income tax

What Is Middle Class?

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middle class or not

Who is middle class in America, and why does it matter? Middle Class Politics One favorite political maneuver is to come out in favor of the middle class. There are a lot of reasons for this. First, and foremost is that numerous studies have shown that no matter how much money they actually make, most Americans think that they are middle class. Thus, when a politician says they care about the middle class, most people make the assumption that the politician is talking about them. On a secondary level, the value in favoring the middle class, is that there is a deeply American assumption that the middle class is where you will find the normal, hard-working American people. Those who are wealthy, can be assumed to be either exceptionally lucky, exceptionally hard working, or exceptionally smart, depending on who you ask. Realistically, it is all three. One need only look at the number of seemingly less than intelligent, or motivated, celebutaunt children who just luckily have wealthy parents, compared to the rags to riches stories of various immigrants or sons and daughters who were born into poverty. Whereas, the poor are the exceptionally unlucky, unhard working, or unintelligent. The fact that …

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New Year Finance Checklist

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annual personal finance checklist

It’s a new year. Contrary to popular opinion, for the most part, when it comes to money, finances, banking and investing, it doesn’t really matter if the year is new or not. That being said, plenty of people take the opportunity of a fresh calendar to take a fresh look at things like personal finance and their financial plans. So, here is a checklist of things to start thinking about to make sure you personal finances are lined up for 2016. 2016 Personal Finance Checklist Don’t get overwhelmed. Not all of this stuff needs to be done at once. Put a section on your calendar each week or two, and by the end of the first quarter, your finances will be reviewed, tuned-up, and ready for the year ahead. Banking Checklist Review your checking account statements and make sure your bank isn’t charging you fees just for having a checking or savings account. If you are paying monthly fees, or minimum balance fees, find a new account. Check with your current bank first, you might just be signed up for the wrong account. Remember, at today’s interest rates, there is no way having a higher rate compensates for having to …

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What You Need To File Your Taxes

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If you are an American, chances are you have started receiving tax forms and reports from various companies. Recently, many companies, banks, brokerages, mortgage companies, and charities have started providing tax reports and forms electronically. Ironically, you may get a notice in the mail from these entities telling you that you will get your tax documents electronically. Forms Required to File Taxes Exactly which forms you need to file your income taxes depends upon your individual tax situation. People who own their own business have more tax forms they need. Likewise, people with more deductions, or various financial vehicles such as trusts require additional documents as well. If you have any financial accounts or situations that are not “standard” you’ll need to check with an accountant or tax professional to find out what is required for you to file you taxes. Employed by an Employer If you, or you and your spouse, are not self employed, then you will need a W2 Form from your employer to file your taxes. The W2 form lists several numbers including your total wages for the year, as well as various contributions to things such as 401k plans, or cafeteria accounts, or pre-tax insurance …

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Fourth Quarter 2014

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Welcome to the fourth quarter of 2014. It’s been an interesting year so far. Let’s jump right in. First, if you own a small business, like me, your third quarter estimated tax payments are due to your buddies at the IRS by October 15. By now, you should start having a little bit of an idea how your income might go for the year. If you are doing more business than last year, consider bumping your payment to keep up with your higher income. On the other hand, if business is off, then back that withholding off a bit too. Also, if you are a small business owner and you don’t get your health insurance through a spouse or other plan, don’t forget about the Obamacare open enrollment period for 2015, which runs from November 15, 2014 to February 15, 2015. You got an extra extension into April this year while the government worked out some bugs. That won’t necessarily be the case this year, so double-check your plan, or see what the new ones are. You can go to HealthCare.gov and they’ll redirect you to your state exchange if necessary. September Jobs Number The September labor report is due …

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Capital Gains Home Sale with Home Office Depreciation

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If you have a small business, the taxes can be pretty tough to swallow. That’s why you need to be sure that you take all the tax write offs you possibly can to lower your small business tax bill. These small business tax deductions are particularly important for solo entrepreneurs and other self-employed business owners who get stuck with additional self-employment tax. For many business owners, one important tax deduction is the home office tax deduction. This deduction allows home owners who use part of their home for business purposes to write off expenses including deducting property taxes, a portion of utilities and other costs of owning and maintaining a home. How Home Office Affects Capital Gains on Home Sale When you sell property, like your home, you typically have to pay taxes on any increase in the value of the asset. These taxes are called capital gains taxes. Fortunately, these taxes are often taxed at a lower tax rate than your standard tax bracket rate. Unfortunately, on the sale of a large asset, like your home, these capital gains can still be substantial. Luckily, there is a special home sale exclusion for capital gains on the sale of your …

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Do I Need an Accountant?

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The only question I get asked more often than, do I need a financial advisor, is do I need an accountant. The answer isn’t that complicated for most people, however, as with all things money and finance, there are always some exceptions that seem to throw off the ability for anyone to give a straight answer. So, let’s start with with what an accountant does and does not do, and then move on from there. The spoiler, if you are chomping at the bit to get a quick answer, is probably not, but let’s examine the angles to be sure. What Does An Accountant Do? First of all, before deciding whether or not you need an accountant, you should probably understand what an accountant does. More importantly, you should probably understand what an accountant does not do. Now, just like other professions, there are accountants who do more than accounting. I actually know some accountants who are also financial advisors. After all, there is some merit to wrapping all of your financial needs into one little package from the same professional you already trust. But, for our purposes here, we are going to focus on just accountants. That is, do …

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Mid-Year Review 2014

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Here it is, June 2014, the middle of the year. So, what do things look like for your personal finances in 2014 at the half-way point? Let’s jump right in and find out. 2014 Taxes You’re going to pay taxes in 2014, and in every year until you die. Right now, is a good time to handle a few tax issues before the second half of 2014 gets rolling. First, use the IRS withholding calculator to see if your tax withholdings are set properly. Grab a paystub and enter your information for so far this year. Add in a best guess of your various income tax deductions, or use last year’s tax forms to make estimates. Of course, if you prefer, you can use the 2014 standard tax deduction rate as well. Either way, if you are way off on your withholdings (you’ll owe a fortune, or get a fortune back as a refund), it’s time to submit a new W4 form to your employer. Grab your nearest HR person and ask for one, or just get one from the IRS website and turn it in. You only need the bottom part and filling in the worksheet is not necessary, …

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Detecting IRS Phone Scam

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The latest phone scam goes something like this: Someone calls and claims to be from the IRS. They say that you owe taxes and you need to make a payment right away. Otherwise, the scammer says, you may be deported, lose your business license, or even be arrested. This is in addition to the ongoing problems with tax fraud identity theft. How To Tell If It’s the IRS Phone Scam There are a couple of tip offs that can help you detect whether it really is the IRS on the phone. First, off, the IRS does most of this stuff by mail. Mail gives a verifiable paper trail for future legal proceedings if necessary. Also, having a computer spit out 10,000 letters is way faster, cheaper, and more efficient than calling 10,000 people. If you haven’t gotten a single letter from the IRS before you get a phone call, be very suspicious. Sometimes, the scammer gets lucky and maybe you have gotten some letters from the IRS. Maybe you didn’t understand them completely. Now, it’s time to understand how the IRS threatens people. The IRS cannot do ANYTHING at all without telling you IN WRITING that they are going to …

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What Happens If You Don’t File Your Taxes On Time

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What happens on April 15?  For those of you from non-US countries, that probably doesn’t mean much.  To us Americans, April 15th is Tax Day, the deadline to file tax returns. Yup, and entire day taken over and corrupted by government. Well, I guess those interstates won’t pave themselves for free. If you’re working at the last minute then you might be looking for last minute tax tips.  Of course, what many people really want to know is what happens if you don’t file your taxes by the deadline and is there anything I can do if I can’t get my taxes done? The answer, actually, is surprisingly benign.  Filing late is a no-no and can result in all kinds of problems, not the least of which are penalties.  But, there is a ray of hope.  Instead of filing your tax return, file for an extension.  One extension is granted automatcially, so all you have to do is send in the form.  If you can’t get your taxes done by April 15, then make sure you file your request for extension in its place to avoid penalties, fees, and interest. If you file for an extension when are your taxes due?  …

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Will IRS Really Settle Tax Debt for Pennies on the Dollar?

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The latest radio commercials claim that if you owe the IRS $10,000 or more in back taxes or delinquent tax, that there are government programs that will help you settle that tax debt for pennies on the dollar. They go on to say that, with this company’s help, of course, you can make you tax debts go away, including fees and penalties. Sound too good to be true? It probably is. How IRS Settles Delinquent Tax Debts In many ways, the IRS is just like any other creditor. If someone owes them money, then they want to get paid that money. However, in many other ways, the IRS is unlike any other creditor out there. For most companies, collecting on a delinquent debt is a cost-reward calculation. The amount of possible debt recovery is compared to the cost of getting that money. For a very large debt from someone with the means to pay it, it is worth it to engage lawyers and go to court to seize assets and garnish wages. For smaller debts, or for debtors with no assets, the cost of collecting the debt isn’t worth it. There comes a point where trying to collect the debt …

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