By April 20, 2018, 138 million taxpayers had dutifully filed their federal income tax returns.¹ And all of them made decisions about deductions and credits—whether they knew it or not. When you take the time to learn more about how it works, you may be able to put the tax code to work for you. A good place to start is with two important tax concepts: credits and deductions.² Credits As tax credits are usually subtracted [...]
American educational reformer Horace Mann called education “the great equalizer.”¹ In football, it’s been said that turnovers are the great equalizer. And anyone who’s ever watched CBS’s “The Amazing Race,” knows airport delays are the great equalizer in a race around the world. In taxes, there’s also an equalizer of sorts; it’s called the alternative minimum tax, or AMT. Instituted in 1969, it was intended to ensure that the very rich didn’t pay a lower [...]
According to the most recent information available, Americans have individual life insurance with a total face value of $12 trillion.1 Due to a variety of factors, these individuals may find themselves in circumstances where the specific life insurance policy or annuity contract they own does not suit their needs.2 They may want to exchange products without incurring a taxable event. That’s where Section 1035 of the Internal Revenue Code comes in. A 1035 exchange provides a [...]
“Audit” is a word that can strike fear into the hearts of taxpayers. However, the chances of an Internal Revenue Service audit aren’t that high. In 2017, the IRS audited 0.5% of all individual tax returns.¹ And being audited does not necessarily imply that the IRS suspects wrongdoing. The IRS says an audit is just a formal review of a tax return to ensure information is being reported according to current tax law and to [...]
Taxes are one of the biggest budget items for most taxpayers, yet many have no idea what they’re getting for their money. In 2017, as in recent years, Americans spent more on taxes than on groceries, clothing, and shelter combined. In fact, we worked until late April just to earn enough money to pay our taxes. So what do all those weeks of work get us?1 Fast Fact: In the Hole. In fiscal 2018, the federal government [...]
The Internal Revenue Service estimates that taxpayers and businesses spend 8.1 billion hours a year complying with tax-filing requirements. To put this into perspective, if all this work were done by a single company, it would need about four million full-time employees and be one of the largest industries in the U.S.¹ As complex as the details of taxes can be, the income tax process is fairly straightforward. However, the majority of Americans would rather [...]
By any measure, the tax code is huge. According to Commerce Clearing House's Standard Federal Tax Reporter it's up to 74,608 pages in length.¹ And each Monday, the Internal Revenue Service publishes a 20- to 50- page bulletin about various aspects of the tax code.² Fortunately, it’s not necessary to wade through these massive libraries to understand how income taxes work. Understanding a few key concepts may provide a solid foundation. One of the key concepts is marginal [...]
