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2016 IRS Tax Brackets, What They Mean For You

It’s time again, and the IRS have released their income tax brackets for the 2016 tax year. The top rate of tax is now set at 39.6% and for people earning $415,050 or over whilst married couples can earn $466,950 before joining the higher rate.

For single people, you can earn up to $9,275 and be taxed at the lowest rate, set at 10%. Higher than this, you’ll be paying $927,75 plus 15% on anything up to $37,650 whilst over $37,650 you’ll be paying $5,183,75 plus 25% of everything over $37,650 and under $91,150.

Once you pop over the $91,150 mark, things begin to ratchet up with $46,278,75 plus 28% being owed on everything up to $190,150.

In the next bracket, $119,934,75 to $413,350 requires $119,934,75 and 33% of everything over $413,350 whilst the last “main” bracket starts at $411,501, requires $119,401,25 and 35% of everything up to $411,500

For people earning more than $415,050, you’ll be paying 39.6% of everything over $415,050 and $120,529,75 for everything under.

Married & Surviving Spouses

If you’re married or a surviving spouse, you be better off with a lower rate bracket not stopping till $18,550 (10%) whilst earning over that means you’ll pay $1,855 plus 15% of anything over $75,300.

At the next level, you’ll pay 25% of everything under $151,900 and pay $10,367,50 on everything up till $75,300. If you’re earning more than $231,450 – you will be in the 33% bracket, paying $51,791,50 and 33% of everything over $231,450.

Over $413,350 you need to pay $130,578,50 and 35% of everything over $413,350 whilst in the last bracket, you’ll be paying $130,578,50 plus $39.6% of everything over $466,950.

Heads of Household

If you’re the head of a household, you’ll have a slight better deal that single people with $13,250 being the basic rate of tax (10%). Above this, $50,400 is the next level with $1,325 plus 15% of everything over $13,50 and up to $50,400 being paid. Above $50,400, the rate is $6,897,50 plus 25% of everything over %50,400.

The next bracket, $130,150 means you’ll pay $26,835 plus 28% of everything over $130,150 up till $210,800. One past this bracket you’ll pay $49,417 and 33% of everything over $210,800. The second highest bracket for heads of household is $413,350 and means paying $116,258,50 plus 35% of everything over $413,350.

The highest tax rate is $441,000 and means paying $125,258,50 and 39.6% of everything over $441,000

Married but Filing Separately

This bracket is somewhat similar to the single persons bracket but with slightly more forgiving brackets. It kicks off in much the same way at $9,275 (10%) and then reaches 15% for those earning up to $37,650. ($927,50 is the back payment)

Above this, $37,650 is the next bracket with $5,183,75 being owed plus $25% of everything over $37,650 and up to $75,950. Here, you’ll pay 28% plus $14,758,75 for everything below $37,650.

$115,725 is the next bracket, with $25,896,75 being owed and 33% being the rate for everything over $115,725 and up to $206,675. Over $206,675 and you will pay $55,909,25 and 35% on everything over that figure.

The highest rate tax bracket is still quite low at $233,475 meaning a payment of $65,289,25 and 39.6% of everything over $233,475.

Conclusion

Overall, nothing much has changes from last year save for some inflation adjustment. Whilst organizing your tax, don’t forget your deductions (Mortgage interest, charity donations or pension plans) as they might help place you in a slightly lower bracket.

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Refund Schedule 2016

IRS Tax Refund Schedule for 2016

The IRS will open their doors to tax returns in January 2016.  Once that occurs, you may submit your taxes at any time.  After the IRS has received your forms, they will acknowledge receipt with an email, assuming you gave them one when you filed electronically.*

That receipt date is the beginning of your own personal tax refund schedule.  If all goes well, you’ll have your refund within 21 days.

Important Information About the 2016 Refund Schedule

The refund schedule for 2016 is posted on the IRS website, but taxpayers should know the IRS doesn’t follow the same refund schedule they did years ago.  Each return is treated as a separate identity, following a unique pathway through the IRS tax processing center.

That means it’s hard to generalize about the status of your return.  You can, however, reasonably expect your refund to arrive within 21 days of the IRS receiving your e-filed forms.  For paper returns mailed in, you’ll have to wait a month before you can even begin checking the status of your return!

A Personalized Refund Schedule for 2016

To see your own schedule and track the progress of your tax return as it goes through the system, log in to the IRS website with your personal credentials.  Again, wait 24 hours after the IRS sends you that acknowledgement email, or a month after you mail it via US Postal Service.

You’ll find out if there were any red flags on your return- further processing will be necessary in those cases.  That will delay your refund, of course.

When to Call the IRS About Your Refund Schedule

Calling the IRS too soon after you file taxes will be a waste of time.  You will only learn what you could have learned by logging into the website or using the IRS refund schedule app.

But if it’s been more than 21 days since the IRS got your e-filed tax return, calling might provide further insight.  Likewise, if it’s been more than 6 weeks since you snail-mailed your return, calling the IRS may help.  In these situations, your tax return is off the normal IRS refund schedule and there may be a problem or the IRS needs more information from you.

 

*For the purposes of this article, we’ll be assuming you are e-filing, not mailing your tax return to the IRS in the US mail.  

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…But it Wasn’t My Fault!

If you are charged a penalty or excess tax due to something that wasn’t your fault, you can request a refund or abatement of the money owed via IRS Form 843.  This form covers dozens of situations where you might ask for money back from the IRS due an error, so I’m going to try and cover a few of them here.

Excess Withholding

One is when your employer calculates excess withholding on your paycheck.  Sometimes payroll just makes a mistake and that can result in too much Social Security taken out of your check.  Again…not your fault.  You can get a refund of that excess withholding by filling out and submitting IRS Form 843.

Penalty Abatement

If you have a tax penalty due to late payment or non payment of taxes with the IRS, you can use IRS Form 843 to request an abatement.  Things that are not your fault, like a divorce, theft of your records, hospitalization or other disasters such as a hurricane, are possible justifications for paying late or not paying yet.  Fill out the form and the IRS may remove your penalties in light of these life-altering situations.

You will have to explain in writing the reason for your penalty abatement.  And of course Form 843 is required-download it at the IRS website…here’s a direct link.

 

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Looking for the 2014 Refund Cycle Chart? Use the IRS App Instead

No matter how many times I tell people this, the fact still remains… taxpayers continue to hunt for the 2014 Refund Cycle Chart, even though no such thing exists.  But maybe this will work:  there’s an IRS Refund status app for your smartphone.   It’s called IRS2go and it allows you to not only check your refund status but also to obtain tax records and watch IRS videos as well.

Smartphone App vs. Refund Cycle Chart…the Choice is Easy!

Now, wouldn’t you rather check out an app than examine a Refund Cycle Chart?  The app is so easy, you just type in some personal info to sign up for an IRS account, then get info about your refund, when it’s coming etc.  It’s so much better than a plain old refund chart that estimates when your refund will arrive, based on a calendar and past turnaround times that don’t have any bearing on your own personal tax return and what might be occurring on any given day with your return.

Don’t worry- the IRS claims their IRS 2go app is safe and secure.  The IRS has put a ton of effort into fraud prevention lately…that’s precisely why your refund may get delayed.  They’re running tax returns through more checks & balances these days.  Tax fraud and identity theft via tax returns are infamous and widespread scams.  So the knowledge behind the new fraud detection processes with the tax return routine is put to good work creating a safe and secure smartphone app for checking your refund status.

To get the IRS refund app for your phone, go here to the USA.gov website. It’s free of course.  And stop searching for a 2014 Refund Cycle Chart…charts are of a bygone era now!  It’s all about apps, not charts.

Tax Time

3 Reasons Why You Should Stop Looking for 2014 Tax Refund Dates

Looking for 2014 Tax Refund Dates?  Want your refund NOW?  Filed your taxes and wondering when you’ll get your MONEY?  Sorry, but your should stop now and here’s why.

  1. Nobody Knows Your 2014 Refund Dates…Not Even the IRS!  You see, there’s no set schedule anymore because the IRS doesn’t simply process your tax return and issue your refund anymore.  Now, they scrutinize more carefully in an attempt to search out identity theft and fraud.  So, you never know what’s going to make the IRS suspect a tax return of fraud… a misspelling, an unusual number of deductions, a typo with your social security number, a change in address.  The formula isn’t quite known, so nobody knows which tax returns will get flagged.  When a return gets flagged, it gets delayed and then the date of your tax refund is totally unknown.  Therefore, there is no longer such a thing as  2014 tax refund dates.  We can only say that the IRS does its best to get you your return within 21 business days, but most refunds are issued in 10 days or so.
  2. If You’re That Frantic About Getting Your Tax Refund…Something’s Wrong!  Seriously, if you’re stalking your IRS refund like a drug addict then something is not quite right.  It probably means you need the money a little too desperately…and that’s a definite no-no.  Maybe you overspent on the Holidays and need that refund money to pay your credit card bill?  Bad bad bad financial planning.  Worse yet: maybe you need it for rent?  Whoa, the IRS can’t solve your problems with one refund.  What will you do next month?  Yes, if you are stalking your tax refund it’s time to take a look at your personal finances and maybe tighten up a little.  Your 2014 tax refund will not save your budget.
  3.  Instead of Looking for Refund Dates, Use the IRS Refund Tracker.  Now there’s something new, since all-purpose, one-size-fits-all refund dates are obsolete.  It’s the IRS Refund Tracker, and you can use it to find out information on your very own tax return with the IRS.  Once you’ve electronically submitted your tax return to the IRS, wait 24 hours and then log in.  You’ll get daily updates on the status of your return, which you can use to gauge your very own 2014 tax refund date.  Even better than a 2014 tax refund schedule, don’t you think?
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Skiing, South Beach, and… Taxes

January is peak season for a lot of things designed to get us through the misery we call winter.  Outdoorsy types can look forward to great skiing, or if you prefer a different scene: there’s nothing hotter than South Beach, Miami in January.

January is also peak season for Federal income tax returns.  The IRS starts accepting e-filed tax returns sometime in late January, usually.  This year, the 2014 tax refund schedule starts up on January 31, the first e-file acceptance date.  That means tax preparation companies start encouraging you to work on your tax returns in the weeks leading up to that acceptance date.  That way, when the e-file acceptance begins, all they do is hit “submit” and your own personal tax refund schedule has begun for 2014.

What’s the 2014 Tax Refund Schedule?

After you’ve e-filed your tax return with the IRS, it’s anybody’s guess how long it will be before you get your tax refund.  Times they are a changin’ because there is no longer a predictable pattern with the timing of IRS refunds.  Therefore, there is no tax refund schedule anymore.  Let me repeat…

there is no 2014 tax refund schedule

How do you know when you’ll get that nice check then?  You don’t.  How do you know something isn’t wrong with your tax return?  Well you can find out a little bit about what’s happening to your tax return after it’s been submitted to the IRS.  You go to the IRS website and use the Refund Tracker.  If you were looking for the 2013 tax refund schedule then stop because you have the tracker instead.

How do I Use the IRS Refund Tracker?

    1. First, make sure you’re on the actual IRS website, not an imposter site or a site offering to help you “track” your refund.  They’ll “track” your refund money right into their own bank accounts!
    2. The address of the refund tracker is here:  https://sa2.www4.irs.gov/irfof/lang/en/irfofgetstatus.jsp notice is says irs.gov in the address.
    3. It will look like this:

refund-tracker

  1. Second, enter your personal data…your social security number, Filing Status, and Refund Amount. Why the Refund Amount?  Because only you would know this, from having  recently prepared your tax return.  It’s for security purposes.  Otherwise, anyone could just get your social security number and guess at your filing status, then redirect your tax refund to their own bank account…STEALING your money!!!
  2. Now, you’ll be able to get a status on your return, and you’re one step closer to knowing when your refund will be issued.

So stop looking for the 2014 tax refund schedule because there isnt’ one!  Hope this helps.

 

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per diem

If you travel for your job, you’re usually not expected to cover the cost yourself.  So, book yourself at the Hilton, right?  Order room service, live it up since they’re paying?  Sadly, you’ve got it all wrong if this is what you’re imagining for business travel.  Unless the company you work for is very very profitable, they’re going to reign in your business travel expenses and give you a budget.  Usually you get per diem.

What is Per Diem?

Per diem is latin for “for the day”.   That means you get so much money for each day of travel.  It’s a rate set by the federal government (the US General Services Administration (GSA), to be exact).  The per diem rate is different, depending on where you’re traveling.  A hotel in downtown San Francisco will require more cash than a roadside motel in rural Kansas.

To help businesses figure out what to allow for their business travelers, the GSA runs a website with a lookup function for every state, every city in the US.  Employers, accountants and travelers simply look up the per diem for the business destination and everyone works from that number.

Per diem covers lodging, meals, and incidental expenses like cab fare, dry cleaning, things like that.   Per diem is usually broken up into two dollar amounts:  the lodging part and the M&IE part (Meals & Incidental Expenses).

If you need to submit your travel expenses to your company, check the GSA website’s per diem page here.  Find your city’s rates, multiply by days traveled and you’ve got an expense report.

Money refund

Selling Your Old Stuff: Capital Gains & Income Tax

If you sell your stuff and make money, you have to report it to the IRS.  The money you make from selling your property is called capital gains and the IRS taxes it.  It’s up to you to report this income.  Now before you panic and realize you’ve been selling your stuff on eBay and Craigslist for years and never paid any taxes, read on.

Do I Have to Pay Capital Gains Tax When I Sell My Car?

Notice the word gains in capital gains.  It means you gained money.  When you sell your old car you received money but you didn’t make money, did you?  Unless it was a Model T or some other priceless collectable car that actually went up in value, your car started losing you money the second it rolled off the sales lot.   99% of the time when you sell your old car, it’s for less than what you paid.  So, no worries!  It’s not a capital gain because the selling price was less than the buying price for you.  It’s rare to “flip” a car, also.

Do I Have to Pay Capital Gains Tax When I Flip a House?

Flipping a home, on the other hand, is different.  If you buy and sell real estate for a profit this is definite capital gains material here.  If you owned the property for less than one year then the profit you made will be taxed as regular income.  House flippers usually fall into this category.  Deciding when to flip means calculating how the capital gains tax rate will affect your profits.

If you held the property for more than one year then it’s a long term gain and will be taxed at what amounts to a lower rate, for most people.  Most long term capital gains are taxed at 15%.

Do I Have to Pay Capital Gains Tax When I Sell My Stuff on Craigslist?

Usually people are selling their old stuff on  Craigslist.  It’s yard sale material.  Your old sofa that you sold for $100…if you paid more for it than $100 well then you’re not making a profit, are you?  Therefore, no capital gains tax on that sale.  Same for used clothes, etc.  Unless you sell it for more than you originally paid, there is no capital gains.

eBay, however, is more and more about selling new stuff (NWT) and making  a profit and running a retail business online.  You are supposed to report your income and pay sales tax to your state.  Capital gains tax can come into play here as well.

Same goes for Ebay: if you sold the item for more than you originally paid, capital gains tax rate applies here too.  And no, you can’t claim a loss for selling something for less than what you paid.

How do I Report Capital Gains?

You will have to use the long form: IRS Form 1040, not the EZ or the A versions.  Fill out Schedule D, Capital Gains and LossesHere’s a look at Schedule D on the IRS website.  For more info you can consult Schedule D Instructions here.

 

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IRS Publication 6209: For Conspiracy Theorists

Does your curiosity go beyond normal?  Are you under the impression that the IRS is hiding something from you? Are you afraid the IRS has mistakes in the file they keep on you?  Do you want to demand to see your file and correct those mistakes?  Do you think the IRS is hiding secret messages in your file, coded so you can’t read them?  Does all this sound crazy to you?  Well believe it or not, some people answer yes to all of these questions.

Does the IRS Really Have a Master File on Me?

Well actually I guess they do. It’s simply an electronic version of your tax returns.  And guess what, they use computers now to process tax returns.  Computers don’t speak English or even recognize words, really.  There are codes involved…oooooh!  Your electronic file is called your Individual Master File (IMF).  Makes it sound like your file with the FBI.  Remember all those stories of hippies in the 1960s, the FBI was watching them for subversive activity?  Ooh, the FBI has a file on you!  Some people think the IMF is paramount to having the FBI watching you and preparing to take you out or at least infringe on your human rights in some way.  But no, the IRS just needs to keep records.  Financial records.  Here’s what your IMF contains:

  • your income
  • your name & address and Social Security Number
  • what you owe the IRS
  • info from your 1040 (deductions, etc)

Now, if you can fathom how the IRS uses this information to infringe on your rights then by all means tell me because that really is not a lot of information.  Your bank has that info.  So does your lender if you have a mortgage or other type of loan.  Jeez, even your landlord took way more this when he checked your background.  Your employer has all this plus WAY more.  You reveal more about yourself when you sign up for a Facebook account.

IRS Publication 6209

If you still are interested in obtaining your Individual Master File (IMF) from the IRS then you’re also going to need a copy of IRS Publication 6209.  This publication is a 600+ page long document of abbreviations and numbers.  You can use it to decode your IMF file, should you feel inclined to do so.  While you’re at it could you grout my tub, since you seem to have a lot of extra time on your hands.

Oh, there are people out there that believe the IRS took IRS Publication 6209 down so it would be impossible to decode their IMF.  Nope, it’s right there.  Not removed.  There.   Take a look for yourself here on the actual IRS website.

Tax Form Filling

IRS Publication 501: Basic Filing Questions Answered

How would you like to find out that you don’t have to file any income taxes?  Or if you have a choice of whether to file, how to determine what’s better?  How about  learning all about exemptions, and how the affect your tax bill with the IRS?  It’s all there plus more in IRS Publication 501,  Exemptions, Standard Deduction, & Filing Status.  Granted, a lot of  IRS Publications do contain vital information that you absolutely have to know about for filing your federal income tax return.  Pub 501, however, is more of a general background document, where you can learn the how and the why of basic tax structure.  Also, it serves as a guide for tax professionals.  For example, not sure whether your client needs to file income tax or not?  IRS Publication 501 spells it all out, according to tax law.  Also, details on exemptions are included in Pub 501, so if there’s a question, it can be answered.

IRS Publication 501: Who Must File?

Did you think that everyone must file income taxes?  Well you’re wrong.  Some people make so little money that the IRS doesn’t bother with them.  Also, some dependents don’t have to file either.  That goes for married people, too.  Filing status matters in whether you have to file.

So, who doesn’t have to file?  Well first of all, who would think they were exempt from paying federal  income taxes?  Well there are some gray areas in this matter, believe it or not.  If you are a U.S. citizen and living in Puerto Rico: do you have to file?  Yes you do, and IRS Publication 501 spells that out for you.

IRS Publication 501 comes in handy in figuring out whether dependents have to file, also.  Say your teenage son had a job and you are claiming his as a dependent.  Does he have to file his own income tax return?  Yes, according to Table 2 in IRS Publication 501.  As long as the dependent made more than a certain amount ($5,950 in 2012) in earned income then yes, he has to file also.

How about dependents that are over 65?  If they make more than $7,400 in earned income then yes, they have to file even though they are being claimed as a dependent on someone else’s tax return.  Unearned income can trigger the filing requirement, too.  For age 65 and up, it’s $2,400 and you have to file.  For under 65, it’s $950 in unearned income (e.g. interest from a savings account) and you must file.

IRS Publication 501: Filing Status

Are you married or not?  Seems like a simple question, doesn’t it?  Well in the eyes of the IRS sometimes it’s not.  For example, what if you have a common law marriage.  Does the IRS recognize that?  Well the answer is yes if you are living in a state where that is recognized.  They essentially leave it up to the state’s law.

What if you hate your spouse so you’re living apart but haven’t done anything about it yet?  Technically you are still married until you are legally separated or divorced.  Sorry, you’ll have to do your taxes together, perhaps as one last act of marriage.

What if you are a widow? Are you single or not?  Depends on when you became a widow.  For a tax year, if your spouse died during that year then you are still married when you file that year’s taxes.  If you are still married at the end of the following year then you become a widow in the eyes of the IRS.

IRS Publication 501: More Information

For more examples like this on life’s trickier definitions and the IRS, go to their website, where you can view the entire IRS Publication 501 in detail.