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IRS Reveals How “High Income Earners Pay No Tax”

The IRS “Statictics of Income” division has just released the Spring SOI Bulletin. While we don’t expect it to challenge the latest Tom Clancy thriller on the best seller list, the Bulletin actually appeals to an even bigger audience- anyone who wants to learn, the secrets of reducing taxable income.

The big news in this issue was this: in 2007 4,535,623 Americans reported “ adjusted gross incomes “ of more than $200,000 or more. 10,456 of them paid zero federal income tax! I mean nothing, zip, zilch, nada!!!

Paying no tax is hardly remarkable. According to the Washington-based Tax Policy Center, this year 47% of Americans will pay no federal income tax. That’s because their income is so low, or because they qualify for enough exemptions, deductions, and credits to eliminate any liability. But making $200,000 and paying no tax-now, that’s an accomplishment. How did they do it? Where did they get the personal tax advice?

According to the IRS, here are the items that produced the largest effects on high income returns:

• Interest Paid (including mortgage and investment interest)

• Taxes Paid

• Charitable Contributions

• Casualty and theft Loses

• Partnership and “S Corporation” loses

• Plus five proprietary tax reduction strategies that the IRS hopes you never learn!

You probably don’t want to count on “casualty and theft losses” as a way of reducing taxable income. But you can count on one thing. Very few of those 10,456 lucky winners sat down to file their taxes and discovered their zero tax bill by surprise. Almost all of them did it through careful tax reduction planning.

Do we sound like a broken record with the “P” word. Sorry, that’s too bad. Tax planning is really the key to minimizing your taxes. So while we can’t promise tax planning will eliminate your tax bill entirely, we can tell you it gives you your opportunity to keep more of what you earn.

Are your friends , family, or colleagues grumbling about unhappy April 15th surprises/ You can be a hero by helping them avoid those surprises. Let them know that we can help, with the right tax plan and the right concepts and strategies for them. And if you don’t have a tax plan of your own…well, you know where to find us!

Call now at 610-945-1954 to set an appointment.

As the end of the tax year approaches, you can probably get a rough idea of how much you’ll owe in taxes. To lower your tax bite, it is wise to take certain steps at year-end. Numerous strategies exist to help you, including reviewing professionally developed year-end tax checklists, performing a marginal tax rate analysis to ensure that you won’t be pushed into a higher tax bracket unnecessarily, and postponing income and accelerating deductions (or vice versa).

Year-end tax planning and also investment decision-making may sometimes result in substantial tax savings. Year-end tax planning primarily concerns the timing and the method by which you report your income and claim your deductions and credits. The basic strategy for year-end planning is to time your recognition of income so that it will be taxed at a lower rate, and to time your deductible expenses so that they may be claimed in tax years when you are in a higher tax bracket. In a nutshell, you should try to do the following:

• Recognize income when your tax bracket is lower
• Pay deductible expenses when your tax bracket is higher
• Postpone the payment of tax whenever possible

Can checklists help you? Yes they can, but “How Do I Reduce My Taxes?”

Tax planners develop checklists to guide taxpayers toward year-end strategies that might help to reduce their taxes. These checklists offer several suggestions and are arranged in categories, such as “Retirement Planning Checklist.” The checklists trigger tax-savings ideas that may not have occurred to you. At the Tax Reduction Network, we provide these checklists during our clients’ annual reviews. Our clients have saved thousands of dollars by not overpaying their income taxes year after year! So you can show me how to reduce tax liability!

For instance, one suggestion may be to shift income at the year’s end to family members who are in lower tax brackets to minimize your overall taxes. Another suggestion might be for a married person to calculate his or her taxes two ways, using both married filing jointly status and married filing separately status, in order to minimize income tax liability.

Do you need personal tax advice? In the example below this client is eliminating the taxation of their social security income.  If your social security income is being taxed, there are 100% legal ways to stop paying tax on this money.

A Tax Return Example Using Proven Tax Reduction Strategies

Old Tax Return                                                                                     New Tax Return

$10,000                                      Interest Income                                  $ 0

$10,000                                      Dividend Income                                $ 0

$10,000                                      Capital Gain Distributions                  $ 0

$20,000                                      Pension & Annuity Income                $ 20,000

$13,600                                      $16,000 Taxable Social Security       $ 0

$63,000                                      Total Taxable Income                        $ 20,000

$6,221                                        Total Tax                                            $ 438

Tax Savings                                      $5,738

Please check line 20b of your tax return that you recently filed.  If there is a dollar amount on that you line, you are paying tax on that income.  Would you like it to stop? Call 610-945-1954 today!

If you fill-in the Tax Reduction Summary form today, you will receive a Free personalized 30 minute Tax Reduction Summary Report which is valued at $750. It will show you specific ways to reduce your tax bill by thousands of dollars each year or more! And that includes the tax on your social security benefits.

For more information, call 610-945-1954 today! If you are an individual or business owner earning over $200,000 or are married and earning over 250,000, President Obama has a new tax plan for you and it’s not going to lower taxes! Are you ready to start reducing taxable income?

Every day you wait; will cost you more and more in income taxes for 2014 and beyond.  Don’t procrastinate, fill-in the Tax Reduction Summary Form today to see how much you can save on your taxes.

Incorporation is the next step in the evolution of your business. The laws for incorporation vary from state to state, but incorporating is definitely something to consider to provide protections for you and your business.

1. Liability. This is the primary issue because in a sole proprietorship there’s no safety net between your client and his or her business. If the business can’t pay its bills, creditors will go after him or her personally to make up the difference. If the business purchases a vehicle, your client purchases that vehicle. If the business gets sued, so does your client. If employees run into trouble on the job, so does your client. Your client and his or her business are inseparable. Even though there’s no cost in choosing the route of sole proprietorship, there’s no protection either.

2. Taxes. With every paycheck comes the hard-hitting reality of losing 6.2 percent of the first $106,800 of gross salary on Social Security and an additional 1.45 percent for Medicare (except Medicare contains no cap – you pay on every dime you make.) But what your client may not know is that employers are required to match those amounts, along with any state payroll tax amounts. So that’s a minimum of 15.3 percent right off the top of your client’s income. The right incorporated business structure minimizes the brunt and avoids payroll taxes on a good chunk of that income.

3. Audit Risk. The Internal Revenue Service (IRS) cites in its own stats that sole proprietorships and general partnerships have a 1 in 7 chance of being audited. The IRS cites 1 in 50 or higher for incorporated businesses. The message here is that the more casually a business is run, the more likely it is to have some recordkeeping errors.