Tax News
IRS Data from 2007
Who Pays Income Taxes Anyway?
The top 25% of all taxpayers paid 86.59% of all income taxes in 2007
(to be in top 25% your 2007 adjusted gross income exceeded $66,532)
The top 10% of all taxpayers paid 71.22% of all income taxes
(what put you in the oft-mentioned top 10% of U.S. earners? $113,108)
The top 5% of all taxpayers paid 60.63% of all income taxes
(top 5% means the rich right? Well, $160,041 put you in such rarified
air)
The top 1% of all taxpayers paid 40.42% of all income taxes
(the top 1% earned $410,096+ in 2007, not chump change by any means)
Taxpayers earning under $66,532 in 2007 (that's 75% of all taxpayers)
paid 13.41% of all income taxes, and those earning under $32,879 paid
just 2.89%
January 22, 2010
Earthquake Donations Deductible on 2009 Return
Congress passed bills this week allowing taxpayers making 2010 charitable contributions for Haitian earthquake relief deductible on their yet to be filed 2009 returns. This applies to donations made before March 1st. Donations after that must be taken next year on the 2010 return, as per the usual convention.
January 20, 2010
Who Needs A Smart Car?
Why limit electric carts to the golf course and gated retirement community? New rules for vehicle energy credits allow for a $4,000-6,000 break on street legal electric golf carts. This can be up to 50% of the cost of the cart! In claiming the credit, taxpayers need a copy of the manufacturers' credit certifications.
January 1, 2010
Important 2010 Dates
Friday January 15: 4th quarter estimated tax payment for 2009 due.
Monday February 1: W2s and 1099s due to employees/contractors.
Monday March 15: Calendar year corporation returns due.
Thursday April 15: Individual and partnership tax returns due.
Thursday April 15: 2010 1st quarter estimated taxes due.
Tuesday June 15: 2010 2nd quarter estimated taxes due.
Wednesday September 15: 2010 3rd quarter estimated taxes due
Wednesday September 15: Partnership returns on extension due
Friday October 15: Individual returns on extension due.
Monday January 17 2011: 4th quarter estimated taxes for 2010 due.
January 1, 2010
Roth IRA Conversions
The government has recinded the income restrictions on conversions of IRAs into Roth IRAs, and for the second year, 401Ks can be converted to Roth IRAs as well. The benefit of this is while you must pay any taxes due on the conversion, you will enjoy tax-free earnings and withdrawals at retirement. If you convert in 2010, the government has a nifty bonus: You can pay 50% of the tax due on the conversion in 2011 and 50% in 2012, but with tax rates sure to be higher in 2011, maybe paying it all in 2010 makes more sense.
A couple of other things to consider: First, income restrictions on contributions to Roth IRAs will not change, so if you pull in over $100K gross (you know, the big bucks), you can't contribute (and will incur a penalty tax for contributing) so a Roth IRA might not be for you rich folk. Second, and while highly unlikely, it is possible the government may one day start taxing Roths. There is precedent for this type of behavior ... currently up to 85% of Social Security benefits can be taxed; yep, those very same benefits that FDR swore would never be taxed.
December 23, 2009
COBRA Subsidy Extended
The COBRA subsidy on health insurance coverage for terminated employees, due to expire at the end of the year has been extended to February 28, 2010. An employee who loses their job on or before February 28, 2010 may elect to participate in COBRA continuation coverage and pay only 35% of the COBRA premium. The remaining 65% is paid by the employer, who will be reimbursed by the federal government. So it's a win-win: workers get health coverage for a reasonable rate, employers mandated to pick up the balance get reimbursed. The subsidy is now available for 15 months, increased from 9 months.
December 18, 2009
Repeal of Estate Tax
If you've ever worried that your heirs will bump you off for the money, be extra watchful in 2010. Congress surprisingly let the one-year repeal of the estate tax come to pass. In case you hadn't heard, in 2010 the estate tax — currently set at a maximum tax rate of 45% for assets over $3.5 million — will disappear for one year allowing unlimited family wealth to pass to heirs tax free. The issue will most certainly be revisited early next year, probably with rules retroactive to the beginning of the year 2010. The threat of returning to 2001 levels — 55% tax rate for assets over $1 million — will also loom over that debate as Congress tries to find money to pay for its spending habits.
December 10, 2009
2010 Mileage Rates
The government announced new mileage rates for next year. As expected, with gasoline prices somewhat stable and down from peak levels, the 2010 rates are lower than 2009. Business, 50 cents/mile (down from 55); medical and moving, 16.5 cents (down from 24); charitable, 14 cents (unchanged). Remember to KEEP A LOG, a WRITTEN LOG. If you are depreciating a business vehicle or have taken 179 deductions on one in the past you cannot use standard mileage rates but must use actual costs. However, the log is crucial to calculate the ratio of business/personal miles to determine what percentage of actual costs is deductible by your business.
November 8, 2009
Home-Buyers Tax Credit Extended and Expanded
As I expected, the first time home buyers credit was extended. It was also expanded beyond first time home buyers to include anyone buying a home as a principal residence. The credit is for 10% of the home value, maximum of $8K for first time home buyers and $6,500 for other buyers. Escrow must close by April 30, 2010 on properties bought for less than $800K. Unlike with the prior credit rules, homes over 800K are not eligible and some income restrictions still apply. The credit can be claimed on your 2009 or 2010 return.