Friday, October 31, 2008

Obama Vs. McCain - Tax Plans

This is the best non-democrat/non-republican view of our presidential candidates I have seen yet. This shows the difference between the two candidates’ tax plans using the Marginal Tax rate.

Each person's marginal tax rate is the amount that they pay in tax on their last dollar of income. The impact of the tax paid on that last dollar is important economically because…” http://www.taxfoundation.org/publications/show/23724.html

This article was written by Dr. Robert Carroll, (http://www.taxfoundation.org/staff/show/134.html) who is Vice President for Economic Policy at the Tax Foundation. “The mission of the Tax Foundation is to educate taxpayers about sound tax policy and the size of the tax burden borne by Americans at all levels of government. From its founding in 1937…” http://www.taxfoundation.org/about/

Remember when reading this article who we are talking about and how much money they make. The latest data we have is from 2006 when 135,719,160 tax returns were filed. Of those returns, this shows who is paying our income tax.

Top 1% of filers pay 40% of the tax collected. (about $370,000 AGI and up)

Top 5% of filers pay 60% of the tax collected. (about $150,000 AGI and up)

Top 10% of filers pay 71% of the tax collected. (about $1050,000 AGI and up)

Top 25% of filers pay 86% of the tax collected. (about $64,000 AGI and up)

Bottom 50% of filers pay 13% of the tax collected.

Senator Obama

Here are some of the factors of Senator Obama’s tax plan and how it would affect the Marginal Tax Rate of Taxpayers. (More on Senator Obama’s plan http://www.taxfoundation.org/publications/show/23724.html)

As has been extensively reported, three components of the Obama plan would raise the marginal tax rates of higher-income taxpayers.

1. Roll back the reduction in the top two tax rates enacted in 2001 and 2003. These changes would increase the top two tax rates from 33 percent to 36 percent and 35 percent to 39.6 percent.

2. Restore the phase out of the personal exemption for higher-income taxpayers (the so-called PEP provision) and the limitation of certain itemized deductions for higher-income taxpayers (the so-called Pease provision).

3. Increase Social Security taxes paid by higher-income taxpayers. It is unclear exactly what is being proposed by Senator Obama on Social Security taxes, and his proposal may not even take effect until 2018, outside of the ten-year budget window. Nevertheless, it is assumed here that he would increase Social Security taxes by 4 percent to illustrate the likely effects of his plan on marginal tax rates.6

Senator McCain

Here is a small summery of how Senator McCain’s tax plan would affect the Marginal Tax Rate of Taxpayers. (More on Senator McCain’s plan http://www.taxfoundation.org/publications/show/23724.htm)

Senator McCain's tax plan also affects marginal rates, but for very different reasons. His tax plan includes only two individual tax proposals and only his health tax credit has a material effect on effective marginal tax rates. The McCain health tax credit—$5,000 for family coverage and $2,500 for individual coverage—replaces the current income tax exclusion for employer-based health insurance. The repeal of this exclusion has the effect of increasing taxpayers' taxable incomes, which then pushes some taxpayers into higher income tax brackets. This effect is shown in Figure 4 which compares marginal tax rates under current law to those that would prevail if McCain's tax plan became law. Note the leftward shift of the marginal tax rate schedule. Some taxpayers' effective marginal tax rates go up and others go down.

Pay close attention to Figure 2 for Obama and Figure 4 for McCain to see where your tax rate would go depending on who is elected president. Remember to VOTE and always make an educated decision.

Monday, October 27, 2008

Unclaimed Money

IRS will not forward refund checks. So to be sure to receive refunds and other correspondence make sure to keep your address current with the IRS.
If you change your address after filing your return you may complete a Form 8822, Address Change Request, and send it to the address shown on the form. You should download Form 8822 from the IRS website (www.irs.gov) or order it by calling 1-800-TAX-FORM ( 1-800-829-3676 ).

Make sure your family members are current as well. Often elderly family members stop filing tax returns and may move. Make sure they are not missing out on money due them. Other good places to check for lost cash are these two websites:

www.missingmoney.com
www.unclaimed.org

Play around and see if you can find some free money!

Questions? Contact us at:
MB Tax Professionals, LLP
503.595.5890
www.MBTaxpro.com

Oregon Cultural Trust Tax Credits

The deadline to make charitable contributions for 2010 is December 31st. The Oregon Cultural Trust Tax Credit allows you to double your donation to 1,300 nonprofits in this state and to claim a 100% tax credit. This means you get dollar for dollar off your Oregon tax return up to:
$500 for individuals
$1000 for joint filers
$2500 for C-Corporations

What you need to do:
Donate money to one of the 1,300 participating nonprofits
Donate the same amount to the Oregon Cultural Trust
Write off 100% of the Oregon Cultural Trust donation on your 2010 tax return

Example of the benefit:
donation to nonprofit $1,000
donation to OCT $1,000

Federal Tax Savings $ 500
State Tax Savings $ 90
State Tax Credit $1,000
Total Savings $1,590

Net cash cost $ 410

Benefit to Oregon Charities $2,000

For more information check out the website at http://www.culturaltrust.org/
Or contact us at:
MB Tax Professionals, LLP
503-595-5890
http://www.mbtaxpro.com/

Thursday, October 9, 2008

Roth IRA

WHAT IS A ROTH IRA?

It is an individual retirement account with special tax benefits. Your contributions are made with after-tax dollars, they grow tax-deferred and when you start withdrawing the money, it is TAX-FREE. Because it is an ACCOUNT, you can invest in whatever you like (mutual funds, stocks, bonds).

WHO CAN INVEST?

You can only contribute to or open a ROTH if you make less than $116,000 as a single person or $169,000 as a couple.

HOW MUCH CAN I CONTRIBUTE TO A ROTH IRA?

You are able to contribute up to $5,000 per year. If you are over 50, you can contribute up to $6,000.

CAN I OPEN A ROTH IRA EVEN IF I HAVE A 401k OR SEP?

Absolutely! However, you should maximize your 401k and SEP first, because with those plans you save money on your taxes, you are able to contribute more and chances are your company is matching (with the 401k). However, if you have maximized your 401k and SEP, definitely open a ROTH.

WHEN CAN I TOUCH THE MONEY PENALTY-FREE?

You are eligible to start withdrawing the money after age 59 1/2. If you need the money before that, you will be charged a 10% penalty only on ROTH earnings. Withdrawals of the principal are penalty free if it has been in the account for at least five years.

WHEN AM I REQUIRED TO START TAKING WITHDRAWALS?

That is one of the great benefits about a ROTH IRA. There is no age where you are required to begin taking withdrawals. With other IRAs and 401ks, you are required to start taking a minimum distribution at age 70 1/2, but there is no age limit with the ROTH.

WHAT IF I NEED THE MONEY BEFOREHAND?

That is another great things about the ROTH. If the principal has been in the account for at least five years, you don't pay any penalty. You also don't pay any penalty if it is used for a first home, qualified education expense or certain hardships.

THIS INFORMATION IS FOR INFORMATIONAL PURPSOSES ONLY AND SHOULD NOT BE TAKEN AS INVESTMENT OR TAX ADVICE. WHEN MAKING A DECISION ALWAYS CONSULT YOUR FINANCIAL PLANNER OR TAX PROFESSIONALS FIRST.

If you are not currently working with a financial advisor or think that your financial advisor could be working a bit better for you, we have excellent referrals that we work with on a regular basis.
Contact Us

BOOKSTORE
Our Bookstore includes books on starting your business, wealth creation and managing your time.
Bookstore

MOTIVATION
“Gratitude unlocks the fullness of life. It turns what we have into enough, and more. It turns denial into acceptance, chaos into order, confusion into clarity.... It turns problems into gifts, failures into success, the unexpected into perfect timing, and mistakes into important events. Gratitude makes sense of our past, brings peace for today and creates a vision for tomorrow.”
-Melodie Beattie
= = = = = = = = = = = = = = = = = = = = = = = = = =
Contact us today and we can set up an appointment.


MB Tax Professionals, LLP
Phone 503.595.5890 Fax 503.282.0513 2580
NW Upshur St. Portland, OR 97210
All rights reserved.

2008 Roth IRA Conversions

For those of you who converted a Traditional IRA into a Roth IRA during 2008 consider recharacterization. When you converted from the Traditional to the Roth you created a taxable event based on the value of the IRA. With the recent decline in the markets most accounts are worth far less today than when the conversion was done. Take advantage of this and turn it into a positive! You can recharacterize the conversion, basically turn it back into a Traditional IRA and not pay tax on value that has been lost. Really wanted a Roth? No problem, just convert the account again at the lower value and benefit even more. You have time - it just must be done by the due date of your 2008 income tax return. If you have questions contact us!


MB Tax Professionals, LLP
503.595.5890
2580 NW Upshur Street
Portland,OR 97210