Here’s how much money Americans could save — or lose — under Trump’s tax plan

President Donald Trump vowed throughout his campaign that he’d overhaul the US tax system, simplifying it and putting money back in the pockets of American citizens.

Trump’s proposed plan, if enacted, would almost certainly deliver on that first promise: It would pare down the seven income tax brackets to three, and it would eliminate personal exemptions in favor of increasing the standard deduction, among other changes geared at streamlining the tax code.

But would the plan result in more money for US workers? Taxes, unfortunately, remain stubbornly complicated — even in a system overhauled for simplicity.

For most people, the answer would be yes. But it depends on who you are. Some of the simplification measures mean valuable tax breaks — like the head-of-household filing status — would vanish, leaving millions of families, including more than half of single parents, with a higher federal tax burden than in previous years, according to a report by the Urban-Brookings Tax Policy Center, a nonpartisan think tank.

The Tax Policy Center has analyzed the Trump administration’s proposed tax plan, comparing it with the current tax code to show who stands to gain the most — and who would wind up a loser — if Trump’s plan became the law of the land.

Below, we break down some various tax scenarios and how they affect different people. It’s important to keep in mind that no law has been passed, so nothing is yet a given.

While their plans have similarities, Trump and House Republicans don’t agree on everything. It seems likely the main contours of Trump’s plan will come to legislative fruition, but the chaotic political climate has banished certainty to the quarters of the foolish.

Read on to see how your wallet would be affected under Trump’s tax plan.


First, here’s a quick synopsis of some of the main changes that would affect people.

• Instead of seven, we’d have three income tax brackets.

Current: 10%, 15%, 25%, 28%, 33%, 35%, 39.6%

Proposed: 12%, 25%, 33%

• The standard deduction would go way up. It jumps from $6,300 to $15,000 for singles; for married joint filers, it jumps from $12,600 to $30,000.

• Personal exemptions and exemptions for dependents would be eliminated, as would the head-of-household deduction.

• Families with children under age 13 could deduct childcare costs, capped at the state average.

• The alternative minimum tax, a complicated surtax that raises rates on middle- to upper-middle-class earners, would be axed. It currently affects nearly 5 million people.

• Gift taxes and estate taxes would be gone; capital gains held until death would be exempt up to $5 million per person.


Overall, under Trump’s plan, every income level would see its average federal tax rate decline.

The Tax Policy Center analysis isn’t just looking at income tax. It accounts for individual and corporate income tax, payroll taxes for Social Security and Medicare, the estate tax, and excise taxes.


So Americans at every income level would, on average, see more money in their pockets. The gains, in raw dollars, are largest for high-income earners.


Here’s what those savings look like measured as a percent increase in after-tax income. Again, higher-income earners would see their tax savings increase the most — both by dollars and by percentage.


For married couples filing jointly, the average increase is slightly less, in most cases.

One reason for the slight dip? The elimination of personal exemptions.

While the proposed plan increases the standard deduction for married couples from $12,600 to $30,000, many married couples also have children, who count for additional exemptions they would lose under the new plan. Since each exemption is currently worth $4,050, couples with three children or more would get a larger deduction under the system we have now than under the proposed plan.

Five exemptions — one for each parent and each of the three children — is worth $20,250. After factoring in the $12,600 standard deduction, a couple today would reap a break of $32,850, compared with the flat $30,000 under Trump’s plan. That discrepancy would grow with each child added into the picture.

This would be offset to a degree by a proposal to allow families to deduct the average cost of childcare, but not enough to cover the difference in many cases, according to a Tax Policy Center study.


That decrease in tax savings becomes more apparent when you isolate tax filers with children.

This chart includes single parents, who would lose their head-of-household filing status under the new plan. Most parents still get some tax cut, but those earning between $20,000 and $50,000 would see their taxes increase.


But head-of-household filers, as a group, fare the worst on average. It’s not a huge increase, but these filers who earn between $20,000 and $200,000 would see their federal taxes go up rather than receive a tax cut. For many of these families, though, every dollar counts.

What is the head-of-household status, and why are these people hit the hardest overall?

The head-of-household status applies primarily to single parents (you’re not eligible if you’re married) and comes with a higher standard deduction than single filers without dependents — $9,300, compared with $6,300.

Under the current law, a single parent with one child would receive $17,400 in deductions — two personal exemptions worth $8,100, plus the $9,300 head of household deduction — compared with the flat $15,000 deduction under Trump’s plan.

That loss of income becomes starker with each child added to the picture. A single parent with three children is looking at over $10,000 lost deductions under Trump’s plan — $25,500, compared with $15,000.

Taxpayer Bill of Rights

• The Right to Be Informed.

• The Right to Quality Service.

• The Right to Pay No More than the Correct Amount of Tax.

• The Right to Challenge the IRS’s Position and Be Heard.

• The Right to Appeal an IRS Decision in an Independent Forum.

• The Right to Finality.

• The Right to Privacy.

• The Right to Confidentiality.

• The Right to Retain Representation.

• The Right to a Fair and Just Tax System.

 

Mid Year Life Changes that bring New Year Tax Surprises

A Mid Year Adjustment Can Prevent a Tax-Time Surprise When it comes to filing a federal tax return. Many people discover that they either get a larger refund or owe more tax than they expected. But this type of tax surprise doesn’t have to happen to you. One way to prevent it is to change the amount of tax withheld from your wages. You can also change the amount of estimated tax you pay.

Here are some tips to help you bring the amount of tax that you pay in during the year closer to what you’ll actually owe:

  • New Job. When you start a new job, you must fill out a Form W-4, Employee’s Withholding Allowance Certificate. Your employer will use the form to figure the amount of federal income tax to withhold from your pay. Call us at 702-564-1040 or make an appointment online with any questions.
  • Estimated Tax. If you get income that’s not subject to withholding you may need to pay estimated tax. This may include income such as self-employment, interest, dividends or rent. If you expect to owe a thousand dollars or more in tax, and meet other conditions, you may need to pay this tax. You normally pay it four times a year. We can calculate this for you if you call 702-564-1040 or make an appointment online at www.5641040.com.
  • Life Events. Make sure you change your Form W-4 or change the amount of estimated tax you pay when certain life events take place. A change in your marital status, the birth of a child or buying a new home can change the amount of taxes you owe. Call us to see what new tax laws and changes you make in your life can lower your tax bill. You can reach us at 702-564-1040 or make an appointment online at www.5641040.com.
  • Changes in Circumstances. If you receive advance payment of the premium tax credit in 2014 it is important that you report changes in circumstances, such as changes in your income or family size, to your Health Insurance Marketplace. You should also notify the Marketplace when you move out of the area covered by your current Marketplace plan. Advance payments of the premium tax credit provide financial assistance to help you pay for the insurance you buy through the Health Insurance Marketplace. Reporting changes will help you get the proper type and amount of financial assistance so you can avoid getting too much or too little in advance. If at anytime you want some up to date tax advice feel free to call us at 702-564-1040 look online for tax tips articles or make an appointment at www.5641040.com.

What to do if you get a Notice from the IRS

What to do if you get a Notice from the IRS. Each year the IRS mails millions of notices. Sometimes it seems like tens of millions if you get them personally. Here’s what you should do if you receive a notice from the IRS:

  1. Don’t ignore it. You can respond to most IRS notices quickly and easily. And it’s important that you reply promptly. If you don’t know what to do make an appointment at www.5641040.com.
  2. IRS notices usually deal with a specific issue about your tax return or tax account. For example, it may say the IRS has corrected an error on your tax return. Or it may ask you for more information. If you don’t know what to do make an appointment at www.5641040.com.
  3. Read it carefully and follow the instructions about what you need to do. If you don’t know what to do make an appointment at www.5641040.com.
  4. If it says that the IRS corrected your tax return, review the information in the notice and compare it to your tax return. If you don’t know what to do make an appointment at www.5641040.com.
  5. If you agree, you don’t need to reply unless a payment is due. If you don’t agree, it’s important that you respond to the IRS. Write a letter that explains why you don’t agree. Make sure to include information and any documents you want the IRS to consider. Include the bottom tear-off portion of the notice with your letter. Mail your reply to the IRS at the address shown in the lower left part of the notice. Allow at least 30 days for a response from the IRS.
  6. You can handle most notices without calling or visiting the IRS. If you do have questions, call us at 702-564-1040 or if you don’t know what to do make an appointment at www.5641040.com.
  7. Keep copies of any notices you get from the IRS. If you don’t know what to do make an appointment at www.5641040.com.
  8. Don’t fall for phone and phishing email scams that use the IRS as a lure. The IRS first contacts people about unpaid taxes by mail – not by phone. The IRS does not contact taxpayers by email, text or social media about their tax return or tax account. If you think someone is trying to scam you call us at 702-564-1040 or make an appointment online at www.5641040.com.

Gambling Winnings Tax Tips

Tip Sheet on Gambling Income and Losses

Whether you like to play the ponies, roll the dice or pull the slots, your gambling winnings are taxable.

You must report all your gambling income on your tax return. If you’re a casual gambler, odds are good that these basic tax tips can help you at tax time next year:

1. Gambling income. Gambling income includes winnings from lotteries, horse racing and casinos. It also includes cash prizes and the fair market value of prizes like cars and trips.

2. Payer tax form. If you win, you may get a Form W-2G, Certain Gambling Winnings, from the payer. The IRS also gets a copy of the W-2G. The payer issues the form depending on the type of game you played, the amount of your winnings and other factors. You’ll also get the form if the payer withholds taxes from what you won.

3. How to report winnings. You must report all your gambling winnings as income. This is true even if you don’t receive a Form W-2G. You normally report your winnings for the year on your tax return as ‘other income.’

4. How to deduct losses. You can deduct your gambling losses on Schedule A, Itemized Deductions. The amount you can deduct is limited to the amount of the gambling income you report on your return.

5. Keep gambling receipts. You should keep track of your wins and losses. This includes keeping items such as a gambling log or diary, receipts, statements or tickets.
 

Nine Tips for people who owe MONEY to the IRS

Did you end up owing taxes this year? The vast majority of Americans get a tax refund from the IRS each spring, but those who receive a bill may not know that the IRS has a number of ways for people to pay. Here are nine tips for taxpayers who owe money to the IRS.

  1. If you get a bill this summer for late taxes, you are expected to promptly pay the tax owed including any penalties and interest. If you are unable to pay the amount due, it is often in your best interest to get a loan to pay the bill in full rather than to make installment payments to the IRS.
  2. You can also pay the bill with your credit card. The interest rate on a credit card or bank loan may be lower than the combination of interest and penalties imposed by the Internal Revenue Code. To pay by credit card contact one of the following processing companies: Official Payments Corporation at 888-UPAY-TAX (also www.officialpayments.com/fed) or Link2Gov at 888-PAY-1040 (also www.pay1040.com) or RBS WorldPay, Inc at 888-9PAY-TAX (also www.payUSAtax.com).
  3. You can pay the balance owed by electronic funds transfer, check, money order, cashier’s check or cash. To pay using electronic funds transfer you can take advantage of the Electronic Federal Tax Payment System by calling 800-555-4477 or online at www.eftps.gov.
  4. An installment agreement may be requested if you cannot pay the liability in full. This is an agreement between you and the IRS to pay the amount due in monthly installment payments. You must first file all returns that are required and be current with estimated tax payments.
  5. If you owe $25,000 or less in combined tax, penalties and interest, you can request an installment agreement using the Online Payment Agreement application at IRS.gov.
  6. You can also complete and mail an IRS Form 9465, Installment Agreement Request, along with your bill in the envelope that you have received from the IRS. The IRS will inform you usually within 30 days whether your request is approved, denied, or if additional information is needed. If the amount you owe is $25,000 or less, provide the highest monthly amount you can pay with your request.
  7. You may still qualify for an installment agreement if you owe more than $25,000, but a Form 433F, Collection Information Statement, is required to be completed before an installment agreement can be considered. If your balance is over $25,000, consider your financial situation and propose the highest amount possible, as that is how the IRS will arrive at your payment amount based upon your financial information.
  8. If an agreement is approved, a one-time user fee will be charged. The user fee for a new agreement is $105 or $52 for agreements where payments are deducted directly from your bank account. For eligible individuals with incomes at or below certain levels, a reduced fee of $43 will be charged.
  9. Taxpayers who have a balance due, may want to consider changing their W-4, Employee’s Withholding Allowance Certificate, with their employer. There is a withholding calculator available on IRS.gov to help taxpayers determine the amount that should be withheld.

Tax Information for Students Who Take a Summer Job

Many students take a job in the summer after school lets out. If it’s your first job it gives you a chance to learn about the working world. That includes taxes we pay to support the place where we live, our state and our nation. Here are eight things that students who take a summer job should know about taxes:

  1. Don’t be surprised when your employer withholds taxes from your paychecks. That’s how you pay your taxes when you’re an employee. If you’re self-employed, you may have to pay estimated taxes directly to the IRS on certain dates during the year. This is how our pay-as-you-go tax system works.
  2. As a new employee, you’ll need to fill out a Form W-4, Employee’s Withholding Allowance Certificate. Your employer will use it to figure how much federal income tax to withhold from your pay. For help go to 5641040.com
  3. Keep in mind that all tip income is taxable. If you get tips, you must keep a daily log so you can report them. You must report $20 or more in cash tips in any one month to your employer. And you must report all of your yearly tips on your tax return.
  4. Money you earn doing work for others is taxable. Some work you do may count as self-employment. This can include jobs like baby-sitting and lawn mowing. Keep good records of expenses related to your work. You may be able to deduct (subtract) those costs from your income on your tax return. A deduction may help lower your taxes.
  5. If you’re in ROTC, your active duty pay, such as pay you get for summer camp, is taxable. A subsistence allowance you get while in advanced training isn’t taxable.
  6. You may not earn enough from your summer job to owe income tax. But your employer usually must withhold Social Security and Medicare taxes from your pay. If you’re self-employed, you may have to pay them yourself. They count toward your coverage under the Social Security system.
  7. If you’re a newspaper carrier or distributor, special rules apply. If you meet certain conditions, you’re considered self-employed. If you don’t meet those conditions and are under age 18, you are usually exempt from Social Security and Medicare taxes.
  8. You may not earn enough money from your summer job to be required to file a tax return. Even if that’s true, you may still want to file. For example, if your employer withheld income tax from your pay, you’ll have to file a return to get your taxes refunded. Call Wagner and Associates for an appointment at 702-564-1040 or make an appointment at 5641040.com

Defense Of Marriage Act-Same Sex ruling comes down from IRS

The U.S. Department of the Treasury and the Internal Revenue Service (IRS) today ruled that same-sex couples, legally married in jurisdictions that recognize their marriages, will be treated as married for federal tax purposes. The ruling applies regardless of whether the couple lives in a jurisdiction that recognizes same-sex marriage or a jurisdiction that does not recognize same-sex marriage. This will allow people to file amendments for joint returns possibly generating refunds for millions of Americans.

The ruling implements federal tax aspects of the June 26 Supreme Court decision invalidating a key provision of the 1996 Defense of Marriage Act.

Under the ruling, same-sex couples will be treated as married for all federal tax purposes, including income and gift and estate taxes. The ruling applies to all federal tax provisions where marriage is a factor, including filing status, claiming personal and dependency exemptions, taking the standard deduction, employee benefits, contributing to an IRA and claiming the earned income tax credit or child tax credit.

Any same-sex marriage legally entered into in one of the 50 states, the District of Columbia, a U.S. territory or a foreign country will be covered by the ruling. However, the ruling does not apply to registered domestic partnerships, civil unions or similar formal relationships recognized under state law.

Legally-married same-sex couples generally must file their 2013 federal income tax return using either the married filing jointly or married filing separately filing status.

Individuals who were in same-sex marriages may, but are not required to, file original or amended returns choosing to be treated as married for federal tax purposes for one or more prior tax years still open under the statute of limitations.

Generally, the statute of limitations for filing a refund claim is three years from the date the return was filed or two years from the date the tax was paid, whichever is later. As a result, refund claims can still be filed for tax years 2010, 2011 and 2012. Some taxpayers may have special circumstances, such as signing an agreement with the IRS to keep the statute of limitations open, that permit them to file refund claims for tax years 2009 and earlier.

Additionally, employees who purchased same-sex spouse health insurance coverage from their employers on an after-tax basis may treat the amounts paid for that coverage as pre-tax and excludable from income.

Treasury and the IRS intend to issue streamlined procedures for employers who wish to file refund claims for payroll taxes paid on previously-taxed health insurance and fringe benefits provided to same-sex spouses. Treasury and IRS also intend to issue further guidance on cafeteria plans and on how qualified retirement plans and other tax-favored arrangements should treat same-sex spouses for periods before the effective date of this Revenue Ruling.

Other agencies may provide guidance on other federal programs that they administer that are affected by the Code.

Estate Tax FAQ

What is “Fair Market Value?”

Fair Market Value is defined as: “The fair market value is the price at which the property would change hands between a willing buyer and a willing seller, neither being under any compulsion to buy or to sell and both having reasonable knowledge of relevant facts. The fair market value of a particular item of property includible in the decedent’s gross estate is not to be determined by a forced sale price. Nor is the fair market value of an item of property to be determined by the sale price of the item in a market other than that in which such item is most commonly sold to the public, taking into account the location of the item wherever appropriate.” Regulation §20.2031-1.

When can I expect the Estate Tax Closing Letter?

There can be some variation, but for returns that are accepted as filed and contain no other errors or special circumstances, you should expect to wait about 4 to 6 months after the return is filed to receive your closing letter. Returns that are selected for examination or reviewed for statistical purposes will take longer.

Who should I hire to represent me and prepare and file the return?

The Internal Revenue Service cannot make recommendations about specific individuals, but there are several factors to consider:

  • How complex is the estate? By the time most estates reach $1,000,000, there is usually some complexity involved.
  • How large is the estate?
  • In what condition are the decedent’s records?
  • How many beneficiaries are there and are they cooperative?
  • Do I need an estate tax professional?

With these questions in mind, it is a good idea to discuss the matter with several estate tax professionals. Ask about how much experience they have had and ask for referrals.

This process should be similar to locating a good physician. Locate other individuals that have had similar experiences and ask for recommendations. Finally, after the individual(s) are employed and begin to work on estate matters, make sure the lines of communication remain open so that there are no surprises during administration or if the estate tax return is examined.

Finally, most estates engage the services of both attorneys and/or Enrolled Agents (EA). The attorney usually handles probate matters and reviews the impact of documents on the estate tax return. The EA often handles the actual return preparation and some representation of the estate in matters with the IRS. However, some attorneys handle all of the work.

EAs may also handle most of the work, but cannot take care of probate matters and other situations where a law license is required. In addition, other professionals (such as appraisers, surveyors, financial advisors and others) may need to be engaged during this time. Engaging these separate professionals is not the complete answer. They need to work on the same team.

What if I do not have everything ready for filing by the due date?

The estate’s representative may request an extension of time to file for up to six months from the due date of the return. However, the correct amount of tax is still due by the due date and interest is accrued on any amounts still owed by the due date that are not paid at that time.

Do I have to talk to the IRS during an examination?

You do not have to be present during an examination unless an IRS representative needs to ask specific questions. Although you may represent yourself during an examination, most executors prefer that professional(s) they have employed handle this phase of administration. They may delegate authority for this by signing a designation on the Form 706 itself, or executing Form 2848 “Power of Attorney”. Enrolled Agents and Attorneys are best suited to represent you against the IRS.

Foreclosure and EA

An Enrolled agent is the only tax practitioners licensed by the U.S. Department of the Treasury to represent taxpayers before all administrative levels of the Internal Revenue Service (IRS) on issues including collection, audits and appeals.

When you look around at what the most current issues happening in our economy, country and local businesses it seems the importance of a qualified tax practitioner is something we all need. As an EA we are required to stay current on any and all tax issues that the public gets faced with.

Taking a closer look at the foreclosures and increasing amount of Short Sales on real estate, there are enormous repercussions ending with tax increases in the tens of millions of dollars.

Whether it is your main home or an investment property, there are rules and ways that you can protect yourself from having to pay thousands dollars from your hard earned money to the IRS for loosing property.

If you modified your property and received an addition to your income and ended up with a tax liability from that you know that in these uncertain times, you need someone who is on your side and not out to take from you and your family.

There are many exceptions to the Cancellation of Indebtedness Income that the 1099C attempt to make many Americans liable for those tens of millions of dollars those banks are anxious “forgive”.

If the house is your primary residence you can exclude a certain amount of that income. To qualify for primary residence you have to have owned and lived in the property for 3 out of the last 5 years.

The other most popular exemption is Insolvency. Insolvency is complicated due to the nature of the actual date of acquisition. The only way to verify a date of acquisition with the bank they will need to issue you a 1099A or you will need the selling contract and title paperwork. Once you have that you are only insolvent up to the amount your liabilities are more than your assets. Any amount that is forgiven over that could cause you some un-needed heartache.