If you're a Liberal, you're likely not worried about the Democrats raising taxes and instituting new taxes to fund big programs of all description. That's just the way you are. If you're a Conservative, you likely loathe the Democrats' tax-and-spend mentality and want to eliminate what you see as mammoth, inefficient government programs. That's just the way we are. Most American's fit into one category or the other. Most are firm in their beliefs around taxes but nobody, I repeat nobody, likes paying taxes. The colossal irony of taxes in America and how polluted our economy has become with them is the way in which America was born and the role that taxes played in the colonial revolt and subsequent American Revolution. It is a quirk of fate that we now find our country besieged by all forms of taxes on virtually everything that can be taxed. Some might say (I would), that taxes are simply a way for a greedy, incompetent and profligate government to steal from its citizenry. Regardless, you'll be appalled to learn that over the last 100 years, the following taxes have mysteriously appeared:
Tax IRS Interest Charges IRS Penalties (tax on top of tax)
Liquor Tax Luxury
Taxes Marriage License
Tax Personal Property
Tax Real Estate
Tax Service Charge Tax Social Security
Tax Road Usage
Tax Telephone Federal Universal Service Fee
T ax Telephone Federal, State and Local Surcharge Taxes
Telephone Minimum Usage Surcharge
Tax Telephone Recurring and Nonrecurring Charges
Tax Telephone State and Local Tax Telephone Usage Charge
Taxes Vehicle License Registration
Tax Vehicle Sales
Tax Watercraft Registration
Tax Well Permit
Tax Workers Compensation Tax
Hon.Brian Scavo notes more taxes to come? and they might even tax that!
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Once again, none of these taxes existed 100 years ago. Then, America was the world's wealthiest nation. Then, we had no national debt. Then, we had a thriving economy that was the envy of the free and developed world. Now we have rampant unemployment. Now we have a weak dollar. Now we have spiraling debt over $14 trillion. Now we have a terrible economic situation. Isn't it obvious? We should stop this tax insanity before it's too late. Politicians of both parties govern the nation and decide what laws should be passed. They are responsible for our current situation. But some are more responsible than others: the Democrats.
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IRS Interest Charges IRS Penalties (tax on top of tax)
Marriage License Tax
Personal Property Tax
Real Estate Tax
Service Charge Tax
Social Security Tax
Road Usage Tax
Recreational Vehicle Tax
State Income Tax
State Unemployment Tax (SUTA)
Telephone Federal Excise Tax
Telephone Federal Universal Service Fee Tax
Telephone Federal, State and Local Surcharge Taxes
Telephone Minimum Usage Surcharge Tax
Telephone Recurring and Nonrecurring Charges Tax
Telephone State and Local Tax
There’s less than two months left before the year ends, and there are not a lot of changes set to take place.
Despite the fact that it feels like mid-February, from a financial perspective we’ve got another month to go until we turn the page into 2015. That’s enough time to do a little end of the year tax work. The good news, says Greg Rosica, Ernst & Young Tax Partner and a contributor to the EY Tax Guide 2015, is that there are not a whole lot of changes set to take place before the end of the year. “Things are fairly similar in 2015 as they were in 2014” he says. That can change. Sometimes last minute changes do come down the pike. But for now, your job is fairly predictable.
You should start, as you do every year, by getting the lay of the land. Job number one is to sit down and project your tax picture for the full 2014 year. “We’re in November so we have over 10 months of information,” Rosica says. “You can estimate the remaining.” Once you have that, look forward and do a 2015 – and perhaps even 2016 – income projection to try to understand the types of income you’re going to have. See if you’re subject to itemized deductions being phased out, if you’re in alternative minimum taxland, or if you’re subject to the new net investment income tax that went into effect on January 1, 2013 for individuals who have net investment income and modified adjusted gross income of $200,000 or more for singles, $250,000 or more for couples, he suggests. “Once you understand [your overall picture] you can start to look at ways to defer income, accelerate deductions and deflect income down to lower tax-bracket family members.” Specifically:
Consider deferring income. Generally, this is a valued strategy because it allows you to put off paying the taxes on whatever income you push into the next calendar year. Look at bonuses, if you have any flexibility as to when you earn or receive them. Similarly, with stock options, can you take them in January versus December? And if there are any assets you’re considering selling, you may want to wait until January if there will be a gain associated with the sale. Deferring doesn’t always make sense, Rosica notes: “Look at it from a big picture perspective. If you’re already in a fairly high [income] year and you’re going to try to have a lower one next year, you may not want to defer.”
Look at accelerating deductions. When it comes to real estate taxes, state income taxes, even charitable contributions, you want to consider if you get more benefits from paying them – and taking the commensurate tax deductions – this year versus next. By pushing payments into December, you can often lower your tax liability, but again, this is not a no-brainer, notes Melissa Labant, director of tax advocacy for the AICPA. “If you’re subject to the alternative minimum tax, you may not receive a benefit for certain deductions like real estate taxes and state income taxes. That’s why you want to have an income tax preparation prepared as soon as possible. It gives you the opportunity to look at income and expenses.”
Weigh deflecting income to lower tax bracket family members. If you have children who are in a lower tax bracket than you are, it may make sense to gift certain assets to them. They can then sell the assets and pay taxes on that sale at their lower rate. “There is still a zero tax bracket for capital gains, so there are real favorable results that can be achieved by looking at this,” Rosica says.
Max out retirement, college-saving contributions. If you haven’t maxed out your 401(k) contributions for the year (the limit on contributions is $17,500, $23,000 if you’re over 50), and you’re in a position to do so, get in touch with your benefits department pronto. (If you’re self-employed, you may be able to deduct much more — $52,000 or 25% of your compensation — by contributing to a SEP-IRA). Similarly, if you’ve established a 529 college savings plan for children or grandchildren, contributions should be made before the end of the year if you’re looking to capitalize on the break many states offer on state income taxes. And if, like me, you have a college-aged son or daughter who worked over the summer, consider helping them with a Roth IRA contribution. “Many people are concerned about giving their kids money that will impact their motivation,” Rosica says. This shouldn’t. “This is a way to help them start saving for retirement in an extremely tax-efficient way.”
Contribute (wisely) to charity. Finally, if you’re thinking about making year-end contributions to causes you believe in, think about giving appreciated stock that you’ve held for more than 12 months rather than cash. You get a deduction for the full value of the contribution and you don’t have to pay tax on the appreciation. “You can actually get more cash into the hands of the charity this way,” Labant says. It’s a gift that gives back.