IRA Income - Higher Retirement Income Equals Less In Taxes?

If your IRA income goes up will you pay more in taxes or less? Usually more! I am not a CPA but with some common sense and careful thought we can decrease your taxes due and increase your IRA income!

If you are a CD investor at the bank and take IRA income you might be able to lower your taxes due. How? Let's take a look.

For example, if you are taking income in the amount of $30,000 per year and you have $220,000 invested in CD's that are not in an IRA consider this idea for example and see if it might fit into your exact situation. You might be taking way more IRA income or have way more money in CD's to work with.

Since I am not a CPA and like to work with easy round numbers let's make it easy for all of us. Your taxes due at 25% of $30,000 would equal $7,500. If you were also earning interest on your CD at 3% you would pay $1,650 on the $6,600 earned from your CD each year whether you take the money out or not.

What if we lowered the need for your income withdrawal to $15,000 by annuitizing all or part of your CD?

You annual payments could easily equal $15,000 plus your missed CD money per year and since you would be getting part of your principal back you would still only pay around $1,650 a year in taxes. You would save $3,750 on your IRA income taxes and saved money is made money so really you end up with $33,750 in IRA income each year plus we could always increase your income to replace the lost CD interest if you need it as well. If not then we would just leave that money in the investment. You might even drop into a lower tax bracket and save even more.

In this idea your IRA can then grow much faster to replace your CD value. You get more money, less taxes, higher growth in your IRA, and at least half of your IRA income is guaranteed now at a certain rate. Your monthly stream of new money can also pass on to your heirs in most cases. Sound good?

If you are interested in taking a look at this idea be sure to check with a competent annuity professional. Most agents and brokers have never annuitized an annuity and don't truly have a grasp as to when it is a good idea due to lack of experience. Be sure to ask about how much experience they have in working with annuities. And remember, there is never a bad time to make more money!

Keith Dennis works exclusively with small business owners to help them create tax-free income streams for retirement. Business owners are often stuck in the tax-deferred investment trap. They get a small break now and then end up paying much higher taxes later because they lose their business deductions. Then on top of that, their income is usually 100% taxable!

With tax-free investing you can literally have twice the income in retirement saving the same amount of money, retire sooner, or even save about half as much versus tax-deferred investments.

Get it touch with Keith today to learn how it works through the Small Business Retirement Group's Fan Page.

Article Source: http://EzineArticles.com/expert/Keith_Dennis/175155

How to Compute Cash Flow and Sales Proceeds Before and After Taxes

The primary purpose real estate investors own income property is to make money; favorably from a steady stream of cash flow generated by the property on a monthly basis as well as a lump sum profit when the property gets sold sometime in the future.

This is the explanation for real estate investing. To buy investment real estate with an "income stream" that regularly generates more rental income than operating expenses and debt service, and to collect sizable proceeds due to the property's appreciation in value upon sale.

Fair enough. But real estate investors consider more than these cash flows and proceeds before taxes. They are also concerned how much they can expect to collect after they pay federal income taxes.

In this article, we'll look at both so you will have an understanding of how they are computed in a real estate analysis.

In essence, both work the same way. The revenue investors collect prior to income taxes is known as the "before tax" (BT) revenue, and the amount of revenue an investor actually can keep after settling up with the IRS is called the "after tax" (AT) revenue.

Cash Flows

Cash flow before tax (CFBT) is rental income less operating expenses less debt service (i.e., the mortgage payment) less any non-funded capital additions.

Rental Income

less Operating Expenses

less Debt Service

less Non-funded Capital Additions

= CFBT

Cash flow after taxes (CFAT) is derived by computing tax liability based upon taxable income and then subtracting that amount from CFBT. Okay, so let's break it down.

Taxable income is net operating income (rental income less operating expenses), less the mortgage interest expense and amortized points, less depreciation. It should also be noted that any interest earned by the investor due to the property's revenue would in turn be added (which we'll ignore for our illustration).

Net Operating Income

less Interest Expense

less Amortized Points

less Depreciation (real property and capital additions)

= Taxable Income

Tax liability is taxable income multiplied by the investor's marginal tax rate (combined federal and state income tax rates). In this case, when the taxable income is a positive amount there would be a tax liability, whereas when it is a negative amount there would be a tax savings. In other words, if income is earned after allowable tax deductions, the investor will have to pay taxes and therefore has a tax liability; if no income is earned, the investor can deduct a loss from his or her income taxes and therefore has a tax savings.

Taxable Income

x Marginal Tax Rate

= Tax Liability (or savings)

The final computation,

CFBT

less Tax Liability

= CFAT

Or,

CFBT

plus Tax Savings

= CFAT

Sales Proceeds

This is the amount the seller can expect to receive once the property is sold.

Sales proceeds before tax virtually represent the dollar amount the seller will collect from escrow at closing. It is the sale price of the property less cost of sale less loan repayment (i.e., balance remaining on the existing loans).

Sale Price

less Cost of Sale

less Loan Repayment

= Sales Proceeds (BT)

Sales proceeds after tax are the sales proceeds before tax less the taxes the investor must pay the IRS due to a sale of the rental income property.

Sale Proceeds (BT)

less Taxes Due to Sale

= Sales Proceeds (AT)

Taxes due to sale is a combination of the recapture tax (or Cost Recovery Recapture) and the capital gains tax less tax savings due to unamortized loan points multiplied by the investor's marginal tax rate.

About the Author

James Kobzeff is the developer of ProAPOD. A leading provider of real estate investor software solutions since 2000. Create cash flow, rates of return, and profitability analysis presentations to evaluate any-size investment opportunity in minutes! Easy and affordable. Learn more at =>www.proapod.com

Article Source: http://EzineArticles.com/expert/James_Kobzeff/35775

IRS Tax Debt - Even Government Employees Can Lose Their Jobs Due to Their Tax Debt

The Few: Government jobs are hard to get. There's a waiting list a mile long. But when you finally land that job, you have to be careful. Did you know being in debt to the IRS can actually make you lose your job? Then you'll be broke and still be in debt. If you work for the government, watch out. This scenario could easily happen to you.

What They'll Do:

Bank Levy: This is a common way the IRS collects their money. Ignore the IRS's "Final Notice and Intent to Levy," and the IRS might seize the money you owe right out of your bank account. In one fatal swoop, all the money you've saved up for years could be gone.

Wage Garnishment: This is a bigger danger to you and your job. The IRS has to notify your place of employment when they decide to garnish your wages. If you fall into the category of people that cannot be in debt to a government entity, this could cause you to lose your job. Although usually, you'll get a limited amount of time to resolve the debt, first.

Don't Delay! You can't lose your job. So you need to know how to remove an IRS debt, and quickly! But nothing with the IRS can go fast. Especially when you're not a professional. Remember, you're dealing with people who are skilled and trained in IRS procedure. But here are some methods for beating your debt.

Installment Agreement: Try paying monthly. Everyone has the right to apply for this program. The IRS will need to know your full and complete financial information. They will compare that to the amount of money you spent on your basic needs. Then they will determine how much you will pay them each month. This may sound a bit like how you pay your credit card debts, but it's not the same. With your credit card debts, you choose how much you pay each month. But with the IRS, They choose how much you pay each month. And if you default, you will be disqualified from the plan! So you cannot miss even one payment.

Offer in Compromise: Good luck winning this! You do have the option to settle your debt. But don't even bother to try to submit and Offer if your financial situation isn't dire. The IRS will again, check your entire financial situation. If they find you have no assets and absolutely no way to pay your debt in full, they will consider an Offer. The IRS approves only around 2% of the people that apply. So make sure you don't make any small mistakes while filling out the 44 page document.

Getting Lucky: If you take care of your IRS debt before they find you, you'll be one of the lucky ones. For many people out there, it's already too late. Work on your debt now, before the IRS makes you lose your job and your money.

Now You Have The Smoking Gun...Use it!

Richard Close was an IRS-Hitman. He worked as a revenue officer for the IRS and his father was the head of the collections branch for 30 years; so it runs in the family. He left that behind and now he's partnered with Tax Defense Network to help thousands of Americans with their tax problems. He gives the tips and tricks for you to fight the IRS and win! Visit him at: http://irs-hitman.blogspot.com orhttp://www.taxdefensenetwork.com or contact: email irs-hitman@taxdefensenetwork.com or 1-888-248-9058.

Article Source: http://EzineArticles.com/expert/Richard_Close/159875

Concepts To Consider When You Can't Pay Your Taxes

Not paying your taxes on time entails various consequences. If you are having trouble paying your taxes in full, don't let it hinder you in filing your tax return timely. Consider paying as large a percentage of the amount owed or borrow money from others in order to settle your tax liability in full. Filing a return and not including full payment can save you large amounts of penalties and fees. Moreover, payment plans are available and being on a current payment plans avoids IRS collection process which may include, property seizures, garnishments etc. Most CPA firms can advise you on these matters.

These are the ordinary penalties:

· "Filing Failure" penalty

5% per month on the amount of tax due on the return to a maximum of 25%

· "Payment Failure" penalty

.5% per month on the amount of your tax due on the return to a maximum of 25%

· Both "Filing Failure" penalty and "Payment Failure" penalty apply

The "Filing Failure" penalty lowers to 4.5% per month and "Payment Failure" penalty is

.5% per month. The combined penalty stays at 5%. The maximum penalty for both is 25%. Then, the "Payment Failure" penalty continues at.5% per month another 45 more months. Both penalties can go to a maximum of 47.5%.

Besides the penalties above, interest is charged on late payments. Also when you are self-employed, you take full responsibility for paying the taxes as money is earned through the year.

Payment extensions are provided when it can be proven that unwarranted hardship exists. Inconvenience caused by paying the tax isn't enough grounds for unwarranted hardship. The taxpayer must show that paying the tax would cause significant difficulty and/or expense. For example, a fire sale, selling property at an extremely discounted price, since the person faces the difficulty of paying taxes.

When a payment extension is granted, interest is still charged but the "Payment Failure" penalty is waived. The payment extension is usually good for six months from the due date of the return. The IRS will lengthen time allowed for a payment extension due to some circumstances..

To apply for a payment extension use Form 1127. Form 1127 requires a taxpayer to provide detailed statements of; assets and liabilities, statement income for each of the 3 months prior to the due date of the tax return and statement expenses for each of the 3 months prior to the due date of the tax return.

Paying Income Taxes With Borrowed Funds

Borrowing money to settle tax obligations is an option. Here are some various scenarios:

· Loan From Individuals

Borrow from relatives or friends. Interest rates are probably lower.

· Loans From Banks Or Other Commercial Institutions

Interest on this type of loan is usually considered a non-deductible personal interest expense. Typically a financially troubled taxpayer has a hard time to qualify for this type of loan.

· Home Equity Loan

Interest rates may be lower than with other types of loans. The interest payments may be tax-deductible. This is usually the cheapest option.

· Credit Card

There are a number of companies approved to accept credit cards or debit cards to pay income tax. Note, interest charges may be high and is usually considered a non-deductible personal interest expense. On top of this interest, the companies approved to accept credit cards or debit cards to pay income tax charge a service fee.

Monthly Payment Agreement Request

File form 9465 to apply for a monthly payment agreement with IRS, this can be done online at WWW.IRS.GOV. This process can be done after a hardship extension expires. Form 9465 requires less information than Form 1127 regarding the hardship extension. No financial statements are required if tax due is under $50,000.

When the amount owed is more than $50,000 Form 433-A Collection Information Statement for Wage Earners and Self-Employed Individuals is required. This form helps the IRS obtain detailed, information about you. Consider consulting a CPA Firm about allowable expenses and national living standards that correspond to Form 433-A.

There is a fee for the monthly payment agreement and it is deducted from the first payment if the request is approved. When the payment agreement request is approved, interest on any tax due date is still imposed. However the "Payment Failure" penalty is reduced to.25 % instead of.5% if the return is timely filed.

The monthly payment agreement has a fee of $120. The fee is reduced to $52 when a person permits the IRS auto debit from their account. In the event the taxpayer qualifies as a low-income the fee is reduced to $43.

Monthly Payment Agreements may be terminated if IRS thinks the probability of obtaining payments are at risk. The IRS will also terminate a monthly payment agreement if the financial information supplied was not accurate or complete.

Other reasons for terminating the agreement are the following:

• Failing to make a monthly payment.

• Failing to pay another tax liability when it's due.

• Failing to provide updated financial information.

• IRS finds out that your financial condition has improved.

A written notice will be sent by the IRS 30 days prior to changing or terminating a monthly payment agreement. IRS will also provide the grounds for changing or terminating a monthly payment agreement. The requirement for written notice does not apply when the IRS believes the collection of tax owed is at risk.

Thus, it is very important that tax returns are filed properly even if full payment cannot be made. Options like hardships extensions or monthly payment agreements may be availed to prevent further charges, penalties and other serious consequences.

We hope this article was helpful. This article is an example for purposes of illustration only and is intended as a general resource, not a recommendation.

http://www.cpafirmsouthflorida.com

We can help deal with the IRS and paying your taxes. Accountant Pompano Beach here to help!

Article Source: http://EzineArticles.com/expert/Peter_D._Rudolph/1367050

US Tax Accountant Demonstrates "Due Diligence" by Expats

Federal tax code provisions that apply exclusively to US citizens living overseas offer money-saving exclusions and deductions but they also have rigorous qualifying and reporting requirements.

Failure to comply with some of these regulations or misinterpreting a requirement for a hefty tax write-off could prove costly, both by incurring a higher bill and facing stiff penalties. This is where a US tax accountant with international tributary experience can provide not only professional expertise but also peace of mind.

The IRS is interested in whether US citizens who miscalculate their taxes did so intentionally or not, since tax fraud is a serious criminal offense. By hiring a reputable US tax accountant with international tributary experience, an expat demonstrates a measure of good intent and desire to be thorough and honest in calculating his or her income and expenses.

A US tax accountant specializing in expat tax preparation service is familiar with the detailed criteria that qualify an overseas US citizen to take advantage of money saving provisions such as the foreign earned income exclusion, credits and the foreign housing deduction. Without a qualified international US tax accountant, an expat who self-prepares a return, or hires a preparer without international experience, might miss out on significant savings or, worse, under-calculate and thus attract IRS scrutiny.

An American living abroad must file US tax returns and pay any tariffs due for as long as they keep their US citizenship (or green card, for US resident aliens living abroad). This is why it makes sense for expats not just to pay their taxes on time, but to develop an overall strategy that makes the most of applicable tributary provisions of both the US and the country of residence.

A US tax accountant with international experience can provide a level of expertise that a preparer in the US with no international experience would be hard-pressed to match. The provisions of the US tax code that apply exclusively to expats take hours just to read, and a full understanding of many of the sections requires several readings.

Real world experience in dealing with these complex provisions is another advantage that a US Tax Accountant with an expat clientele brings to the professional relationship. Knowing what to expect from the IRS is a valuable quality that an experienced international tax accountant develops over time.

Conducting business overseas, whether a solo professional practice or a small company, absolutely requires professional advice from a US tax accountant who has helped US entrepreneurs set up foreign legal entities.

Tax Planner CPA, a firm that specializes in expat tax planning, has a website that has a regularly updated collection of articles, blogs and Q&As addressing expat tax issues. The web site is http://www.taxplannercpa.com.

David Odom is a US Citizen who during his trip to India was informed about his requirement to still File US taxes in spite of not having US income.Since then, he began investigating expatriate taxation and now writes articles on the subject - so that fellow Americans don't run into the same issues as he did of US Tax Accountant.

Article Source: http://EzineArticles.com/expert/David_Smith_Odom/861561

When Can You Integrate Your Past Due Taxes in the Bankruptcy?

There are certain criteria that a person should meet before including the taxes in his or her bankruptcy filing. While it is possible for IRS taxes to be included in a bankruptcy, there are a number of factors that limit which taxes can or cannot be included. Here are the conditions that you meet before filing bankruptcy:

Notes:

1. Taxes voluntarily filed at least two years ago can be integrated in a bankruptcy

2. Payroll tax or fraud penalties can never be discharged

3. It is only allowed for chapter 7 and chapter 13: that is chapter 7 indicates total, chapter 13 indicates payment plans

4. Tax returns filed 2 years ago

5. Feeling not guilty of tax evasion

6. Taxes that are not fraudulent

7. You should file four previous tax returns: It should prove that it has been filed with the IRS and filed no later than date of first creditor's meeting

While it is possible for IRS taxes to be included in a bankruptcy, there are a number of factors that limit which ones can or cannot be included. Only federal income ones are eligible to be discharged in bankruptcy; payroll ones or fraud penalties can never be discharged. Prior filed ones are also not eligible for discharge. The discharge of federal income ones also depends on which type of bankruptcy is filed. Only chapter 7 and chapter 13 bankruptcies are eligible for federal income tax discharge. Chapter 7 bankruptcies give full discharge of allowable federal income tax debts while chapter 13 bankruptcies create a payment plan to repay a portion of the debt while the remainder is discharged.

There are five rules that assess whether income tax debts are capable of being discharged by bankruptcy. An income tax debt must meet all five of these criteria before it can be deemed to be discharged.

The first two of the five rules state that a debtor cannot include any taxes that are over three years old and that the tax returns must have been filed at least two years ago. This means that if a debtor files for bankruptcy in 2010, he cannot claim back tax debts from beyond 2006 and that the tax returns must have been filed at least in 2008.

The third criterion states that the taxes must have been assessed at least 240 days prior to bankruptcy filing. The tax return must not be fraudulent. If the debtor used a false Social security number on his/her income tax, the income tax debt will not be eligible for discharge.

Lastly, the taxpayer must not be guilty of tax evasion, meaning the taxpayer must not be guilty of any intentional acts of evading tax laws.

In addition, the bankruptcy petition is required to prove that his/her previous four income tax returns have been filed with the IRS. The four previous tax returns must be filed no later than the date of the first creditors' meeting. Petitioners must also provide a copy of their most recent tax returns to the bankruptcy court and creditors if a request is made.

Bankruptcy attorney Chino can offer you best legal services to satisfy your needs. To clear the doubts regarding your bankruptcy filing, you can make a free consultation with our bankruptcy lawyer Chino.

Article Source: http://EzineArticles.com/expert/Nancy_P_Shevell/597242

The Increase in House Repossession Due to Unpaid Property Taxes

House repossession due to non-payment of property taxes is on the rise in several municipalities in Michigan.

The economic downturn that has swept the country since December 2007 has severely affected Michigan's economy, leaving some of its communities scrambling to reduce their budgets, find additional revenue sources and implement measures to survive the current economic crisis.

Most local governments in Michigan derived their revenues from property taxes. The state's property tax revenues are based on millage rates and a property's taxable value. However, revenues from property taxes are slow to rise than they were used to because of the declining property values.

Non-payment of mortgages or property taxes by homeowners resulted in house repossession. As more and more house repossession occur in a neighborhood, the assessed home values of surrounding properties are lowered, thereby reducing the total tax revenue that local governments may collect.

Adding to the problem of dwindling revenues due to property tax declines, municipalities in Michigan are also experiencing difficulties due to reductions in the revenue sharing payment program of the state.

Under the revenue sharing program, the state distributes a share of the collected sales tax to local government in the form of unrestricted revenues. The constitutional portion of the revenue sharing accounted for 15 percent of the nearly 4 percent total state sales tax collections. In addition, the statutory revenue sharing is derived from 21.3 percent of the established 4 percent total state sales tax collections.

Under the current troubled economic times, consumers tend to spend less, yielding low revenue from sales tax and resulting to reductions in payments of statutory revenues to local municipalities. In addition, the state's financial difficulties have forced lawmakers to reduce revenue sharing payments given to local governments.

Meanwhile, Oakland County Treasurer Andy Meisner explained that reduced revenues may directly and severely affect the ability of the local community to provide necessary services for its residents.

Data released by the Oakland County Equalization Division showed that many communities in Michigan lost millions due to low taxable value of properties.

Currently, there are 550 properties that have reverted to county ownership because of non-payment of property taxes. However, the total number of house repossession due to unpaid property taxes represented only a small portion of the number of home loan foreclosures in Oakland County

Joseph B. Smith has been educating buyers on the finer points of House Repossession at Repo-Homes.com for over five years.

Article Source: http://EzineArticles.com/expert/Joseph_B._Smith/274799

Will Tax Preparers Lose Money This Year Due To The Late Tax Season?

For tax preparers, this government shutdown couldn't have come at a worse time. Americans are not able to file their taxes early like they have in previous years. Americans will have to wait this year to file their taxes and the window to submit them just got even smaller. The new date for filing your taxes is February 21st 2014. This means a lot of work for tax preparers in a very short amount of time. For some small businesses tax companies that might mean less business. Is it possible small business tax preparation companies will lose money? Let's look at the situation at hand.

Some small business tax prep companies only have a staff of 1-10 people most of the time and usually they have a larger window in order to prepare peoples taxes. Well, that's all changed now due to the government shutdown. Tax preparers will have 2 less weeks to complete the same amount of taxes as the previous year or even possibly more. This is detrimental to small business companies because they only have limited staff. Same amount of work, less time to do it in. If small tax companies are smart, they will still prepare the taxes but have to wait to submit them.

Will people get a quicker refund if the use software to prepare their taxes?

Even if you e-file your taxes, the same waiting period stands for e-filing and paper filing. You can still prepare your taxes with the software and get ready to submit but you will have to wait two extra weeks to push that submit button.

Now, for users who have ever had their identity stolen and already have to wait an additional 6 weeks already, this means that you won't be seeing your refunds returned till around March or April.

Is there any way to get my refund quicker?

Not really, the government has made it very clear that they have to work very hard to get ready for this upcoming season and won't be ready till February 21st, and that's if that date sticks. The date has already changed a couple of time and there is no guarantee. It is up to the government and how fast they can get themselves ready.

Your best bet is to just wait it out until February and submit your taxes then. Still get them prepared early but don't get your hopes up about submitting them too soon.

Erick B Carlson is a contributor to one of the most reputable tax preparation Companies online that offer tax preparation in Phoenix, AZhttp://www.thattaxlady.com/tax-preparation-phoenix-tax-preparers/

Article Source: http://EzineArticles.com/expert/Erick_B_Carlson/1505387