Tax Rates Over the Years

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Tax rates over the years

Tax rates are scheduled to go higher next year, with the top rate once again hitting 39.6%. For a look at tax rates over the years, here’s a partial history of our federal income tax rates for individuals since the income tax was created in 1913.

Federal Income Tax Rates Since 1913

Year              Lowest bracket    Top bracket

1913-1915               1%                   7%

1918                         6%                  73%

1923                         3%                  56%

1925-1928               1.5%                25%

1936-1939                4%                  79%

1944-1945               23%                 94%

1964                        16%                 77%

1971-1981               14%                 70%

1982-1986               12%                 50%

1988-1990               15%                 28%

1993-2000               15%                39.6%

2003-2010               10%                 35%

David Bradsher, CPA  is a Washington DC / Northern Virginia area CPA who works with small business owners and non profit leaders on a monthly basis to provide them with guidance and advice on how to grow their organizations, minimize their tax liabilities and increase their bottom line.

Will Congress cause your Paycheck to be incorrect?

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Unless congress acts by December 10, your paycheck may or may not be correct. It all depends on the if the Bush-era tax cuts are extended. If they are extended to some degree, which most expect that they will be the IRS may not have enough time to update the information used by your payroll department to withhold the correct amount of tax from your paycheck.

See this for more infomation –

Senate tax-vote delay causes headaches for payroll departments

Evaluate risk in your investments

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If nothing else, the recent financial meltdown provided an important learning experience and reinforced time-tested concepts about risk in investing. None of these lessons will comfort investors. However, we can still evaluate investment risks, at least on a relative scale.

Conservative investors fear loss of principal above all. They flock to lower-risk vehicles, such as Treasury bonds, CDs, and money market funds, which are comparatively well known and easy to understand. They’re willing to accept a lower ceiling on their potential earnings in exchange for a lower risk of losing principal. However, this reasoning ignores or underrates a different but no less serious risk: that inflation will outstrip the earning power of the investor’s savings, causing the principal to lose value even when achieving its maximum rate of return. In the worst case, conservative investors can outlive their investments.

Aggressive investors have no problem with risky investments if the investments carry a high profit potential. The more rational risk-takers recognize a corresponding loss potential and accordingly risk no more principal than they can afford to lose. Less rational people may continue to risk everything until little or nothing remains.

The wisest investors take a balanced approach. Since most have neither the time nor the resources to analyze individual investments in depth, they generally refer to advice and analysis provided by outside sources. They also diversify their holdings so that if one investment fails, their portfolios are not irreparably damaged.

The mix of assets in your own portfolio should reflect your risk tolerance, but it also should be tempered by an awareness that both extreme caution and excessive risk-taking can be pathways to ruin. In general, no one stock or other single investment (excluding mutual funds, which are bundles of investments) should comprise a major part of your portfolio. Varying the types of assets in your portfolio (foreign vs. domestic stocks, bonds, mutual funds, Treasury bills) can provide an additional margin of safety.

You can’t escape risk in the world of investments, but you should try to choose the investments that fit both your risk comfort level and your personal financial situation.

David Bradsher, CPA  is a Washington DC / Northern Virginia area CPA who works with small business owners and non profit leaders on a monthly basis to provide them with guidance and advice on how to grow their organizations, minimize their tax liabilities and increase their bottom line.

Will the kiddie tax apply to you?

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Kiddie Tax - What you need to know

Got college-bound kids? Then you might have questions about the kiddie tax, since these federal rules can apply to the unearned income of full-time students up to age 24.

Here’s an overview of the rules.

* The basics. The kiddie tax affects how much you’ll pay on part of the investment income your child receives, such as interest or dividends. When the rules come into play, this “unearned income” is taxed using your rates.

* How the tax is applied. For 2010, the first $950 of your child’s unearned income is tax-free. Tax is calculated on the next $950 using your child’s federal tax rate, which can be as low as 5%. Unearned income over $1,900 is taxed at your federal income tax rate, when that rate is higher than your child’s.

For an 18-year-old, the kiddie tax applies when your child’s earned income â?? that is, money received from wages, salary, tips, commissions, and bonuses â?? is less than half the cost of providing necessities such as food, clothing, and shelter.

The same 50% support exception applies when your child is a full-time student and age 19 through 23.

* Planning tip. Consider hiring your college student in your family business. Wages are earned income and can lessen or eliminate the kiddie tax.

Still have questions about the kiddie tax? Give us a call. We have answers, information, and planning strategies.

David Bradsher, CPA  is a Washington DC / Northern Virginia area CPA who works with small business owners and non profit leaders on a monthly basis to provide them with guidance and advice on how to grow their organizations, minimize their tax liabilities and increase their bottom line.

New Law saves education jobs

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On August 10, President Obama signed into law the “Education Jobs and Medicaid Assistance Act of 2010.” The law will fund the jobs of an estimated 140,000 teachers who would otherwise have lost their jobs, and it will help states with Medicaid costs.

To pay for these provisions, the law makes a number of changes to the foreign tax credit and eliminates the advance payment option for the earned income credit.

If you need details of provisions that affect you or your business, contact our office.

David Bradsher, CPA  is a Washington DC / Northern Virginia area CPA who works with small business owners and non profit leaders on a monthly basis to provide them with guidance and advice on how to grow their organizations, minimize their tax liabilities and increase their bottom line.

IRS extends filing deadline for small charities

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All nonprofit organizations (except for churches and church-related groups) must file an annual return with the IRS. Failure to do so for three consecutive years results in the loss of the organization’s tax-exempt status. The filing deadline for the 2009 return was May 17, 2010, and thousands of small charities hit the three-year failure to file point on that date.

The IRS had conducted an extensive notification program to remind charities of their filing obligation, but large numbers still have not filed. Now the IRS has extended the filing deadline to October 15, 2010, hoping that small charities will bring their filings up to date and avoid losing their tax-exempt status.

If you are responsible for a nonprofit organization and need details or filing assistance, give our office a call.

David Bradsher, CPA  is a Washington DC / Northern Virginia area CPA who works with small business owners and non profit leaders on a monthly basis to provide them with guidance and advice on how to grow their organizations, minimize their tax liabilities and increase their bottom line.

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