Everybody says up, right? While I can’t predict the future, I thought it would be interesting to see what the historical tax rates were for different income groups. Here is some data taken from the Congressional Budget Office about historical federal tax rates as a percentage of “comprehensive household income”, defined as pretax cash income plus income from other sources like rental income and dividends. Note that this isn’t the same as your marginal income tax rate, which is the tax rate on your last dollar earned; This is a percentage of all your income.
As a reference, here are the quintiles for annual household income as defined by the US Census Bureau in 2005:
1st Quintile: $0 - $18,500
2nd Quintile: $18,500 - ...
As hundreds of high school kids run out this month and get their first summer job, they will also be greeted with their first wonderful paycheck… that and the phrase “What’s FICA and where did all my money go?” Ah, payroll taxes. First, some quick definitions of where your money is going other than federal, state, and local income taxes:
Social Security Tax
This is also commonly marked as FICA-O, SS, SSWT, or OASDI. If you work for an employer, 6.2% of your wages is withheld by the government for social security programs. Your employer also must contribute a 6.2% matching contribution that isn’t mentioned. For 2007, both the employee and employers contributions only apply to the first $97,500 of wages.
Medicare Tax...
Please don’t take the following as tax advice. It’s what I did, not necessarily what others should do.
I’m filing Form 4868 for an automatic extension of time to file my tax return. But that doesn’t give me any extra time to pay any taxes owed, so I must estimate my tax liability and send that in. Specifically, I must pay at least 90% of my total tax due by April 17th in order to avoid penalties for late payment. Here’s my quick and dirty estimation method:
Estimating total taxable income. I added up all the income from our W-2s, 1099-MISCs, 1099-INT, 1099-DIV, capital gains, and other gross business receipts to get our gross income. I took out our 401(k) contributions and a ...
Here I am, trying to start on my taxes but wondering why only half of my clients sent me a 1099-MISC this year! It turns out that businesses do not have to send a 1099-MISC to corporations no matter how much money they paid them. My business is an S-Corporation, so instead of having nice printed forms that clearly show how much they paid me in 2006, I get… nothing. I still have my own accounting books, but I have found in the past that my records and my client’s records aren’t always in sync.
For example, I might do a job in November, send the invoice in December, their check is written in late December but I don’t receive and deposit it until early January. ...
If April 17th seems like it is approaching faster than ever this year, perhaps it is time to consider filing an extension. I myself am still waiting on several 1099 forms, some of which had to be corrected. Here’s what I dug up for us procrastinators
What exactly does filing an extension get me and how do I do it?
Sending in IRS Form 4868 by April 17th will land you an automatic six-month extension until October 15, 2007 to file your tax return. You can either mail in the paper form or use a tax software package. If you are eligible for Free File, you may be able to e-file for free as well. However, it is important to note that filing ...
Since we’re looking for jobs right now, I wanted to find any way to save some money in that department. It turns out that many job-search expenses may be tax-deductible, but as you might expect from the IRS, there are plenty of hoops to jump through:
You have to be looking for a new job in your present occupation, even if you don’t ever get one.There cannot be a “substantial break” between the ending of your last job and your looking for a new one. Vague? Yep.You cannot be looking for a job for the first time. Sorry, recent graduates.Job search expenses are lumped in with many other “miscellaneous deductions”, such as the home-office deduction, union dues, work-related education expenses, bad business debt, tax prep ...
If you itemize deductions and live in a state with sales tax, give the IRS Sales Tax Deduction Calculator a spin.
Taxpayers who itemize deductions on Schedule A of the Form 1040 in 2006 have the option of deducting the amount of state and local sales taxes paid instead of deducting their state and local income taxes paid. Taxpayers cannot take a deduction for both sales and income taxes.
Residents of states with no income tax should definitely look into this. If you have made some large purchases this past year, it may also be worth the effort to dig up those receipts. Via Consumerist.
I mentioned earlier that I am forgoing all the free federal and state tax filing software options and paying an accountant this year. A reader asked why. That’s a good question, here’s what I (as a non-tax pro) think the decision process should look like:
Do I even want to deal with it?
Some people just think about taxes and feel queasy. It’ll cost at least $100 to pay a person to do it for you, but it’ll get done. Or maybe you feel your time is worth enough that it’s cheaper to just outsource it.
Try doing it online yourself for free first
Most online tax websites only make you pay for your return at the very end, when you want to print ...
On top of the free federal E-filing options, more and more states are also offering their own online income tax filing. This makes sense, as it reduces errors and saves the state from having to go through all those paper returns. Other states have partnered with some online preparers to offer free online filing for certain groups, such as the active military and those under a certain income limit.
So I decided to try and gather the information that was available for all 50 states. Some of these were hard to find! Be sure to read all the details, the offers can be confusing, and you might have to click on a specific link to qualify. Even if you don’t qualify for ...
The IRS website has been updated to show their free 2007 filing options for those people with adjusted gross incomes under $52,000 and satisfy certain other conditions that vary by preparer. Remember, 401k contributions lower your AGI so you may be better off than you think. Also, you only pay at the end, so if you end up over the limit you can still back out. There is even a helpful form to determine which companies are free for your specific situation.
If you have state income tax returns, be sure to look up those prices ahead of time, they can be $30 or higher and ruin any potential savings (TurboTax, TaxSlayer and TaxEngine offer free returns for certain states). Anyone can get a ...
