Category Archives: taxes

What are the Tax Brackets for Married Couples?

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Do you want to know how much money you will be paying in taxes this year? You need to understand tax brackets. Tax brackets are the ranges of income that are taxed at different rates. The higher your income, the higher your tax rate will be. In this blog post, we will discuss how tax brackets work and who pays what!

There are seven tax brackets in the United States: ten percent, fifteen percent, twenty-five percent, thirty-three percent, thirty-seven percent, and forty-seven percent. The first six brackets apply to taxable income (TI). TI is your total income minus any deductions or exemptions. The seventh bracket applies to long-term capital gains and qualified dividends.

Income in the United States is taxed at progressive rates. That means that as your income increases, so does your tax rate. The tax rate for each bracket is applied to the income that falls within that bracket. For example, if you have a taxable income of $50,000, your tax rate would be fifteen percent on the first $37,950 of income, twenty-five percent on the next $12,050 of income, and thirty-seven percent on the remaining $50 of income.

The marginal tax rate is the tax rate you pay on your last dollar of income. In our example above, the marginal tax rate would be thirty-seven percent. The effective tax rate is the average tax rate you pay on all of your income. In our example above, the effective tax rate would be twenty percent.

So, who pays what in taxes? The answer may surprise you! According to the Tax Policy Center, the top one percent of earners (those making over $628,000 per year) pay thirty-seven percent of all federal taxes. The top five percent of earners (those making over $151,000 per year) pay fifty-nine percent of all federal taxes. The bottom ninety-five percent of earners (those making less than $151,000 per year) pay forty-one percent of all federal taxes.

As you can see, the majority of Americans do not shoulder the entire burden of paying taxes. The top earners in our country pay the majority of federal taxes. So, next time you hear someone say that the rich don’t pay their fair share in taxes, you can tell them that they are wrong!

What are the tax brackets married filing jointly?

The tax brackets for married filing jointly are the same as the tax brackets for single filers, except that the income thresholds are doubled. For example, the 15% tax bracket for married couples begins at $19,050, while it begins at $12,700 for single taxpayers. The highest marginal rate of 39.60% applies to taxable incomes over $470,700 for married couples, compared to $418,400 for singles. (These numbers are based on Tax Year 2016.)

How to Get a Tax Advance Refund

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Do you have an emergency expense you need to take care of? You can get a loan based on your tax refund, known as a tax advance refund.

Many tax preparation platforms offer this service. They are partnered with the banks that lend the refunds. Once you receive your refund, the portion you borrowed will be taken out of that and paid back to the bank to pay off the outstanding loan amount.

Tax advance refunds often come with no fees or interest, but before opting for one you should read the small print first.

Where Can I Obtain a Tax Refund Advance?

Many of the most popular tax preparation platforms offer tax refund advances, including Jackson Hewitt, H&R Block Emerald Advance, and Liberty Tax. Loans can be applied for in a brick-and-mortar location or online.

Online tax filing services like TaxAct and TurboTax also offer tax refund advances

Preparing for the Tax Consequences of Selling Your Business

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The process of selling a business is filled with many decisions a business owner makes to ensure the best after tax profit once the sale is finished. Structuring the transaction properly can help minimize taxes and maximize after-tax profits.

Getting effective and timely input from qualified professionals early in the process can reduce stress and ensure success. Knowledgeable providers like the CSuiteXchange offer the best management level advice on sophisticated transactions. What’s most favorable to a buyer often isn’t optimum for the seller, and vice versa. Thus, it is to your benefit as a seller to think clearly about how you ultimately be impacted, but also to know what “hot buttons” may drive decisions for the Seller as well.

This article will focus on the tax aspects involved in the sale of a pass-through type of business, like the typical LLC, and particularly as it relates to S corporations.

Stock Versus Asset Sale

Primarily, there are two ways a company may be sold: through the stock of the company or via the company’s assets. Selling stock can be simple, but isn’t always; the buyer and seller agree on the price of the stock and exchange it for cash or other consideration. In an asset sale, the buyer and seller agree on price, and then also have to agree on how that price will be allocated to the various assets. The asset allocation will likely affect both the buyer and seller’s tax outcome.

Consequences of a stock sale are realized by the seller at closing. Any gain will be taxed to the seller at capital gains rates according to the seller’s holding period – long term or short term. The nuances of calculating the gain can be challenging and generally require an experienced tax specialist to determine the amount properly. The buyer will have to work with his own tax professionals to determine what his basis on the newly acquired stock will be.

Asset sales may involve the sale of inventory, fixed assets, receivables, intellectual property and often most important, goodwill. Fixed assets may be eligible for depreciation or amortization depending on the asset types. The sale of a business via asset sale has the potential for significant, early tax deductions for a buyer. Along with the flexibility of choosing which assets will be included or excluded, the potential tax benefits makes asset purchases very popular with buyers.

Installment Sales

Many sales are structured so that the seller carries a note from the buyer as part of the consideration in the sale, or may retain an ownership interest in the company that will often be transferred to the buyer at a future date based on the achievement of metrics agreed upon by the parties. Installment sales can work to the seller’s advantage when payments are spread out over a period of years and taxes can sometimes be deferred into those later years instead of coming due at the closing on the business.

But be careful! There is a potential pitfall for unwary sellers – they need to be aware that any gains taxed at ordinary income tax rates, including recapture of past depreciation expense, is recognized in the year the agreement is executed and taxable at the time of sale. This tax liability accrues to the seller irrespective of whether there is any cash exchanged at the time of sale. Thus, a seller could receive a much smaller than anticipated after tax receipt, even a negative amount, in the year of the sale of the business.

Covenant Not to Compete & Goodwill

In most asset sales, there is some allocation of purchase price to goodwill and often to an agreement not to compete as well. The non-compete allocation is taxed as ordinary income, while goodwill is taxed as a capital gain. Sellers then, prefer that as much as possible gets allocated to goodwill, unless the amount allocated to the non-compete results in a negative interpretation of the non-compete language to the seller, but this is unlikely.  Buyers allocate goodwill under section 197 of the Internal Revenue Code,

This is a high-level look at the tax aspects of buying or selling your pass-through entity. If you’re considering buying or selling a business, contact Landmark Advisors to assist you today.

Find a Tax Preparer – Tax Prep Software may be the Best Option

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Tax preparation can be a complicated and stressful process. You can avoid the stress by hiring a tax preparer. The tax preparer will ask you for personal information and all the required documents, and will do the rest. If you don’t want to work with a tax preparer, just try TurboTax tax preparation software. It’s easy, fast and convenient.

Don’t be afraid to file for an extension

If you notice that you can’t complete filing your tax returns by the deadline day, you can file for an extension. However, to avoid penalties, you should estimate your tax bill and pay it before the deadline. It’s advisable not to rush the tax preparation or filing process because that may contribute to common errors such as spelling and calculation errors.

Final Words

The above tips will help when you file your taxes. In today’s digital world, it’s always advisable to use a trusted tax preparation and filing software. It’s easy and fast. Hiring a tax preparer is another option, but the most important thing is to provide accurate information.

Carefully Look at Tax Credits and Deductions you are Entitled to

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 If you want to reduce your tax bill or even get a huge tax refund, you need to take advantage of all tax credits and deductions you are entitled to.  Earned Income Tax credit, American Opportunity Tax Credit, energy tax credit, among other are some the credits you can claim if you qualify.

When you look at all the credits and deductions available to you, choose the ones that lower your tax bill or even increase your tax refund. Use tax calculators to get an estimate of the tax credits and deductions. For instance, in case of EITC, use the earned income credit calculator. The information will help you estimate your tax bill or tax refund.

How to Prepare for the Tax-Filing Season – Tips for You

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When the tax filing season comes, you need to prepare and submit your tax returns on time. Learn some tips to prepare for tax filing season here.

Introduction

The IRS expects every taxpayer to submit their tax returns and pay what they owe on time. As you know, tax filing is not a simple affair and involves a lot of documentation and calculations. And that is why the IRS gives taxpayers several months to prepare and submit their tax returns. They also allow for an extension period to file taxes to ensure no taxpayer is left behind. If you don’t comply, IRS can impose heavy penalties or even take tax collection enforcement measures against you. To be on the safe side, here are some tips to ensure you are ready on the first day to file taxes.

Gather your documents

Even if you want to hire a tax preparer to prepare and submit your tax returns, you still have some work to do – gather all the documents and receipts required. You can get your W2 form with an online W2 finder to show your income and withheld taxes. If you are in business, you need bank statements and forms 1099 that show your earnings. There are various forms of 1099 such as form 1099-DIV for dividends, form 1099-INT for interest, among others. When it comes to deductions, you need to have receipts to back up your claim. Gather the receipts and determine whether to itemize your deductions or take a standard deduction.

What You Need to Know About the Recovery Rebate Credit

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The Recovery Rebate Credit is a product of the Coronavirus Aid, Relief, and Economic Security (CARES) Act and the Tax Relief Act. This credit is designed to support Americans throughout the pandemic. It can be used as part of your 2021 tax return, so you can use it to increase your tax refund or decrease the amount you owe to Uncle Sam for the 2020 tax year.

This tax credit was paid in two installments in 2020 and early 2021. It is considered to be an advance payment. Those who did not receive their checks but were eligible can still claim it on their 2020 tax returns.

The majority of qualifying individuals will have already received their corona virus stimulus check and do not need to fill in any forms. Alongside each stimulus check, the IRS will have also provided a receipt confirming the payment.

Information regarding stimulus does not need to be filled out on 2020 tax forms. This is an automatic stimulus payment.

What if You Can’t Make the April 15th Deadline for Tax Filing?

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Perhaps you’re experiencing problems with your paperwork and you can’t submit your taxes by the traditional April 15th tax filing deadline.

In this case, you’ll need to request a formal extension from the IRS. You’ll need IRS Form 4868 to do this. Once submitted, your new tax filing deadline will be October 15th, 2020. What surprises many is that you don’t need to supply a reason. All extension requests are granted automatically.

Another aspect of the extension that catches taxpayers by surprise is that the filing extension is not an extension on when you need to pay your tax bill, if you owe anything. You still need to pay any outstanding taxes by April 15th. It’s only an extension on filing your 1040 tax forms.

If you find yourself in this situation, it may be wise to consult a professional. Since you’re already expecting a tax refund, you likely won’t have anything outstanding with the IRS, unless you owe back taxes.

Thankfully, both professionals and tax preparation software are more than capable of handling this situation.

How to Check the Status of Your Tax Refund

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You can check the status of your refund by looking for the ‘Where’s My Refund?’ tool on the IRS website. Follow the instructions given on-screen and you’ll be able to get a status update on the progress of your refund. This tool also works on the IRS’s mobile app IRS2Go.

Let’s take a look at a few examples of the tax refund schedule and when you could expect to receive your refund if you submitted your return during a certain period:

  • Between January 20th to the 24th, you could expect to receive your refund as early as January 31st, as long as you don’t claim the EIC or the Child Tax Credit.
  • Between February 10th to the 14th, you would receive your refund on February 21st.
  • Between March 29th and April 3rd, you would get your refund on April 17th.

These are just three examples of when you may receive your refund if you submitted your tax return on these dates. They’re only predictions and other factors can impact when you actually get your refund.

Additionally, keep in mind, if you use the get my W2 online option and you’re submitting electronically, you should use the date when your return has been ‘accepted’ by the IRS as your submission date. This is typically between one and three days following the day you sent in your return.

For taxpayers who have decided to send their tax returns in paper form, you should assume at least a three- or four-week delay. This is because the IRS needs to manually enter your information into their systems.

This delay could be even longer if the IRS needs to carry out additional checks on your tax return.

Federal Remodel Incentive Programs and Tax Relief Options

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Are you looking to renovate your home? There is a host of local, state, and federal incentive programs as well as tax relief options and low-interest loans that you can take advantage of. Tax information blog, American Tax Service details how you can easily take advantage of any of these options in its latest post – Federal Remodel Incentive Programs and Tax Relief Options.

For Government incentive programs, there are a few key rules you will need to adhere to if you are to take advantage of any of them. First, you will need to apply for the program before starting renovations and home improvements otherwise you might not be counted eligible. Also, it is worth noting that most of the incentive programs only support basic changes that improve the quality of your property and not luxury changes like home spas and outdoor kitchens. Finally, there must be an oversight in the form of scheduled inspections.

Aside from government incentive programs, taxpayers who are renovating can find out if they are eligible to join a property tax exemption program. This can save them some thousands of dollars during the whole time of renovation or part of it. Eligibility requirements differ between every town and county and as such you will need to find out what qualifies in your local area.

Taxpayers looking to renovate can also benefit from the Home Improvement deduction Programs (HIPs). These programs offer low-interest or no-interest rate loans to homeowners who want to improve the quality of their home. Depending on where your home is situated, there are different eligibility requirements.

However, one rule that cuts across no matter where you are located is that you must be remodeling an existing building, your gross income must be below a set limit, and you can’t be using the money to install luxury items. Another loan option taxpayers can utilize is the FHA Rehab Loans. With this option, you can easily approach many loan providers as the US government will be guaranteeing your loan.

To read the original post, please visit https://americantaxservice.org/federal-remodel-incentive-programs/