Traders Taxed at Unfair Rate?

I see in an article today that Obama is expected to re-suggest a cap of 28% on the value of a deduction for rich people making over $100k a year. He feels it is 'unfair' that someone in the 39.6% tax bracket to actually get a deduction valued at that rate rather than at 28% like someone in the 28% tax bracket would get. Maybe I am missing something but is it only worth 39.6% because they are taxed at 39.6% rather than the 28% bracket. Suggestion: Lower the tax bracket to 28% then the rich would only get a 28% value like everyone else. Then we all can agree that a given tax deduction is worth the same for everyone. Then rich people would not be getting an unfair advantage. BTW - when did the definition of a rich person get lowered to $100,000 from say $1 million dollars like it was many moons ago. Should not the definition be going up with inflation?

Top 8 Misconceptions About Taxes

The task of filing one's taxes seems to be flooded with rumors and misconceptions. Here are the Top 8 Misconceptions About Taxes:

1) Students are Exempt - While there are tax credits for students, no student is truly exempt unless they did not make enough money to file.

2) Married Tax Payers Must File Jointly - Married couples do need to indicate that they are married on their tax return but they are free to decide whether or not to file jointly. Married couples should weigh their options and may find one filing status more beneficial than another.

3) Early Filers Have a Higher Chance of Audit - This is simply not true. The IRS does have red flags for auditing someone, but filing early is not one of them.

4) There is No Need to File if Taxes are Withheld from Your Paycheck - Although taxes have been withheld from your paycheck each month, you still need to file your taxes. Plus, you may be missing out on a return of funds withheld!

5) You Only Need to Reduce Your Tax Liability if You're Rich - This is one of the oldest and most untrue myths about taxes in the book! People of all income levels should take advantage of any tax deductions and credits they qualify for.

6) You Can Not Claim a Working Adult as a Dependent - Even if your child is over 18 years of age and is working full time, you can still claim them as a dependent if you provide more than 50% of their financial support.

7) Only Parents Living With You Can be Claimed as Dependents - Just as with children, if you provide more than 50% of your parents' financial support, you may claim them as a dependent.

8) You Should Not File Your Return Until You Can Afford to Pay - Deciding to not file on time and not file for an extension are the worst decisions you can make if you are low on funds. The IRS may be able to work out a payment plan with you and you will avoid failure-to-file penalties.

05-28-2009 - Law Offers Special Tax Breaks for Small Business; Act Now and Save, IRS Says

Small Business Week is May 17 to 23, and the Internal Revenue Service urges small businesses to act now and take advantage of tax-saving opportunities included in the recovery law.

The American Recovery and Reinvestment Act (ARRA), enacted in February, created, extended or expanded a variety of business tax deductions and credits. Because some of these changes—the bonus depreciation and increased section 179 deduction, for example—are only available this year, eligible businesses only have a few months to take action and save on their taxes. Here is a quick rundown of some of the key provisions.

Faster Write-Offs for Certain Capital Expenditures

Many small businesses that invest in new property and equipment will be able to write off most or all of these purchases on their 2009 returns. The new law extends through 2009 the special 50 percent depreciation allowance, also known as bonus depreciation, and increased limits on the section 179 deduction, named for the relevant section of the Internal Revenue Code. Normally, businesses recover these capital investments through annual depreciation deductions spread over several years. Both of these provisions encourage these investments by enabling businesses to write them off more quickly.

The bonus depreciation provision generally enables businesses to deduct half the cost of qualifying property in the year it is placed in service.

The section 179 deduction enables small businesses to deduct up to $250,000 of the cost of machinery, equipment, vehicles, furniture and other qualifying property placed in service during 2009. Without the new law, the limit would have dropped to $133,000. The existing $25,000 limit still applies to sport utility vehicles. A special phase-out provision effectively targets the section 179 deduction to small businesses and generally eliminates it for most larger businesses.

Bonus depreciation and the section 179 deduction are claimed on Form 4562. Further details are in the instructions for this form.

Expanded Net Operating Loss Carryback

Many small businesses that had expenses exceeding their incomes for 2008 can choose to carry those losses back for up to five years, instead of the usual two. For small businesses that were profitable in the past but lost money in 2008, this could mean a special tax refund. The option is available for a small business that has no more than an average of $15 million in gross receipts over a three-year period.

This option is still available for most eligible taxpayers, but only for a limited time. A corporation that operates on a calendar-year basis, for example, must file a claim by Sept. 15, 2009. For eligible individuals, the deadline is Oct. 15, 2009.

Eligible individuals should file a claim using Form 1045, and corporations should use Form 1139. Details can be found in the instructions for each of these forms, and answers to frequently-asked questions are posted on IRS.gov.

Exclusion of Gain on the Sale of Certain Small Business Stock

The new law provides an extra incentive for individuals who invest in small businesses. Investors in qualified small business stock can exclude 75 percent of the gain upon sale of the stock. This increased exclusion applies only if the qualified small business stock is acquired after Feb. 17, 2009 and before Jan. 1, 2011, and held for more than five years. For previously-acquired stock, the exclusion rate remains at 50 percent in most cases.

Estimated Tax Requirement Modified

Many individual small business taxpayers may be able to defer, until the end of the year, paying a larger part of their 2009 tax obligations. For 2009, eligible individuals can make quarterly estimated tax payments equal to 90 percent of their 2009 tax or 90 percent of their 2008 tax, whichever is less. Individuals qualify if they received more than half of their gross income from their small businesses in 2008 and meet other requirements. For details, see Publication 505.

COBRA Credit

Employers that provide the 65 percent COBRA premium subsidy under ARRA to eligible former employees claim credit for this subsidy on their quarterly or annual employment tax returns. To help avoid imposing an unnecessary cash-flow burden, affected employers can reduce their employment tax deposits by the amount of the credit. For details, see Form 941. Answers to frequently-asked questions are posted on IRS.gov.

Other ARRA business provisions relate to discharges of certain business indebtedness, the holding period for S corporation built-in gains and acceleration of certain business credits for corporations. Also see Fact Sheet FS-2009-11.

Seek Expert for Advice on Tax Planning

With the U.S. Department of Treasury changing laws so frequently, experts are needed to ensure the proper tax deductions are taken. Tax preparation for day traders and investors are different than many and investors could be missing several opportunities causing them to overpay Uncle Sam.

Traders Accounting, the largest online resource for day trading advice and day trader tax preparation, is offering a free tax action plan for this upcoming tax season. The in-depth report is reviewed by tax deduction consultants and offers day traders advice on tax planning.