Is Social Security retirement income taxable?
Social Security retirement benefits are taxable, although it depends on your total income and civil status. Federal law states that an individual must pay taxes if he/she has annual Social Security retirement income of more than $25,000. If he/she has a married status, they must pay such taxes if the income is more than $32,000.
However, if the Social Security retirement benefit is the recipient’s only source of income, then it is rendered to be non-taxable and there is no need to file a federal income tax return.
* Are other pension payments (not SS) taxable?
Just like Social Security benefit payments, other pension payments are taxable, although it is dependent on the recipient’s income and marital status. If such payment is only his source of income, then it may be tax-free. Other conditions are also stipulated on the Instruction Booklet of the Internal Revenue Services (IRS).
* Are tips taxable?
Tips are not taxable if they are given for a service not correlated with a taxable sale. For instance, the tip that you give when your luggage is carried or your hotel room is cleaned is not taxable.
Another perfect example is the tip that you leave your waiter after your meal at a restaurant. In these instances, tips are not taxable.
However, there are taxable tips. These are called mandatory tips, where it is given on a service that is associated in taxable sale.
An example of such a tip is the amount that you have added to a certain meal or beverage (such as a bottomless ice tea which you need to add a certain amount). Such tips are printed in the restaurant’s menu or placed in their advertisement, if any.
* Is child support taxable?
Child support is not taxable. This is neither deductible by the payor nor taxable to the payee. Topic 422 of the Non-taxable Income determined by the Internal Revenue Services (IRS) stipulates that child support payments are not included in taxable income. Thus, it is not included in filing a tax return.
* Are gifts taxable?
Gifts are taxable. It depends on the equivalent amount of the gift to be given. For instance, if you have given somebody a cash gift worth $11,000.00, it has an equivalent deductible tax charged to the giver.
However, there are also stipulations in the law that allow you to give certain amounts, whether in cash or property, which do not have gift tax consequences. Gifts to charities or raffle draw winners have a corresponding deductible tax depending on the cash gift that they have received.
By: Terrance Quixley
Saturday, December 6, 2008
What Do We Get For Our Taxes?
Tax time is coming around again. I'm reminded because I just placed my order for the 2007 version of TurboTax, which is a software application that guides me through federal and Pennsylvania tax return preparation. The damn tax code has become so complex, you really need either a good accountant or a tax package to get it right.
Taxes are everywhere, on everything. Federal income tax, Social Security, Medicare, federal death tax, Medicaid, state income tax, state sales tax, state death tax … let me catch my breath. Certain cities or counties get you for an income tax or a wage tax or maybe even a sales tax. Then there are the smaller but still irritating levies like federal and state gasoline taxes, the state automobile registration tax, the hotel room occupancy tax (talk about taxation without representation!) and the federal telephone taxes (check out your phone bill for the beloved Federal Subscriber Line Charge and the smaller, but still irritating Federal Universal Service Fee). And if you have a small business, well, I won't get into that.
They tax you when you earn, they tax you when you buy and they tax you when you die. Whatever you do, the Taxman has his hand in your pocket. If they could figure out how to do it, they'd tax you for bodily functions. Maybe a little meter on the toilet. Two cents per flush. Wireless, of course.
And think about the skillions of hours that are wasted on tax planning, preparation and collection. Tax attorneys, tax accountants, tax return software, IRS employees, state and local tax collectors, they are all working day and night on our taxes. While you're sleeping innocently in your bed, an IRS computer is selecting you for an audit. And if you are in a hotel, you're paying tax to sleep while that IRS computer is humming away. Your federal government at work.
I read somewhere that the top half of earners pay 96% of federal income taxes while the lower half pays 4%. The principle that a person with a larger income should pay more in taxes is fair, but 96% seems a bit extreme. Every citizen with a decent income, it seems to me, should pay something in taxes. Even if it's only a couple of bucks withheld from each paycheck, at least you're holding up your end as best you can.
My personal choice would be for a flat income tax. No tax on the first twenty five grand, then 15% on everything after that. Or something similar. Allow a few deductibles such as spouse and children, mortgage and medical. Keep it really simple, so that a normal person could file their return without screaming. That's right, tax prep would become the no scream zone. Maybe even no cursing … okay, I lost my head. Anyway, I enjoy cursing at my return.
It's interesting that our government has too much money and yet not enough. A duality that would interest a quantum mechanics researcher. Here's the issue: the government needs more money to fund entitlements such as Social Security and Medicare, but a big tax increase might plunge the economy into recession. And recessions are not good for incumbent politicians.
The simple truth is that people should be allowed to keep the bulk of the money they earn. They know what they need better than a government bureaucrat. Plus, the more an entrepreneur can keep, the more likely she is to invest her money in a small business, and that's what drives the economy. JFK knew that and so did Reagan and Bush 43.
Entitlements are out of control. Already Medicare has more money going out in benefits than tax payments coming in. Social Security is still in the black, but economists predict 2017 as the date it goes into the red. To fund these deficits, the government has to increase its borrowing, raise taxes or divert funds from other programs. These are not good alternatives, so why don't we actually try to fix these creaky old programs. To put it bluntly, they suck. No rational young person would invest his money in Social Security if he had a choice. Let's fix the damn thing!
Unfortunately, it's not going to happen. Here's a bold prediction — they'll eventually put together a bipartisan, blue ribbon, lip smacking panel of old pols and they'll recommend … hold your breath … raising Social Security taxes.
Let's face it, we fifty plus citizens are pretty demanding. We coughed up money supporting prior generations, so we want our fair share of the benefits when we get older. Without these entitlements, many baby boomers will have a tough retirement. If you can afford to retire.
But let's be fair and look at it from the point of the twenty something working stiff. The ratio of retired persons to workers is getting worse year by year. A young guy or gal has forty or fifty years of ever increasing Social Security taxes to pay. They are not happy and I don't blame them.
By: Dan Ronco
Taxes are everywhere, on everything. Federal income tax, Social Security, Medicare, federal death tax, Medicaid, state income tax, state sales tax, state death tax … let me catch my breath. Certain cities or counties get you for an income tax or a wage tax or maybe even a sales tax. Then there are the smaller but still irritating levies like federal and state gasoline taxes, the state automobile registration tax, the hotel room occupancy tax (talk about taxation without representation!) and the federal telephone taxes (check out your phone bill for the beloved Federal Subscriber Line Charge and the smaller, but still irritating Federal Universal Service Fee). And if you have a small business, well, I won't get into that.
They tax you when you earn, they tax you when you buy and they tax you when you die. Whatever you do, the Taxman has his hand in your pocket. If they could figure out how to do it, they'd tax you for bodily functions. Maybe a little meter on the toilet. Two cents per flush. Wireless, of course.
And think about the skillions of hours that are wasted on tax planning, preparation and collection. Tax attorneys, tax accountants, tax return software, IRS employees, state and local tax collectors, they are all working day and night on our taxes. While you're sleeping innocently in your bed, an IRS computer is selecting you for an audit. And if you are in a hotel, you're paying tax to sleep while that IRS computer is humming away. Your federal government at work.
I read somewhere that the top half of earners pay 96% of federal income taxes while the lower half pays 4%. The principle that a person with a larger income should pay more in taxes is fair, but 96% seems a bit extreme. Every citizen with a decent income, it seems to me, should pay something in taxes. Even if it's only a couple of bucks withheld from each paycheck, at least you're holding up your end as best you can.
My personal choice would be for a flat income tax. No tax on the first twenty five grand, then 15% on everything after that. Or something similar. Allow a few deductibles such as spouse and children, mortgage and medical. Keep it really simple, so that a normal person could file their return without screaming. That's right, tax prep would become the no scream zone. Maybe even no cursing … okay, I lost my head. Anyway, I enjoy cursing at my return.
It's interesting that our government has too much money and yet not enough. A duality that would interest a quantum mechanics researcher. Here's the issue: the government needs more money to fund entitlements such as Social Security and Medicare, but a big tax increase might plunge the economy into recession. And recessions are not good for incumbent politicians.
The simple truth is that people should be allowed to keep the bulk of the money they earn. They know what they need better than a government bureaucrat. Plus, the more an entrepreneur can keep, the more likely she is to invest her money in a small business, and that's what drives the economy. JFK knew that and so did Reagan and Bush 43.
Entitlements are out of control. Already Medicare has more money going out in benefits than tax payments coming in. Social Security is still in the black, but economists predict 2017 as the date it goes into the red. To fund these deficits, the government has to increase its borrowing, raise taxes or divert funds from other programs. These are not good alternatives, so why don't we actually try to fix these creaky old programs. To put it bluntly, they suck. No rational young person would invest his money in Social Security if he had a choice. Let's fix the damn thing!
Unfortunately, it's not going to happen. Here's a bold prediction — they'll eventually put together a bipartisan, blue ribbon, lip smacking panel of old pols and they'll recommend … hold your breath … raising Social Security taxes.
Let's face it, we fifty plus citizens are pretty demanding. We coughed up money supporting prior generations, so we want our fair share of the benefits when we get older. Without these entitlements, many baby boomers will have a tough retirement. If you can afford to retire.
But let's be fair and look at it from the point of the twenty something working stiff. The ratio of retired persons to workers is getting worse year by year. A young guy or gal has forty or fifty years of ever increasing Social Security taxes to pay. They are not happy and I don't blame them.
By: Dan Ronco
What Does It Take To Pay Zero Taxes?
How many times have you heard someone say, "I don't pay any taxes. My accountant takes real good care of me . . . I haven't paid a dime in taxes in years."
Does that outrageous statement sound familiar?
Maybe it's your brother-in-law, or a fellow Soccer Mom, or a co-worker at the office.
And so you think to yourself, "What am I doing wrong? How come I'm paying taxes and so-and-so says he/she pays nothing? How do they do it!"
Is it really possible to pay "zero taxes"?
For purposes of this article, let's give your "no-tax" friend or relative a name. Let's call him "Charlie" (or if he is a she, just think "Charlene").
OK, what is Charlie up to? What's his secret?
Charlie has no secret. He's not doing anything that you should be doing. Do not be envious of Charlie, and here's why . . .
I can think of at least five reasons you should ignore whatever Charlie says about his "no-tax" situation.
REASON #1: Charlie is a liar. Every family has one, so don't feel bad. Let's face it, some people just like to indulge in fabrications to make themselves feel good. Charlie is telling you a big fat lie because Charlie has "issues." 'Nuff said?
REASON #2: Charlie is pond scum. OK, hear me out on this one. I don't mean to offend you if Charlie is a close and dear relative, or your best friend, but I'm going to give it to you straight: Charlie cheats on his tax return, and he cheats big time. There are plenty of folks out there like Charlie. He's one of the reasons that you and I pay so much in taxes -- he doesn't report all his income, and he deducts bogus expenses by the thousands.
He and his accountant may even be in cahoots on this. Charlie brings in his records and his accountant crunches the numbers, then calls Charlie and says, "You owe $5,000." So Charlie rummages around in his files and somehow manages to come up with another batch of expenses that miraculously
reduce his balance due to zero. It's like magic!
End result: Charlie's tax return is a big lie.
Charlie is a thief. Charlie should be put in jail for the tens of thousands in taxes he has illegally withheld from the government over the years.
REASON #3: Charlie is stupid. Again, I'm sorry if I'm being too hard on Charlie. But some people are so clueless about taxes that if they have no balance due on their return, or if they are getting a refund, they mistakenly believe they didn't pay any tax that year.
And believe it or not, this is actually a very common misconception that thousands of people cling to. Ah, to be so blissfully ignorant!
I hope you are not so naive to think that the "bottom line" on your tax return tells the whole story about your tax liability. It doesn't.
REASON #4: Charlie is broke. Charlie may actually pay zero taxes because --are you ready for this one? -- Charlie doesn't make any money!
Charlie owns a small business or works full-time at his self-employment activity, and Charlie may rake in hundreds of thousands in income from sales of his product or service -- but Charlie's business spends more than it brings in, and Charlie's business has a loss every year.
So Charlie doesn't really have a tax problem. Instead Charlie has any number of other problems. He has a marketing problem, or a management problem, or a personnel problem. Charlie's business is failing, and paying zero taxes is just a symptom of a business that will eventually close.
REASON #5: Charlie is just scraping by. Charlie's business may not be losing money every year, but it's not really making much either. He has a small profit -- enough to keep him busy. His business may even "look" profitable, but it's really the classic shoestring operation.
So now, I ask you, do you really want to pay zero taxes? People who don't pay taxes are usually in one of these five categories: Chronic Liars, Pond Scum, Stupid, Broke, or Just Scraping By.
The purpose of business is to be profitable.
The unavoidable result of a profitable business is taxes. And yes, you should do everything legally possible to reduce those taxes. But if you are going to be successful, you are going to pay some taxes.
When it comes to taxes, stay away from Charlie.
By: Wayne M. Davies
Does that outrageous statement sound familiar?
Maybe it's your brother-in-law, or a fellow Soccer Mom, or a co-worker at the office.
And so you think to yourself, "What am I doing wrong? How come I'm paying taxes and so-and-so says he/she pays nothing? How do they do it!"
Is it really possible to pay "zero taxes"?
For purposes of this article, let's give your "no-tax" friend or relative a name. Let's call him "Charlie" (or if he is a she, just think "Charlene").
OK, what is Charlie up to? What's his secret?
Charlie has no secret. He's not doing anything that you should be doing. Do not be envious of Charlie, and here's why . . .
I can think of at least five reasons you should ignore whatever Charlie says about his "no-tax" situation.
REASON #1: Charlie is a liar. Every family has one, so don't feel bad. Let's face it, some people just like to indulge in fabrications to make themselves feel good. Charlie is telling you a big fat lie because Charlie has "issues." 'Nuff said?
REASON #2: Charlie is pond scum. OK, hear me out on this one. I don't mean to offend you if Charlie is a close and dear relative, or your best friend, but I'm going to give it to you straight: Charlie cheats on his tax return, and he cheats big time. There are plenty of folks out there like Charlie. He's one of the reasons that you and I pay so much in taxes -- he doesn't report all his income, and he deducts bogus expenses by the thousands.
He and his accountant may even be in cahoots on this. Charlie brings in his records and his accountant crunches the numbers, then calls Charlie and says, "You owe $5,000." So Charlie rummages around in his files and somehow manages to come up with another batch of expenses that miraculously
reduce his balance due to zero. It's like magic!
End result: Charlie's tax return is a big lie.
Charlie is a thief. Charlie should be put in jail for the tens of thousands in taxes he has illegally withheld from the government over the years.
REASON #3: Charlie is stupid. Again, I'm sorry if I'm being too hard on Charlie. But some people are so clueless about taxes that if they have no balance due on their return, or if they are getting a refund, they mistakenly believe they didn't pay any tax that year.
And believe it or not, this is actually a very common misconception that thousands of people cling to. Ah, to be so blissfully ignorant!
I hope you are not so naive to think that the "bottom line" on your tax return tells the whole story about your tax liability. It doesn't.
REASON #4: Charlie is broke. Charlie may actually pay zero taxes because --are you ready for this one? -- Charlie doesn't make any money!
Charlie owns a small business or works full-time at his self-employment activity, and Charlie may rake in hundreds of thousands in income from sales of his product or service -- but Charlie's business spends more than it brings in, and Charlie's business has a loss every year.
So Charlie doesn't really have a tax problem. Instead Charlie has any number of other problems. He has a marketing problem, or a management problem, or a personnel problem. Charlie's business is failing, and paying zero taxes is just a symptom of a business that will eventually close.
REASON #5: Charlie is just scraping by. Charlie's business may not be losing money every year, but it's not really making much either. He has a small profit -- enough to keep him busy. His business may even "look" profitable, but it's really the classic shoestring operation.
So now, I ask you, do you really want to pay zero taxes? People who don't pay taxes are usually in one of these five categories: Chronic Liars, Pond Scum, Stupid, Broke, or Just Scraping By.
The purpose of business is to be profitable.
The unavoidable result of a profitable business is taxes. And yes, you should do everything legally possible to reduce those taxes. But if you are going to be successful, you are going to pay some taxes.
When it comes to taxes, stay away from Charlie.
By: Wayne M. Davies
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