifying than the Alternative Minimum Tax (AMT).

After taking all of that time with your W-2s, donations, and various deductions the AMT steps in and tells you that none of that matters; you suddenly owe thousands more in tax.

That’s scary enough for me.  Here’s an overview of the Alternative Minimum Tax and what can trigger it to impact your taxes.

What is the Alternative Minimum Tax (AMT)?

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What Business Expenses are Tax Deductible?

When it comes to reducing business income for tax purposes, the tax deduction is one of the most popular methods.

You can deduct some of the money you spend on business and lower your taxable income.

However, it’s important that you understand what makes an expense tax deductible for business purposes.  Otherwise, you could find yourself red-flagged by the IRS.

But What Business Expenses are Tax Deductible?

Ordinary and Necessary Expenses

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