IRS Reveals How High Income Earners Pay No Tax!
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.
What is year-end tax planning? or How do I reduce taxable income?
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.
Pay Less Income Tax for IRA Distributions
In the example below this client is taking money from their IRA’s. They would like to take more money and pay less income tax. This dilemma hits taxpayers each and every tax year.
Taking More Money from Your IRA While Paying Less Income Tax Example
Old Tax Return New Tax Return
$10,000 Interest Income $ 0
$10,000 Dividend Income $ 0
$10,000 Capital Gain Distributions $ 0
$5,000 IRA Distributions $ 10,000
$20,000 Pension $ 20,000
$17,000 Taxable Social Security $ 4,000
(Social Security Received $20,000)
$72,000 Total Taxable Income $ 34,000
$8,321 Total Income Tax $ 2,156
Tax Savings $6,165
Would you like a better way to take money from your IRA’s and reduce your income tax bill? 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!
Every day you wait; will cost you more and more in income taxes for 2012 and beyond. Don’t procrastinate, fill-in the Tax Reduction Summary form today to see how much you can save on your taxes.
Eliminating Taxation of Social Security Income
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.
A Cash Transfer Strategy
The Bakers, ages 59 and 57, are still working and are currently in the highest tax bracket. They were seeking ways to reduce their current tax burden. They had accumulated $460,000 in various CD’s and money markets accounts that they wanted to set aside for either future retirement income or for their children’s inheritance. A TRn Legacy strategy providing a cash transfer proved to be a suitable option for the Bakers. Here’s how it worked:
1. The Bakers transferred the assets to TRN Legacy strategy.
2. The TRN Legacy strategy was based on the current value of their assets.
3. The Bakers received an immediate income tax deduction which can save them money on their taxes this year, with a potential 5 year carry-forward.
4. The TRN Legacy strategy plan payments can be utilized to fund immediate life insurance premiums as part of a wealth replacement plan.
5. A portion of the asset was eliminated from their estate.
6. The Bakers recommended their church to benefit from their transaction.
Current Value of Cash Assets $ 460,000
Initial Value of TRN Legacy Strategy $ 460,000
Tax Deduction with TRN Legacy Strategy $ 153,140
Tax Savings at 35% tax Bracket $ 53,599
Immediate Annual Payments for 30
Year Term Certain $ 21,000
Death Benefit from 2nd to Die Life Policy* $2,026,170
A TRN Legacy strategy term certain was issued for the Baker Family that provided an immediate charitable income tax deduction of $153,140, potentially saving them $53,599 in taxes. The TRN Legacy strategy was set up to pay out over 30 years and can be used to fund life insurance premiums that would provide a death benefit of $2.026 million for their heirs. They recommended their church to receive an immediate grant while supporting the charitable works of the legacy strategy. Their plan is re-insured with a major insurance company.
Annuity Transfer Case Study 2
Elsie Carter is an 81 year old widow who had an annuity valued at $274,000. Elsie did not need the income and planned to leave the annuity to her daughter. Elsie was concerned about the tax consequences that her daughter would inherit along with the annuity. She wanted something to go to her church too.
An Annuity Transfer Program also known as a TRN Strategy Plan proved to be a suitable option for Elsie. Here’s how it worked:
1. Elsie transferred ownership of her annuity to TRN Strategy Plan.
2. TRN Strategy Plan based on the full accumulation value was issued.
3. Elsie received an immediate income tax deduction which offset the 1099 gains inside the annuity, helping her settle up with Uncle Sam now.
4. The TRN Strategy Plan will provide a structured inheritance for her daughter, addressing concerns she had about tax issues.
5. Elsie recommended her church to benefit from her transaction.
Current Accumulation Value $ 274,000
Current Cash Surrender Value $ 232,900
Original Cost Basis $ 225,000
Amount of Taxable Gains $ 49,000
Initial Value of TRN Strategy Plan $ 274,000
Tax Deduction with TRN Strategy Plan $ 127,518
Monthly Payments Beginning in 5 Years w/20 Yr Term Certain Payout $ 1,275
A Term Certain Strategy Plan for Elsie was issued that provided an immediate charitable income tax deduction of $127,518. Elsie’s current income is $53,000. She will receive a 1099 this year of $49,000 (on the gains inside the annuity), bringing her total new income to $102,000. The tax deduction reduces her taxable income by up to 50%, thereby bringing her taxable income back to $51,000. This allows her to offset the $49,000 of gain from her annuity AND save money on taxes this year. The remaining deduction of $76,518 can still be carried forward to reduce her taxes next year. Her TRN Strategy Plan is designed to pay out over 20 years beginning when she passes away. She named her daughter to receive payments from the TRN Strategy Plan and recommended her church to receive an immediate grant, while supporting the charitable works of LTF. Her plan is reinsured with a major insurance company.