Obama Seeks $1 Trillion Tax Increase in Budget Plan

President Barack Obama proposed almost $1 trillion in higher taxes over the next decade on the highest-earning Americans, Wall Street financiers, U.S.-based multinational corporations and oil companies to pay for permanent tax breaks for lower earners.

Obama’s 2010 budget proposal, released today, would reinstate the top two Clinton-era tax rates of 36 percent and 39.6 percent, up from the 33 percent and 35 percent the richest Americans now pay. That would affect about 2.6 million taxpayers. The budget also would raise taxes on capital gains and dividends to 20 percent for top earners, up from the 15 percent set by former President George W. Bush in 2003.

The tax increases, which Obama vowed to impose as a presidential candidate, would take effect in 2011 and be the first on high-income earners since 1993. They also would reverse a course set by Bush of lowering the tax burden on the nation’s wealthiest people.

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Tax time, so make things up as you go

LIFE may be what you make it, but when it comes to tax returns it is more a case of making it up. This is an important point to remember with a Tax Office that invents ways to charge you for things that you didn't do, but might have. Here are some words that might have meant something, but don't.

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Get Tax Deductions

Are you a small business owner who is planning on preparing your own taxes this year? If you are, you may want to know about the business deductions that you can claim. You may be happy to know that there are a number of deductions that you may be eligible for. Just a few of those deductions are touched on below.

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How To Turn Bookkeeping Drudgery Into A $175/hour Part-Time Job

For most self-employed people, bookkeeping is about as much fun as a root canal. But like it or not, it must be done, otherwise you'll end up overpaying your taxes big time.

Perhaps this article will help you see this tedious task in a new light. Follow along with me and I can turn your bookkeeping nightmare into the best paying part-time job you ever had.

First, a question:

How much money do you make right now -- per hour -- at your "regular" daytime job or in your business?

Is it $15 per hour? $25 per hour? $50 per hour? Make a mental note of that amount, ok?

Now, let's say by "keeping the books" this month, you record $1,000 worth of deductible expenses.

Let's also assume you are in the 35% tax bracket (15% federal income tax plus 15% self-employment tax plus 5% state tax).

So, for every $1,000 of deductions, you save yourself about $350 in taxes ($1,000 x 35% tax rate).

One more assumption: it takes you about 2 hours to properly record and document that $1,000 of deductions.

Hmmm. You spend 2 hours and save $350 bucks.

How much money did you just make for yourself -- per hour?

$175 per hour! Whoa -- now, compare that to how much you make per hour working in your business or at an employee job. Which "job" paid you more?

Even if it takes you 4 hours -- it's like having a job that pays you $87.50 per hour. Still a pretty good hourly wage, don't you think?

How does that make you feel about bookkeeping? Not such a bad deal after all, is it?

So here's a simple six-step bookkeeping system that will put thousands of dollars of tax savings in your pocket and keep the IRS out of your life.

1. Maintain a separate bank account for your business or self-employment activity.
   
   Never use your personal bank account for business expenses. Having a separate bank account automatically creates the "shell" for the perfect documentation system.
   
   If you don't have a separate business bank account, now is the time to get one.
   
   
2. Maintain a separate credit card account for your business. Same deal as the bank account -- pick one credit card that you use exclusively for business expenses.
   
   
3. These 2 accounts (one bank account and one credit card account) should only be used for business! Never "co-mingle" business and personal financial information.
   
   The only income that goes into your business bank account is business income. The only expenses that are paid from the business bank account and business credit card account are business expenses.
   
   
4. For each major income and expense category, create a simple filing system each calendar year -- one file folder for each major category. Every time you write a check or use the credit card for a business expense, you assign that expense to the appropriate expense category and file the supporting documentation (receipt, invoice, cancelled check, or whatever) into the corresponding file folder.
   
   
5. Keep a separate file folder for all monthly bank account statements and credit card statements.
   
   
6. Use a simple bookkeeping software program to record all deposits, checks, and credit card charges. Once a week or once a month, input all transactions and assign each transaction to the appropriate income or expense category.
   
   

The importance of this "categorization" process cannot be stressed enough -- it's the key to the whole system!

There are any number of software programs out there for this purpose. I've used them all: Quicken, Quickbooks, Money, etc. Spreadsheet programs like Excel can also be used to automate business record-keeping.

But my favorite bookkeeping program for the Small Business Owner or Self-Employed Person is InternetTaxHelper -- it is by far the easiest to learn and simplest to use. If your business grows, you can always invest in a more sophisticated program later. For any small business owner, especially if you're just starting out, this is the best program I've ever seen.

Using a software program is a tremendous time-saver. Once you've input all your individual income and expense transactions, and assuming you've assigned each transaction to the appropriate category and filed the paperwork, you've already completed all the work necessary to audit-proof your income tax return!

One final comment: If you aren't "computer-savvy", that's OK. You can still use good ole pencil and paper to categorize your business expenses.

I have clients who use nothing more sophisticated than a spiral notebook. Each year they buy a new notebook and label each page with a particular income or expense category.

Every transaction gets written down in the notebook on the appropriate page. At the end of the year, they add up the totals for each page, and presto, they give me an annual recap of all major income and expense categories. Get the picture? It doesn't have to be fancy. It just has to be in writing, accurate, and supported by actual paper documents.

Whether you use your computer or not, the end result is the same: Every single transaction has been assigned to the appropriate category, and every transaction has the corresponding "paper trail" -- every receipt, invoice, cancelled check and credit card charge has been filed into the appropriate file folder. Should the IRS question any income or expense amount on your return, you'll be ready!

About the Author:

Wayne M. Davies is author of 3 tax-slashing eBooks for small business owners and the self-employed. For a free copy of Wayne's 25-page report, "How To Instantly Double Your Deductions" visit http://www.yousaveontaxes.com/

Source: http://isnare.com

Three things you should know about tax

Employer's Pension Contributions

The rules regarding tax relief on employer pension contributions in particular for owner/manager businesses have, since A-Day, been somewhat clouded by the Revenue’s interpretation of the wholly and exclusive rules. The tax planning industry concern has been in connection with the Revenue’s approach with regard to the commerciality of an individual’s total remuneration package.

Thankfully, a recent addition to Revenue & Customs’ Manual provides some extra clarity and states “where the controlling director is also the person whose work generates the company’s income then the level of the remuneration package is a commercial decision and it is unlikely that there will be a non-business purpose for the level of the remuneration package”.

So effectively, the commercial value of a controlling director, in remuneration terms, is deemed to be inextricably linked to the success/profitability of the company assuming that their input is pivotal to that success. Accordingly, full tax relief should be granted on pension contributions up to the annual allowance of £225,000.

Offshore Disclosure Facility
The Revenue’s deadline approaches for the so-called tax amnesty for those who have income arising from offshore accounts for which no UK tax has been declared or paid.

The Revenue’s aim has been to get the majority who have avoided paying UK tax to accept the inevitable with the carrot of a fixed 10% penalty.

The intention to disclose needs to be notified to the Revenue by the 22nd June 2007, a full disclosure and payment of taxes due, to include interest and the 10% penalty, must be made by the 26th November 2007.

With the Revenue having obtained details of offshore account holders, one can expect investigations to commence shortly after the 22nd June for those who have not fully disclosed. In particular, it is rumoured that the Revenue intends to name and shame high profile celebrities.

Offshore Investment Bonds
For those looking to defer or mitigate tax legitimately is through an investment in an offshore investment bond. This can include a wide ranging investment strategy from cash deposits, fixed deposits, guaranteed products or a full range of investment collectives to include exchange traded funds. This legitimate long-term deferral can add substantial benefits to an investor’s portfolio for a minimal cost.

By John Robson & Andrew Selsby at RH Asset Management Limited, as published in the Onassis Newsletter, a fortnightly newsletter that gives insight into the investment markets.

For more from RHAM, visit http://www.rhasset.co.uk/