Browsing Category: "Taxes"
Flat tax, my oppinion
Taxes, the one word that can spark heated discussion among friends, enemy’s and politicians. The United States tax system is so complicated that even our own government has trouble deciphering all the legal codes and laws. Does our tax system need a major overhaul?
A flat rate tax has been mentioned and discussed several times throughout our nations history. There are many proponents and opponents to the flat tax system, both sides having very valid and logical arguments. Would a flat tax system benefit our Nation and is the flat tax system fair to everyone?
Basically a flat tax would ensure that everyone pays the same percentage of taxes on their income. Lets say the rate is 25% someone who makes $20,000 would pay $5,000 in taxes and someone who made $200,000 would pay $50,000. Most flat tax systems allow no or very few exemptions making tax time and tax returns very simple.
I think a perfect system would allow a flat percentage charged to everyone, with very few deductions. These deductions would include children, mortgage interest and charitable contributions (which should be very documented).
Even though I’m not upper class, financially speaking, I don’t think it’s fair to place more of the tax burden on the upper class. Why should the wealthy be penalized for being successful in life. I would hope this new tax system would encourage the wealthy to donate more money to charity and help those who are less fortunate, but I don’t think they should be penalized.
Currently the US Revenue Code is over 9 million words long and contains many loopholes, deductions, and exemptions. Â A flat tax system would help eliminate millions of dollars that slide through the cracks every year. It would save the IRS millions of dollars and thousands of man hours.
No matter what tax system we use there will be pros and cons. There will also be thousands of supporters and just as many protesters. I personally don’t know if we “need” a tax system overhaul, but I think things can be done more efficiently
Stimulus Package Tax Savings
Almost every American household will see some tax savings on their paycheck sometime in April. The average overall estimated tax saving should be about $1179. There are several factors that influence the exact amount of cash you will see including marital status, dependents, etc.
So how will you use your ~$100 per month in savings? I’ve compiled a top 5 list of great ideas of how to use your new found tax savings.- Start an automatic savings account – Just a few posts ago I talked about how easy it is to setup an automatic savings account and have money automatically deducted from your paycheck and placed into savings. It’s a great time to get started since you won’t miss the money.
- Pay off some debt. Again since this will be unexpected money why not put it to use before it even gets to your budget. If you have high interest credit cards start paying extra on them every month or even every week. If you have online access to your credit card accounts they allow you to make payments at any time. When you get your paycheck, immediately send it to the balance.
- Split the savings into a few different categories of your budget. First, give yourself some extra spending money. After all that’s what the stimulus package was designed for in the first place. Plan to go out to dinner somewhere nice every month and use some of the tax savings. Send some of the other money to a savings account or use it to pay down debt.
- Start a Roth IRA or similar retirement fund or increase the amount you are contributing. Now is a great time to enter the market or increase the amount you are contributing. Stocks are at their lowest points in years so there are some great deals to be found.
- Start an emergency fund. We all need to have a fund stashed away for a rainy day. Even if it’s just $1,000 in an easily accessible account you will appreciate it down the road. Life is full of unexpected events and being financially prepared will save you more money and stress.
A $400 to $800 credit for many taxpayers
One of the provisions of the new stimulus package includes a payroll tax credit of somewhere between $400 and $800 for most taxpayers. For the average worker this will equate to an increase of about $8 per paycheck. I’m not here to bash the stimulus package because I really hope it works, but I’m not sure how much $8 a week is going to stimulate the economy. I realize something has to be done I’m just not sure this was a great solution.
With that being said what will you do with your $8 per week pay increase? Again this isn’t going to be much of an economy stimulator but wouldn’t it be a great time to start an automatic savings plan? Technology and banks have made it so easy to save money these days there is really no excuse not to start.
Most employers offer you the opportunity to divert money into different accounts. If you already have your check direct deposited then more than likely you can divide the money into different accounts. Just ask your company accountant or your payroll person to help you with this. Since you will be getting $8 per week extra you won’t miss the money if you set this up before it starts.
Another option it to setup an automatic savings plan with your bank or credit union. Most banks allow you to set this up with just a few clicks of the mouse. Again this is money you aren’t used to getting so why not start the automatic savings plan today? By saving $8 per week at a 2% interest rate (yes you can get this with online banks) for 10 years you will accumulate over $4,200!
Start preparing for next years taxes today!
It’s that time of year, time to calculate how much you owe Uncle Sam or how much you money you let the government borrow all year, interest free. This article, however isn’t about adjusting your deductions so you bring home more money it’s about the importance of keeping good records and receipts throughout the year.
Turbo Tax has a great online tax software that allows you to completely do your taxes online and they only charge you if you actually file through them. It’s a great way to double check yourself or get an exact estimate of how much money you will get back or pay this year even if you have your taxes professionally prepared. The software keeps track of your total return or amount owed as you go through each step of preparing your taxes. After you enter your W2 it give you a tally, enter more miscellaneous income and it gives you a tally, enter deductions it gives you a tally, etc. Anyway, I took advantage of this great software and filled out our tax information completely before I took them to our accountant this year and I’ll compare the results.
As I was filling out our information I realized that we have neglected a good deduction for the past few years. Our accountant always asks us if my wife, who is in education, has any educators expenses that we would like to claim. I guess I never realized that you can claim up to $250 for this and you get most of it back. Throughout the year she spends a few dollars here and there and I’m sure it would add up to close to $250 but we never save the receipts. Because we were not prepared we will probably lose over $100 in taxes this year.
So don’t think it’s too early to start preparing for your 2009 taxes. Start a folder today with receipts and donations. Keep good records throughout the year and you will be rewarded. Also learn about all the different deductions offered so you can track them throughout the year instead of scrambling through documents in February!
Tax Rebate Incentive Package, Worthless
Tax Rebate Incentive Package, Worthless
Well, the government’s attempt to stimulate the economy seems to be a worthless endeavor and a recession seems to be inevitable. With rebate checks already in the bank for many of those tax payers who filed electronically much of the anticipated cash will be going to other things than toys and games.
Tax Returns NOT a Savings Account
Tax returns are not a savings account
I know you might enjoy getting back a $3,000 tax return around February every year, but is it really the best financial move? The easy answer is NO! Many people think it’s a great way to save money and it’s a wonderful unexpected chunk of money to get back just after then new year. In reality it’s the worst savings plan you can imagine.
Give Yourself a Raise
Adjust Your Taxes, Give yourself a Raise
Do you always get back tax money from the government every year? If so then you are losing valuable money to the government. The average tax return for Americans is going to top $2,500 this year. Do the math and that’s almost $50 per week that you are letting the government borrow for an entire year! Not only are you letting them keep the money all year but you are also losing valuable interest. How many people do you know that would be willing to let you borrow $2,500 without paying back any interest?
