Author: Eric Buechler

Statistics for 2009 Federal Income Taxes

 The top 1% of all filers paid 36.7% of all federal income taxes in 2009, this is down from 38% the previous year. They also accounted for 16.95 of adjusted gross income, down from 20% the year before. The top 1% of earners income is at least $343,927. The average tax rate paid by them is 24% of their AGI the highest rate since 2003.

The highest 5% paid 58.7% of total income tax and accounted for 31.7% of all AGI. There AGI was a minimum of $154,643.

The top 10% AGI was $112,124 or more. They bore 70.5% of the total tax burden. While bring in slightly more than 43% of total AGI.

The bottom 50% of filers paid 2.25% of total federal income tax bill, mainly due to refundable tax credits. Their average tax rate was 12.5%.

 

Increases in Tax Benefits for 2012 Due to Inflation

• Personal and Dependent Exemptions will be $3,800 up $100 for 2011
• The new standard deduction for married filling joint is $11,900 up $300 from 2011
• For single or married and filing separately it will be $5,950 up $150 for 2011
• For head of household $8,700 up $200 form 2011
• Tax brackets for each filing status increase also

Credits, deductions, and related phase outs

• For the tax year 2012, the maximum earned income tax credit (EITC) for low- and moderate- income workers and working families raises to $5,891 up from $5,791 in 2011, the maximum income limit for the EITC rises to $50,270 up from $49,078 in 2011. The credit varies by family size, filing status and other factors, with the maximum credit going to joint filers with three or more qualifying children
• The foreign earned income deduction rises to $95,100, an increase of $2,200 from maximum deduction for the tax year 2011
• The modified adjusted gross income threshold at which the lifetime learning credit begins to phase out is $104,000 for joint filers, up from $102,000, and $52,000 for singles and head of household, up from $51,000
• The $2,500 maximum deduction for interest paid on student loans begins to phase out for a married taxpayers filing joint returns at $125,000 and phases out completely at $155,000, an increase of $5,000 from 2011. For single filers the phase out remains the same.

 

 

Retirement Plan Establishment Deadlines

• Profit Sharing / Money Purchase – December 31
• 403(b)(7)/ Roth 403(b)(7) – December 31
• 401(k)/ Roth 401(k) – December 31
• Individual K/ Roth Individual K – December 31

IRS officials informally state if iPads, Android, or other tablets are provided to employees primarily for business, personal use not taxable.

Businesses:

• Monthly payroll deposits for November due on December 15

Retirement Establishment Deadlines

• Profit Sharing / Money Purchase – December 31
• 403(b)(7)/ Roth 403(b)(7) – December 31
• 401(k)/ Roth 401(k) – December 31
• Individual K/ Roth Individual K – December 31

Individuals:

Retirement Plans Contributions

• Simple IRA – made per pay period
• 403(b)(7)/ Roth 403(b)(7) – made per pay period
• 401(k)/ Roth 401(k) – made per pay period
• Safe Harbor 401(k)/ Roth Safe Harbor 401(k) – made per pay period
• Individual K/ Roth Individual K – made per pay period

 

Retirement Establishment Deadlines

• Individual K/ Roth Individual K – December 31
• 403(b)(7) / Roth 403(b)(7) – Plan year end (December 31)
• 401(k) / Roth 401(k) – Plan year end (December 31)
• Profit Sharing / Money Purchasing – Plan year end (December 31)

Medical Costs

A portion of special diet costs can qualify as a medical expense. If the diet is prescribed by doctor for medical reasons, then the excess amount of costs that you have for foods over what you would normally eat is treated as a medical expense.

Fees for alternative medicine practitioners can be medicals too, according to IRS. Things like acupuncturists, chiropractors, Christian Science practitioners. Same goes for doctor-prescribed treatment at a health institute.

Amounts aid for repairing hearing aids also qualifies. Thus flex plans can reimburse these costs if they choose to do so. This also includes the cost of batteries, if not covered by the flex plan. You just add them to medical expenses and deduct them on Schedule A to extent your medical expenses exceed 7.5% of your AGI.

Meals and Incidentals

 For meals and incidentals only, the Service’s rates remain the unchanged; $65 a day in high-cost areas and $52 elsewhere. Self employed persons who travel are allowed to use these rates in lieu of keeping receipts, but their lodging expenses must be substantiated separately. They can not use the full $242/$163 per diems.

The per diem rate for incidentals expenses stays the same too… $5 per day

Insurance

Swapping life insurance or annuities for long term-care policies won’t be taxed. Congress changed the law to allow such tax deferred exchanges after 2009. Also long-term-care insurance can be offered as part of an annuity contract, and no tax is due if the insurance premiums are paid with the annuity’s cash value. Also the cash value in the annuities and life insurance can be used free of tax to purchase long-term-care coverage.

Police Officer’s Disability Pension

Court ruled that income not taxable after attaining age 50. If a patrolman who was age 50 and has had at least 20 years of service under his belt was eligible for retirement pension.  If you became a disability pension beneficiary you were paid 50% of the base pay of a patrolman who had reached the age of 50 and has had 20 years in the field. Disabled police officers received the same pay as a police officer who has qualified to retire, even if they did not have suffient years to retire.

            The IRS argued that the benefits paid after turning age 50 were taxable retirement income. It cited Tateosian, TC Memo 2008-101, where the Tax Court held that because a disabled pensioner’s disability benefits effectively terminated under Minnesota law once he turned age 50 and became a deemed service pensioner, his payments could no longer be characterized as compensation for personal injuries under SS104(a) for federal income tax purposes.

            The Tax Court determined that the benefits were nontaxable and rejected the IRS’s reliance on Tateosian.  Instead the Court looked to precedent from the Ninth Court, to which an Appeal case would be heard and determined that the payments were not retirement benefits because they were determined with reference to his age ao years of service.

            For purposes of qualifying for retirement, the fact that the plan deems time spent on disability as equivalent to time spent working does not change the treatment for federal income tax purposes. So if someone completed less than 20 years of service, they would not be eligible for retirement payments; therefore, the character of the payments are nontaxable disability payments for federal income tax purposes.