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