Staying Out Of Trouble With New Tax Brackets

There is nothing more confusing than the IRS tax code

. And additionally complicating issues is the strange design of Tax Brackets. So loads of taxpayers totally get it wrong. Tax legal professional Anthony Parent explains what the myths are, in addition to how to avoid frequent problems.

Every citizen needs to comprehend the historical environment first, however. Each major civilization were destroyed by one thing: High taxes. The founding fathers were no stranger to this fact --- they all studied classical memoirs extensively. Thus, they put language that forbade the federal government from demanding a tax upon income. However, a political bloc, the progressives came into existence around the turn of the century, thought it would be better to tax income to both raise revenue and impose tax brackets that supposedly would make life more fair.

The Progressives eventually prevailed in getting the Amendment they desired passed which would allow Congress to tax income. Progressives' promises to use the new income tax to just tax the rich were quickly thrown aside.

The sixteenth Amendment was only supposed to go after the wealthy, but soon Congress found the rest of Americans to fat a target not to tax by applying Tax Brackets to them. This was a quintessential case of bait and switch. And Congress was just warming up.

The IRS also collects employment and self-employment taxes which nearly affect all wage earners. Employment and self employment taxes comprise over half of all taxes the IRS collects from individual taxpayers. Tax brackets are completely silent to these employment and self employment taxes.

For individual us taxpayers, the current tax brackets are 10, 15, 25, 28, 33 and 35%. The tax bracket one falls into depends on tax filing status and as well as income.

For some kinds of income, these tax brackets are entirely irrelevant. And as an additional bonus, the employment and self employment taxes mentioned to above are not imposed either. The types of taxes that obtain special treatment are long term capital gains, dividends and passive income from real estate investments.

Also, a lot of higher income earners are subject to the AMT. To further confuse things, the Alternative Mimimum tax brackets could be relevant. The Alternative Minimum Tax has totally dissimilar tax brackets. Those tax rates are 26 or 28%. The Alternative Minimum Tax brackets are either 26 or 28%. Even though those tax rates are lower than the standard tax brackets, the actual tax rates can be higher as because with the AMT, the IRS denies several write-offs. Important deductions like local and state tax write-offs.

Tax Brackets are insufficient planning resources. Taxes may be much bigger or much lesser than what the tax brackets maintain. It is imperative not to rely on tax bracets for tax preparation purposes.

by: wildcri2bu

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