Category Archive

Capitol Hill Loves Taxes!!

Did you know that our tax system uses what’s called a Progressive Tax? Your individual income is taxed using graduated rates, as opposed to taxing all of your income at one level. It’s progressive in that it tries to tax rich people (who have more income) at a higher rate; and poor people (those with less income) at lower tax rates.

For example, the rates for 2008 for those filing Married Filing Jointly are as follows:
10% on the income between $0 and $16,050
15% on the income between $16,050 and $65,100; plus $1,605.00
25% on the income between $65,100 and $131,450; plus $8,962.50
28% on the income between $131,450 and $200,300; plus $25,550.00
33% on the income between $200,300 and $357,700; plus $44,828.00
35% on the income over $357,700; plus $96,770.00

So, as seen above, only the first $16k of your income will be taxed at the 10% rate. And every other married couple in America will also have the first $16k of their income taxed at 10%. Then your income will be taxed as you move up from there.  It’s actually more complicated than this, but this is a good start.

Now you know - go conquer the world.

Thanks, Jason M. Blumer

IRS Circular 230 Disclosure: To ensure compliance with requirements imposed by the IRS, we inform you that (i) any U.S. tax advice contained in this communication (including any attachments) is not intended or written to be used, and cannot be used, for the purpose of avoiding penalties under the Internal Revenue Code; (ii) any such tax advice is written in connection with the promotion or marketing of the matters addressed; and (iii) if you are not the original addressee of this communication, you should seek advice based on your particular circumstances from an independent advisor.

Last week was a great week of our THRIVEal classes! 

These classes are part of our THRIVEal Business Success Series.  We offer free classes to our clients every May and November on various topics from Marketing and Branding to the proper tax structures to operate their businesses in.

Here’s a recap…

Monday- Running Your Business on QuickBooks: An Introduction - We touched on the “need-to-know” stuff.  We don’t hit every participant with the whole program.  That tends to overwhelm.  We focused on letting our clients know what they had to do in order to be successful with the program.

Tuesday- Tax Class 101 - We laid out the various tax structures an entrepreneur can operate within, and explained what they were for.  We got a little “techy” and had to use some tax-related language, but overall the group learned a lot.  We went through a very eye-opening example of switching a client from a sole proprietor structure to an S Corp.  We were marveled at the tax dough that can be saved by doing this.

Wednesday- Strategies for Success in Your Business - Clearly the best class of the week!  It’s a topic I love and one that our participants responded to.  We passed on a heavy theoretical dose of management theory to our clients, why they do business, and how we consult with our clients toward growth.  We focused on technical people going into business to do business work, and how entrepreneurs have faulty mentalities when starting new businesses.  With examples from a great book, The E Myth: Why Most Small Businesses Don’t Work and What to Do About It, we helped our clients transition their thinking from one of faulty thinking to one of successful thinking.

Thursday- Efficient Use of Business Technology - We brought in a guest lecturer for this one.  He went through all of the various areas of technology that may help a startup or entrepreneur so that they might leave with one or two ideas of how to improve the efficiency of their office/business.

Friday - Future-Oriented Strategies: How to Budget for Your Business - We spoke of the value of looking ahead in every aspect of life (we all use future-oriented strategies in many aspects of planning for life).  Budgeting for your business should be no different.  We went through some of our high-end software that does regression analysis (statistics are so much fun!) on historical data and projects that data out into the future.  Fun stuff!

Overall the classes were a great success, and I believe they were of great benefit to our clients.  Thanks to all who participated.  E-mail me at thriveal@gmail.com for a pdf of any of the outlines.  Looking forward to November…

Peace out.

Thanks, Jason M. Blumer

The IRS is so lovely.  In what other county can you get “free money” from the government to spend any way you want?  Oh, I feel a song coming on…

“And I’m proud to be an American, where at least the cash is free,

and I won’t forget what the government did so I can spend more funds on me,

and I proudly stand up and wave to you the receipt of my new TV,

I’m proud to be an American and stimulatin’ the economy!”

Sorry - I got a little patriotic there.  Anyway, I wanted to assist some of our readers about some of the basics of the IRS stimulus payment.  It’s going out soon, so you’ll want to run to your mailbox every day to see when it arrives.

1  If you checked the “direct deposit” box for the refund from your 2007 tax return (even if you weren’t due a refund), then your stimulus check will be deposited in to the same bank and account you listed then.

2  To get the payment, you have to have earned income of at least $3,000 (basically, there is a little more to it than that) OR at least some kind of tax liability, a valid SSN# and you can’t be claimed by someone else on their 2007 return.

3  If you have NO tax liability but still have some kind of earned income (again, of at least $3,000), then you’ll only get the BASIC payment, which is $300 for a single person and $600 for a married filing joint couple.  On top of this, they’ll add $300 per qualifying child that you are including on your return (but the kiddo must be under 17 years of age as of 12/31/07).

4  You have to have filed your 2007 return already in order to get your payment this early.  And if you extended your return to October 15th, then the IRS still estimates that you’ll get the stimulus payment before the end of the year.  The sooner you file the quicker you’ll get your big screen TV, I mean, stimulus payment.

5  If you don’t file a 2007 return (because you don’t have to), then you won’t get the check.  File the return, get the check.  No return, no check.

6  If you are single and your income is higher than $75k a year, then your stimulus payment will begin phasing out.  If you are filing married filing joint for 2007, then your stimulus payment begins to phase out at $150k.  The stimulus payment is phased out starting with 5% of everything over the threshold income amount.

7  Wondering if you get the stimulus payment?  Ask the all-seeing all-knowing Economic Stimulus Payment Calculator to see.  You’ll need your 2007 tax return in front of you to go through this exercise.

8  This stimulus payment won’t increase or lower your taxes or refund when you file your 2008 tax return.  The stimulus payment is simply a “pre-payment” on the refund you will be due when you file your 2008 taxes.  Those who don’t get it now will get it when they file their 2008 tax returns (as long as you are eligible for 2008).

9  If you already owe the IRS some money, then you probably won’t be getting your stimulus payment.

10  The payments are being processed according to the last two digits of your SSN#.  Check out the schedule from the IRS: 

Enjoy your new big screen TV.

Thanks, Jason M. Blumer, CPA

Tax season officially ended this past Tuesday, and I have been out of commission since the beginning of January.

We have been busy…

1  doing a lot of business tax returns

2  doing a lot of individual tax returns

3  starting a management consulting engagement in Atlanta

4  assisting with an internationally-related internal embezzlement case

5  wrapping up another “two-partners-fighting” fraud case

6  hiring and firing three or four new people in our firm (and training)

We’ve definitely been busy, and I’m enjoying a break now (we are taking a few days off after tax season) with my family.  I’ve missed them.

Here is what’s coming up…

1  our Thriveal Business Success Series classes start in late May (brochures are coming out in the mail soon - email me at thriveal@gmail.com to receive one),

2  we are going to be focusing on our marketing campaigns a little more with our PR firm, and hiring a marketing intern for the summer,

3  we received a big box of books from John L. Herman “Herman” (entrepreneurial guru of hermanisms.com) and will be hopefully doing a blog interview post with Herman soon, and giving away some of his awesome books in a contest (stay tuned!) 

That’s about it (and that’s plenty).  I’m tired and I need a break.

Thanks, Jason M. Blumer

[following is a tax update I sent to my clients in our year end update letter]

The long-awaited “AMT patch” was finally signed into law on Wednesday, December 19^th, 2007.  We wanted to give you an update on the potential for this tax to affect nearly 21 million taxpayers in 2007.  Since 1969, the Alternative Minimum Tax (AMT) has been available in the tax code to make sure the very rich pay some tax.  However, the income exemption levels protecting the middle class from having AMT imposed on them do not increase each year with inflation.  Some consider this a major flaw in the original bill (although the bill provides some pretty nice tax revenue for the treasury each year).  Due to this oversight in the original bill, and as incomes have risen, more and more middle class have been subject to the AMT.  And this most recent legislation is only a one-year patch, with the quarreling to begin again next year (an election year, no less).  Now that the patch has been passed, these AMT tax revenues won’t be making their way into the coffers of the U.S. Treasury.

On the other hand, no offsetting tax savings were passed in this AMT patch bill – less AMT tax revenues means an estimated $50 billion have been added to the U.S. deficit due to this law. Had the exemption patch not been passed, those married filing joint taxpayers with income (slightly modified) over $45,000 would have felt the AMT bite.  That would have been nearly 23 million taxpayers this year (consider: only 3.5 million taxpayers paid AMT in 2006).  However, the patch has raised this married filing joint income exemption level to $66,250 ($44,350 for single taxpayers) for 2007, safe enough to exempt most middle class taxpayers.

The AMT provisions affect a number of the IRS’s internal programming capabilities, and have estimated a seven week delay in processing returns for this tax season.  The IRS is unsure if this needed reprogramming and testing of its system will make both AMT AND non-AMT filers wait for the proper processing of their returns.  We at Blumer & Associates, CPAs, PC use some high-end tax processing software, and all approved forms must come through our tax vendor.  We will keep you informed on the processing delays as tax season progresses.  We don’t expect it to actually take seven weeks (tax legislation was passed last year on Dec. 20^th and the delay was only about three weeks).

Other late-year tax news includes a mortgage relief bill for those forced to claim mortgage debt forgiveness as income.  Basically, taxpayers facing foreclosure of their homes often have debt forgiveness given to them by mortgage companies who can’t cover that taxpayers full loan balance with the sale of their home (often called a short sale).  This forgiveness comes in the form of a 1099, or “imputed” income, to the taxpayer.  In this new bill, up to $2 million dollars of this “imputed” income on primary residences can be excluded from income, IF the mortgage is refinanced within a three year window.

OTHER MAJOR LAW CHANGES: The 2008 budget omnibus bill was also passed to keep the Treasury department running, with $70 billion going to fund the wars in Iraq and Afghanistan. An energy bill was also passed raising vehicle fuel economy standards by 40%, and increasing biofuel production.  

In addition, victims’ families of the awful Virginia Tech shooting will receive some income exclusion benefits related to payments received from special memorial funds.

Thanks, Jason M. Blumer