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The truth is for most tax filers it really isn't that complicated. Most people earn money through regular wage compensation and because of that it's pretty straightforward
True but ... You've heard the saying "You'll never get rich working for someone else"? Part of that reason is the tax code. The W2 worker is viewed by government as the worker bee and they are taxed higher as they move up the income scale. The deductions are available to everyone but W2 workers are struggling to put aside their seed money needed to invest and take advantage of the tax code. Work overtime or a 2nd job and if you're at the upper end of your tax bracket you could easily put yourself in the next higher bracket and then government takes a higher percentage off the top. It's like getting a pay cut.
The investor is doing things the government wants hence they get deductions. These deductions wouldn't be there if government didn't want it.
But your gross is what you use to calculate your effective rate.
What is your point?
Many people pay whatever the EZ-form says.
Say they earn $100k. They will pay $16,542.50, simply because that is what the EZ-form says to do.
[$10,367.50 plus 25% of the amount over $75,300 = $16,542.50]
Without any greater awareness of budgeting, investing, or tax-planning. They will pay the most they can pay because they do not wish to spend time thinking about it otherwise. Most American taxpayers are like this, they do not itemize. They pay the most they can because they do not wish to be bothered by thinking. Such is life.
I commonly hear these people referred to as 'wage-slaves'. It makes no difference what their salary is. They could be earning $20k/year or $200k/year. They can not be bothered to think about a tax-strategy.
Other people can earn $20k or $200k, and still never pay income taxes.
My comments have nothing to do with a CPA but rather ignorance of how the simply concepts work
I don't believe I said you said anything about a CPA. Re-read and you'll see I gave another instance where people don't understand about the tax code. Anyway... to the readers of this thread.
When interviewing a CPA (remember you are hiring them). Look for a CPA who believes in being a little aggressive but not too aggressive (you don't need that problem).
And stay away from any CPA who believes in higher taxes (sorry liberals CPA's).
One of the CPA's job is to use the tax code to legally reduce your taxable income Period!
Yep, I don't operate a cash business so everything is reported. Back then people didn't have credit cards and a lot of transactions were in cash and was unreported. Today if someone works under the table they are paid cash and that cash payment is unreported, you keep "ALL" that money, instead of giving it away to the government. Hmm, tough choice, keep 100% or give the % of your effect tax rate away.
I deal with a lot of people who are cash-only.
Partly because we migrated to a rural area with very few cellphone hotspots and fewer internet connections. Many businesses have no web presence here. Our local newspaper has no website, etc. Cash transactions are still common in this area.
We have found that by reporting all of our transactions, we end up with more write-offs.
Partly because we migrated to a rural area with very few cellphone hotspots and fewer internet connections. Many businesses have no web presence here. Our local newspaper has no website, etc. Cash transactions are still common in this area.
We have found that by reporting all of our transactions, we end up with more write-offs.
That can happen, everyone's situation is different but you can't deny that there aren't people who do jobs on the side and don't report it. I can't deal with cash and everything is recorded.
True but ... You've heard the saying "You'll never get rich working for someone else"? Part of that reason is the tax code. The W2 worker is viewed by government as the worker bee and they are taxed higher as they move up the income scale. The deductions are available to everyone but W2 workers are struggling to put aside their seed money needed to invest and take advantage of the tax code. Work overtime or a 2nd job and if you're at the upper end of your tax bracket you could easily put yourself in the next higher bracket and then government takes a higher percentage off the top. It's like getting a pay cut.
The investor is doing things the government wants hence they get deductions. These deductions wouldn't be there if government didn't want it.
Hmm, I must disagree.
I served on Active Duty for 20+ years where I was paid a blend of taxable and non-taxable income. Some years I was even declared 'tax-free' due to my duties. The whole time I got W2s.
Starting at about 6 years into my career, I began taking tax classes offered by the IRS, and I began to itemize. Then I began to file Schedule Cs, Es and Fs. Regardless of whether my Navy salary was tax-free or not, I did my utmost to maintain my AGI at zero or below. So in accordance with form W4, line 7, I was technically 'EXEMPT' from income taxation for most of my career. I have maintained that withholding status to this day, as I still have not paid into Income Taxation since I retired.
To assume that anyone getting a W2 can not utilize the tax code, is in error.
Say they earn $100k. They will pay $16,542.50, simply because that is what the EZ-form says to do.
[$10,367.50 plus 25% of the amount over $75,300 = $16,542.50]
Without any greater awareness of budgeting, investing, or tax-planning. They will pay the most they can pay because they do not wish to spend time thinking about it otherwise. Most American taxpayers are like this, they do not itemize. They pay the most they can because they do not wish to be bothered by thinking. Such is life.
I commonly hear these people referred to as 'wage-slaves'. It makes no difference what their salary is. They could be earning $20k/year or $200k/year. They can not be bothered to think about a tax-strategy.
Other people can earn $20k or $200k, and still never pay income taxes.
I didn't have a point to you. You jumped into a conversation and added irrelevant information. I don't care what people paid as a percentage of agi that's why I asked, not you but the person who made the comment what the percentage they paid of gross income. You have gone on an irrelevant tangent
True but ... You've heard the saying "You'll never get rich working for someone else"? Part of that reason is the tax code. The W2 worker is viewed by government as the worker bee and they are taxed higher as they move up the income scale. The deductions are available to everyone but W2 workers are struggling to put aside their seed money needed to invest and take advantage of the tax code. Work overtime or a 2nd job and if you're at the upper end of your tax bracket you could easily put yourself in the next higher bracket and then government takes a higher percentage off the top. It's like getting a pay cut.
The investor is doing things the government wants hence they get deductions. These deductions wouldn't be there if government didn't want it.
People can get wealthy as w2er and to suggest otherwise is nonsense
People can get wealthy as w2er and to suggest otherwise is nonsense
If I said that I should rephrase it.... there are exceptions but for the majority of people they won't get rich working for someone else. When you work for someone else most people agree to exchange their time for money and they only have so much time in the day. Then to make it worse government takes away their money (essentially taking away the time they worked to make that money)
It also depends on your definition of rich, it is much harder and can take longer. There are so many variables.
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