tax planning presented by dr. aa neidermeyer. taxing situations earning income enjoying portfolio...
TRANSCRIPT
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TAX PLANNING
Presented by
Dr. AA Neidermeyer
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TAXING SITUATIONS
Earning incomeEnjoying portfolio incomeBeing a passive participant
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ANNUAL POOLING OF INCOME
Annually, each taxpayer is required to “pool” his/her income items into an active, portfolio or passive pool.
Correct categorization is necessary for the proper tax treatment of the resultant income/loss.
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TAX QUESTIONS
What is your personal tax situation?– E.g. Are your paying taxes on income,
purchases, property and/or wealth?
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TAXES ON INCOME
What are the tax laws where you live and where you earn your income?
– E.g. Are your responsible for paying federal, state and local income taxes?
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TAXES ON PURCHASES
How and where to you acquire the items of your everyday living?
– Tax laws in place where you buy govern the amount of taxes you pay if “nexus” has been successfully established.
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TAXES ON PROPERTY
What property you own and the location of that property determine the amount, if any, of property taxes which you will be assessed.
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TAXES ON WEALTH
If you’re considering transferring and/or receiving wealth, you should determine the governing tax laws at both the Federal and local levels that might cause a tax to be levied when the transfer is made.
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IMPORTANCE OF TAX PLANNING
You’re spending 25-40% of your income on taxes; do NOT spend anymore than the necessary amount.
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COMMON TAX JARGON
IncomeExclusionsGross IncomeDeductions for Adjusted Gross IncomeAdjusted Gross IncomeDeductions from Adjusted Gross IncomeTaxable Income
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INCOME (BROAD CONCEPT)
For individual taxpayers, income is any value enhancement received or placed under the individual taxpayer’s control during the period 1/1 through 12/31 of any year.
The key term here is “realization.”
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EXCLUSION(S)
Exclusions are items of value received which the current tax code states do not have to be included in taxable income.
Examples of exclusions:– Perquisites– Life insurance proceeds– Gifts
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GROSS INCOME
Gross Income is the result of offsetting exclusions from your formulated income (broadly conceived) dollar amount.
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“FOR” DEDUCTIONS
These deductions are individual-specific.
Representative items include– Student loan interest– Alimony– Moving expenses– Contributions to a traditional IRA
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ADJUSTED GROSS INCOME
AGI is the benchmark figure on a tax return. This figure serves as a reference point to determine the magnitude of the deduction for subsequent items.
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“FROM” DEDUCTIONS
Two categories of potential deductions occur:
1. The greater of an individual’s standard deduction or itemized deductions.
2. The number of personal/dependency exemptions to which the individual is entitled.
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TAXABLE INCOME
The reference point to which current tax rates are applied to determine the required tax payments for the individual.
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SATISFACTION OF YOUR LIABILITY
Pay-As-You-Go WithholdingEstimated PaymentsRollover from previous yearsTax credits
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PAY-AS-YOU-GO
Employers are required to withhold a portion of each employee’s annual income tax liability through the payroll withholding program.
The magnitude of the withholding is determined by the W-4 form completed by each employee.
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ESTIMATED PAYMENTS
If any individual is not subject to withholding through an employer’s system, he/she has the individual responsibility to make estimated payments of their annual liability during the tax period.
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ESTIMATED TAX PAYMENTS
In order for timely deposits to be made, a taxpayer should deposit sufficient monies so that 90% of the current year liability or 100% of the prior year’s tax liability is covered.
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ROLLOVER FROM PRIOR YEAR
Depending on the tax computation(s) from a prior year, the taxpayer may have a rollover credit to be used against future taxes.
Correct monitoring of this situation will permit the taxpayer to adjust his/her current payments of any tax liability.
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TAX CREDITS
The most important item to be reviewed would be “tax credits.” These items constitute dollar-for-dollar offset against any tax liability which may be assessed against the taxpayer.
Available credits will vary by the individual situation.