Filing Your Income Tax Doesn't Have to Be Painful

Filing your federal income tax doesn't have to be painful. The IRS offers free tax preparation software for 2024 tax filers with an adjusted gross income of $79,000 or less.

 How do you know what your adjusted gross income will be? Hey, what is adjusted gross income?

 

Adjusted gross income (AGI) is shown after subtracting all available credits from your reported income. The lower your adjusted gross income, the less tax you pay. And if your adjusted gross income is less than $49,708, you may qualify for the earned income credit, even if you don't have a child. It is an opportunity to take advantage of credits offered by the IRS. Never think that an amount is too small. On average, you save $15-$25 for every $100 of allowable deductions.

First, add up all your income documents, including self-employment, W2s, and 1099s. Then, review the available credits and subtract ballpark amounts you use to reduce your income. This will give you a rough estimate of your AGI. You can use the link at the end of this post to search for IRS-sponsored free tax software.

Adjusted Gross Income Credits:

• Educator expenses: Taxpayers can deduct $250 for each eligible educator ($500 if married filing jointly and both are educators). An eligible educator is a kindergarten through grade 12 teacher, instructor, principal, or aide who worked in a school for at least 900 hours during a school year. Qualified expenses include ordinary books, supplies, equipment (including computer equipment, software, and services), and other materials used in the classroom. An ordinary expense is comised in your educational field.
• Certain business expenses of reservists, performing artists, and fee-basis government officials.
• Health savings account deduction: amounts you contributed to an HSA in 2011.
• Moving expenses: If you relocated more than 50 miles from your home for your new job.  
• Deductible part of self-employment tax. 
• Self-employed SEP, SIMPLE, and qualified plans. 
• Self-employed health insurance deduction. 
• Penalty on early withdrawal of savings: If you received a form 1099-INT or 1099-OID, the penalty should be listed. 
• Alimony paid.
• IRA deduction.
• Student loan interest deduction: any interest paid when making student loan payments.
• Tuition and fees for qualified education for yourself, your spouse, or dependents.
• Domestic production activities deduction. 

If you don't have any of these credits, your AGI will be the sum of your income.

IRS free tax preparation software

Is Corporate Cash Hoarding a Lack of Corporate Social Responsibility

Corporate social responsibility is not a high priority for U.S. organizations. There is a viable alternative to raising taxes on the wealthy and on corporations available to the American economy. This alternative can restore funds to the federal and state governments and decrease the U.S. unemployment rates. It may take courage, but exercising this alternative can result in a win-win situation for the American economy. And it is as simple as fulfilling corporate social responsibility.

Harvard's corporate social responsibility initiative defines corporate social responsibility as encompassing "not only what companies do with their profits, but also how they make them. It goes beyond philanthropy and compliance and addresses how companies manage their economic, social, and environmental impacts, as well as their relationships in all key spheres of influence: the workplace, the marketplace, the supply chain, the community, and the public policy realm."

Fulfilling corporate social responsibility helps keep capitalism in check. Harvard's initiative places economic success in part on the organizations that benefit from that success. Currently, American organizations are stockpiling cash while the American economy is experiencing joblessness and loss of disposable income. I can't say I know what they are doing with all that cash. I can say it sits on the balance sheet as a current liquid asset yielded insignificant returns. And I wonder-are these stockpiles a shirking of American corporate social responsibility? The echo from the depths of the economy might say yes.

Seeing all that unproductive cash, I wondered how organizations were obtaining so much cash in a shrinking economy. The average American household's disposable income has shrunk, so consumer spend certainly isn't a major factor. Digging deeper, I realized that many of these American corporations are offshoring jobs and reaching for increased automation in processes. According to the U.S. department of labor, "Cost cutting by U.S. industries in almost every sector of the economy will continue to change the workforce. To reduce labor costs, some jobs are being sent offshore while others are being replaced by technology or are being filled with lower cost workers."

This has real implications for the U.S. economy. As an accountant, I wanted to see the implications, so I decided to do a little analysis on an American organization I was familiar with. Using the annual 10-K reports filed 2007 through 2011 for this U.S. organization, I found that the organization increased net earnings by 36.5% across the five-year period. During this same period, the organization experienced only a 10% increase in cost of goods, and a 25% increase in G&A This same organization, during this five-year period, has offshored a large portion of its back office finance and product production equating to a shift in payroll dollars of approximately $803 million.

Could this organization be remiss in managing their economic, social, and environmental impacts, as well as their relationships in all key spheres of influence: the workplace, the marketplace, the supply chain, the community, and the public policy realm?

The impact of the payroll shift for this one organization on the U.S. economy equates to a 32% loss of federal revenue (individual states of residence lose taxes also). For example, the shift of $803 million dollars in wages and salaries to offshore locations denies the federal government $200 million in individual federal payroll tax, $50 million in social security tax, and $12 million in Medicare tax.

While the economy is composed of many factors, think about changing just this one factor in the U.S. If American corporations could loose their death grip on cash and exercise their American corporate social responsibility, these organizations could infuse the U.S. economy with the jobs that exist offshore. And, as a side note, the organization analyzed in the above example showed a loss in the basic earnings per share of 17.9% during the five-year period.

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Easy Business is Hard Work

The holidays are coming. In the joy of the season, and the rush for gifts, don't forget....take a few moments every weekend to start sorting your tax receipts. Get your medical bills together, if there are any behind, pay them now. It can save you later. Don't forget your charities, especially at this time of year. Donations help those in need, and are still deductable.

Need help or just some more information? Leave a comment, or give me a call. I am listed in the business section in Google Real Accounting and Bookkeeping Solutions

Independent Contractors How to calculate taxes

If you have your own small business and offer services, you could be an independent contractor. Before the end of 2009, calculate what your personal income tax will be. If you have not made tax deposits, it's a good idea to make personal federal tax deposits before December 31st to avoid any penalties.

Calculate the tax due on contract work