Potential Tax Changes for the 2010 Tax Year

Last week we talked about some of the changes waiting on decisions being made in congress.  We would like to continue this discussion this week by focusing a few more issues that we are all waiting to hear about.  Just like the items last week, these are only guesses at what might happen.

Frustrated over taxes?

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  1. Taxes for Capital Gains My stay the Same. Tax on capital gains was expected to raise from the current 15% to 20%.  However, a short-term extension of the current 15% maximum tax rate on these income items is anticipated.
  2. Changes of the Estate Tax. The Estate tax has changed rather regularly.  In 2001, estates worth more than $675,000 were taxed at the 55 percent rate. Over the years, the threshold rose from $675,000 to $3.5 million, and estates worth more than that were taxed at the 45 percent rate. Starting in 2011, it was scheduled to return to 55 percent on estates worth over $1 million.
  3. Many of the Tax Breaks Should Stay in Effect. There are several deductions that were scheduled for change but will likely stay the same.  They include deductions for sales tax, educators expense, college tuition and the extra standard deduction for taxes on your home if you can’t itemize.
  4. The Child Tax Credit Will Likely Change. The child tax credit has been $1000 per child under age 17, and is scheduled to be lowered to $500.  It appears this will go into effect unless it is changed during the lame-duck session.

These are some of the issues that will be affecting many of you.  Again, we don’t know that these changes will or will not take place; this is just what appears to be happening.  We will not know for sure until the end of November.  If you have concerns about your taxes please feel free to contact us and we can give you information about your specific situation.

Also, if you want to develop your own tax strategies so you can save thousands of dollars on your taxes and to receive up to date information on the ever changing tax laws, visit avoidbeingaudited.com.

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Obama Adjusts the Tax Brackets

As we considered what information we might write about this week, we realized that we have had many questions about the Bush tax cuts that were scheduled to expire at the end of 2009. Indecision on Capitol Hill is making tax planning difficult. Congress’s indecision about what to do about the expiring Bush-era tax cuts means that we probably won’t know what will happen to next year’s tax rates until after the November elections.  Everything is being left for a lame-duck session next month.  Because of this, it is not really possible to say what will happen officially, but after doing some research, here are a few things we think will probably happen regarding tax brackets and the definitions of upper middle class.

"Breakfast with Barack"

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Tax Brackets will be Adjusted. As you may know, the amount of taxes you pay each year is based on the tax bracket you are in, which is determined by your annual income.  During his administration, President Bush instituted a 10% tax bracket as the lowest income tax bracket.  This lowest bracket is scheduled to disappear making 15% the new lowest bracket. However, President Obama wants to leave current tax brackets in effect for lower- and middle-income taxpayers, so this might stay the same.  However, things may change for the wealthiest Americans as Obama favors reinstituting higher rates for the wealthiest 3% of Americans—those whose taxable incomes exceed $200,000 ($250,000 for married couples).

Upper Middle Class Tax Break. Obama’s plan includes a redefinition of the middle class by raising the income threshold for the middle class bracket.  Basically, this would cause the 28% bracket (which now maxes at about $170,000 for singles and $210,000 for couples) to be expanded to accommodate the president’s definition of middle class. So some individuals with income now taxed at the 33% rate would drop into the 28% bracket.  So if Obama’s plan goes through, it would raise taxes on the highest-income earners and some pretty well-off taxpayers would enjoy a five-percentage-point rate cut on some of their income. However, most legislators oppose raising anyone’s taxes while the economy continues to limp along, so many feel the tax rates will receive a one to two year extension while congress tries to figure out what to do.

Again, we don’t know that these changes will or will not take place; this is just what appears to be happening.  We will not know for sure until the end of November. If you have concerns about these new tax brackets, please feel free to contact us and we can give you information about your specific situation.

Also, if you are worried about any other tax related issues, check our 12 CD set designed to teach you everything you need to know to save thousands of dollars on your taxes without worrying about being audited. Click here for more information! Or visit http://www.avoidbeingaudited.com.

5 More Benefits from Owning Your Own Business

This week we would like to continue our discussion on the benefits of owning your own business.  As you may know from our last post, there are several great reasons to be self-employed.  So here are five more reasons to start up that side business.

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1. Enjoyment. Business owners enjoy their work because they choose a job they like.  If you choose a business that you are passionate about, you will not only enjoy it but you will be successful as well.

2. Fulfillment. When you are doing a work that you enjoy and feel is important, it is fulfilling.  Business owners constantly set goals and reach them.  They take pride in their work, which leads to higher self-esteem.

3. Product Flexibility. An employee has to push whatever product the company says to.  Business owners have the flexibility to change products and services according to the market.  If a product or service becomes outdated or unpopular, it is exciting to move on and keep up with the times.

4. Enthusiasm. Business owners who love the products and services they offer have enthusiasm.  Enthusiasm attracts more business.  Customers will always come back to a business that shows enthusiasm and a love for what they do.  It is a positive energy that creates synergy and always produces success.

5. Retirement. In today’s world, retirement is unsure and risky.  People who have worked for the same company their entire adult life plan on a good retirement and then one day it is gone.  Creating a business that you love can last long beyond retirement age.  Business owners can train others to run their business and when they choose to retire, it can be with a good passive income.

As we have said before, starting your own business can be very rewarding but can also be very intimidating and sometimes overwhelming.  One of the most of the complicated things can be the finances. We have a great source for how to make sure you are handling your finances correctly. Click here to go to the home page for our new CD series Tax Secrets Revealed.

Anyone have thoughts about the benefits they have seen from owning their own business?

5 Benefits to Owning Your Own Business

We live in uncertain times.  All around us companies that have been considered long standing, strong, and secure are down sizing and even selling out.  Companies that stay in business often cut back on their benefits such as health and retirement.  The era of getting a job, moving up the corporate ladder, and retiring with the gold watch may be in the past.  Even if your job is not in jeopardy, as your life progresses, your children grow up and move away and you find yourself in a higher tax bracket with fewer tax deductions.  Many people live in fear and scarcity wondering if they are going to have to work until they die just to have the basic necessities of life.

With all the uncertainty, there is still hope and ways of creating security for the future.  The key is finding your passion in life and investing in yourself.  You can do this by starting your own business, which is a great way of creating that can create many benefits for yourself.  Here are five benefits to being a business owner.

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1. Job Security.  Business owners have job security.  They never lay themselves off.  That can be a huge stress relief. Also, if business slows they have the option of doing what it takes to increase sales.

2. Maximum Pay.  Business owners choose their wage.  They can create more business whey then need or want more money.  Employees work to make the business owner rich.

3. Flexibility. Business owners can choose their work schedule.  They can plan around family events such as weddings, ball games, and school programs.  Vacations can be incorporated into business trips.

4. Control. Business owners are free from being told what to do and when to do it.  There is no supervisor to answer to, to judge them, or to look over their shoulder.

5. Tax Benefits.  Business owners have the advantage of more tax savings than employees.  There are things that are deductable such as a home office, which includes deducting a portion of utilities, insurance, taxes, interest, and improvements.   These expenses you would be paying for anyway, but if you have a business, they can become tax deductable.  This is just one example—there are many more.

As you can see, starting your own business can be very rewarding, but we realize that is can also be very intimidating and sometimes overwhelming experience.  And as accountants, we know that one of the most of the complicated things can be the finances. We have a great source for how to make sure you are handling your finances correctly. Click here to go to the home page for our new CD series Tax Secrets Revealed.