Who Benefits From Trump’s Tax Plan?

Who are the Winners & Losers in Trump’s Proposed  Tax Plan

While the details are just emerging and the final plan is sure to change, the tax overhaul that Trump & the Republican party recently unveiled has clear beneficiaries; and early indications are it is NOT the “middle class”.  In fact, according to this analysis, Trump’s tax plan will see the majority of the benefits—i.e. tax cuts— to the rich; particularly the top 1% & 0.1%.

 In Indianapolis last Wednesday, Trump outlined his proposal and stated, “…the biggest winners will be the everyday American workers as jobs start pouring into our country, as companies start competing for American labor and as wages start going up at levels that you haven’t seen in many years…”.   This is your classic “trickle down economics” argument that has been made for decades; that by cutting taxes on big businesses and the wealthy, the average American worker will see the benefits work their way down to them in the form of higher wages and more jobs.  The only problem is that study after study has shown these benefits never really reach the middle class.  Staying true to theory of trickle down, Trump proposes slashing taxes dramatically for Americans who earn north of $730,000 a year.

What’s in Trump’s Tax Plan? 

Although far from finalized, the main points of the plan that affect Individual taxpayers are:

  1. Reduce the tax bracket from seven brackets to three: with tax rates of 12%, 25% and 35% percent with a possibility of adding a fourth bracket.
  2. Doubling the standard deduction from $6,000 to $12,000 for individuals and from $12,000 to $24,000 for those married filing jointly.
  3. Creation of a new tax credit for non-child dependents while increasing the current child tax credit.
  4. Elimination of most itemized deductions but keeping the mortgage interest and charitable giving deductions.  Tax incentives for retirement saving and education plans will be retained; i.e SEP, Traditional, Roth IRA’s and 529 college saving plans etc.

As far as business & corporate taxes, this proposal is just as ambitious.  In President Trump words: “This will be the lowest top marginal income tax rate for small and midsize businesses in this country in more than 80 years…”.  Under this plan, businesses and corporations would see:

  1. A decrease in overall tax rate from 35% to 20%
  2. A new tax rate of 25% for “pass-through” income for businesses like sole proprietorships and partnerships which currently make up nearly 95% of all businesses which are taxed at the rate of their owners.
  3. Limitation of the deductibility of corporate interest expenses, in exchange for the option to immediately expense business investments
  4. Preserves tax credits for research and development and low-income-housing from a business standpoint.

Although the tax plan has a vast amount of changes for individuals & business on many levels, the benefits overwhelming favor the affluent and business owners.

How is the Public Reacting to the Trump Tax Plan?

Proponents of this tax plan for companies are overjoyed: “An encouraging step forward in our shared goal of a tax system that delivers higher economic growth, job creation and wages that our country desperately needs.” said Jamie Dimon, the chief executive of JPMorgan Chase and the chairman of the Business Roundtable.  John Stephens, the AT&T chief financial officer, said it was “A big step toward meaningful reform that would encourage more investment and job creation in the United States.”

Opponents like Edward D. Kleinbard, a tax expert at the University of Southern California law school calls Trump’s Tax Plan “a very cynical document…The extraordinary thing about the proposal is that we know that it loses trillions of dollars in revenue, yet at the same time the only people we can identify as guaranteed winners are the most affluent.”  Even Republican Rand Paul recently came out against Trump’s tax plan calling it a “middle class tax hike”.


This analysis from the Tax Policy Center above clearly illustrates how the current tax proposal favors the wealthy; particularly  the top 1 percent and top 0.1% them.  Pay particular attention to the Share of Total Federal Tax Change.  It breaks down U.S. income earners into 5 categories—from those making the least in the lowest quintile to those making the most in the top quintile.  As you can see, the top quintile reaps a whopping 86.6% of these potential tax cuts!  The other 4 quintiles combined would only realize 13.4% of these cuts. Parsing these numbers even further for the top quintile the majority of tax cuts go to the top 1% (79.7%) and the top 0.1% (39.6%) which equate to an average tax cut of $207,060 & $1,022,120 respectively.  Most Americans don’t even come close to earning the amount of money the top 1% would gain in tax cuts. 

Time & time again, Trump has pledged on the campaign trail and as President that the middle class will see the rewards of his tax cuts and it was time for the rich to pay their fair share by closing tax loopholes amongst other things. However, it is hard to come to any other conclusion than this tax plan, if passed, would overwhelmingly benefit the wealthy and not the middle class. In fact, this plan may create even more tax loopholes that would directly benefit wealthy families.

How Does Trump’s Tax Plan Affect You?

If the previous health care battles are any guide, the political fight to get these cuts enacted will be fierce and has only just begun.  This means that the ordinarily taxpayer can most likely expect tax filing delays—similar or worse than in recent years—while congress bickers…especially for taxpayers who file early.  It will be a while before we can really dig into the ultimate affects of whichever Trump’s tax proposal is ultimately passed.  One thing is for certain: In it’s current form the only real beneficiaries to this proposal are those that make nearly a $1 million or more annually.  Because of all this uncertainty and the prospect for an increase in taxes for the middle class, hiring the services of a Tax Professional this tax season may be well worth the money as they can help you navigate this complicated tax climate as well as potentially unlock benefits you might ordinarily overlook.

If you’d like more information about out how Trump’s existing or eventual tax proposal will affect you, feel free to contact us via the web or call us toll-free at (888) APRIL-15 to speak to an R&G Brenner Tax Professional.

Please feel free to comment below on Trump’s proposed tax overhaul.

How Do Taxes Affect My Credit?

How Paying Tax Can Affect Your Credit Score
How Paying Tax Can Affect Your Credit Score

When you are focused on improving your credit, paying on time and avoiding high amounts of debt will help you build a great credit rating. If you are not paying your taxes, or you use personal loans or credit cards to pay your taxes, your tax bill is something that could have a devastating impact on your credit rating. Missing a deadline for tax payments to the IRS could even result in a tax lien.  Here are some ways taxes can affect your credit:

What is a Tax Lien?

If you fail to pay your taxes, the IRS can file a federal tax lien with the credit bureaus. This will dramatically impact your credit rating. The IRS usually files a lien if you owe more than $10,000 and you have not paid for at least 30 days. If you end up with a lien from the IRS, you can end up with 100-point hit to your credit rating; enough to take your score from good to poor and significantly affect an individual’s financial history.

IRS Payment Plans

The best way to avoid a tax lien is to pay your taxes on time. If you do fall behind, one option the IRS provides is a payment plan for individuals to pay their taxes. The IRS will automatically debit your account each month until you have paid off the entire balance owed. If you enroll in the payment plan, you can have the lien removed by asking the IRS to take it off your credit report. Payment plans with the IRS will not reflect on your credit rating, but if you are late with payments to the IRS, they can reinstate the lien which will then negatively affect your credit.

Personal Loans

Some people choose to take out a personal loan to pay their back taxes. If you decide to go this route to pay your taxes, keep in mind that you will need to pay interest on the loan which could compound and result in a much higher total owed depending on the interest charged. To be approved for the loan, you must meet the credit requirements of the lender. When they pull your credit report, a failure to pay your taxes will appear on your credit report, which will affect the interest rate at which a loan is extended to you or even prevent you from getting a loan at all. If you are late to make payments, your credit rating will be impacted. Defaulting on the loan, like failing to pay your taxes, will drastically hurt your credit score. That said, the interest from an IRS installment plan may accrue more quickly than the interest on a loan. Carefully consider if using a personal loan to pay your taxes is the best decision, and consult with an R&G Brenner tax professional if you need help deciding what would be right for you.

Credit Card Payments

Another way your tax bill can impact your credit rating is if you use a credit card to pay your taxes. Credit cards come with certain interest rates, which can increase your debt burden. The interest of a credit card can end up causing you to pay more money than you initially owed in taxes. Like a personal loan, missing payments on your credit card can hurt your credit score. Credit cards add to your debt burden, which can hurt your credit rating if you end up borrowing too much. Having a high balance on your credit cards can even prevent you from raising your credit score. If your credit rating is severely impacted, you can have a hard time getting approved for other loans, and it can even hurt your ability to find a job.

R&G Brenner usually suggests taxpayers try to take advantage of payment programs offered by the IRS, before other options as they usually are the most beneficial to the taxpayer.  However, it is important to consider all different options available when paying your taxes so taxpayers do not end up unnecessarily struggling with higher amounts of debt.

Could a Tax Credit Help Millennials Financially?

Could The EITC Help Millennials?
Could The EITC Help Millennials?

A lot of attention is being paid to Millennials, who, unlike their parents’ generation, are bucking the trend of graduating directly into lucrative jobs, settling down, buying a house and having 2.5 kids. Millennials, defined as young adults born between the early 1980s and early 2000s, are instead moving back in with their parents, struggling to find work and as a result not making big purchases like cars and homes, not getting married as young, and not having children until much later in life, if at all. While this pattern may not hold for every member of this young generation, statistics indicate that most Millennials are struggling financially. Could a tax credit help all that?

Different Priorities

Millennials’ parents grew up in a different generation. The milestones of life seemed natural—even inevitable—to Baby Boomers. According to Moyers and Company, it’s not that Millennials don’t want the nice job, big house and other big ticket items, it’s that they can’t afford them. This young generation is chronically under-employed or entirely unemployed, and earnings for this age group are on the paltry side. For a generation more concerned with the how many Twitter followers they have than how much is in their 401k, it makes sense that the weight given to these traditional milestones wouldn’t be the same as their parents’ generation, for whom success was defined by those milestones.

Can a Tax Credit Help?

Enter the proposal of a tax credit for this young generation: the Earned Income Tax Credit. As it stands now, this tax credit is extended only to struggling families who earn some money but not nearly enough to live on, says BloombergBusinessweek. It helps them navigate their way up the income brackets to cut down on poverty rates, offering incentives to get back to work. The problem is that, while the tax credit helps families, it leaves struggling young, childless adults out in the cold. Yes, these Millennials may qualify for different—smaller—tax credits if they’re under 25, but this only aids those most likely to still rely on their parents financially.

Coincidentally, the EITC excludes adults between 18 and 24 with no children, who don’t live with their parents and who don’t go to school. Yet this segment of the population is falling through the cracks, going broke because they simply can’t get by in this economy with what they have available to them. Generation Progress is one group looking to make the EITC available to young Millennials through more generous phase-in and phase-out periods to assist these adults in the margins. Crucially, the EITC is not an open-ended type of financial care; it’s just a means for young and emerging adults to get some help until they’re financially stable enough to support themselves.

Would the Credit Be Enough?

It’s hard to say whether a single tax credit would be enough to help an entire generation that’s struggling. Social welfare programs already in existence, like food stamps and social security, cut the poverty rate in the United States significantly. It’s possible that extending the EITC to Millennials will give them just the boost they need to begin lives filled with success.

Understanding Obamacare: How The Affordable Care Act Will Affect Your Taxes

How The ACA Affects Your Taxes
How The ACA Affects Your Taxes

Certain provisions of the Patient Protection and Affordable Care Act (PPACA) are set to take effect in 2014, some of which may have an impact on taxpayers. The PPACA, more colloquially known as “Obamacare,” is the new healthcare law that sets up either a state or government run health exchanges. Along with the change in healthcare accessibility comes a change in taxes.

Whether you agree or disagree with the new law, there’s a good chance that your taxes will be affected by it in one of four major ways:

  • You could receive a tax credit to help you pay insurance premiums.
  • You will experience a tax increase on Medicare if you fall within a certain income bracket.
  • You will have an increased tax on any investment income if you fall within a certain tax bracket; or,
  • You will be penalized, via tax, for not purchasing some form of healthcare.

Receiving a Tax Credit

If you qualify (eligibility is determined by income, family size, and age) then you will receive a tax credit that will help you to pay your health insurance premiums at the start of 2014. In order to be entitled to the tax credit, an individual must earn between 100%-400% of the federal poverty line, or approximately between $11,000-$46,000 dollars a year. For a family of four, a family must earn less than $94,000 to receive any portion of a tax credit. 

Tax Increases on Medicare

If you make over $200,000 dollars a year as an individual or $250,000 collectively as a couple, the new law adds an additional 0.9% tax on your payroll taxes to pay for the Medicare expansion. The 0.9% tax will automatically be withheld from an individual’s paycheck if the individual earns more than $200,000 per year. However, if you make less than $200,000 per year on your own but are married and you and your spouse make $250,000 dollars or more collectively, the 0.9% won’t be withheld from your taxes—and you will be responsible for paying that amount at tax time. 

Tax Increase on Investment Income

Just like the changes in the Medicare tax, this tax increase also focuses on individuals making more than $200,000 dollars per year or couples who collectively make more than $250,000 per year. Unlike the Medicare tax, though, this hike only applies to a tax filer’s adjusted gross income rather than total income. Those who fall within this income category are responsible for an additional 3.8% investment income tax

Being Taxed for Lacking Insurance Coverage

One of the components of the Affordable Care Act—known as the Shared Responsibility Provision —specifies that obtaining health insurance in mandatory, and a fee will be incurred by anyone choosing not to purchase insurance. The tax will present itself in one of two ways in 2014:

  • You will be charged 1% of your income tax, or
  • You will be charged $95.00 per year (whichever one is more is what you’ll be responsible for).

The fee for failing to obtain insurance increases thereafter:  In 2015 it’s 2% of your income, and in 2016 it’s 2.5% of your income or $695 per person (the maximum fee per family is $2,085). Thereafter, the penalty is increased based on the cost-of-living adjustment. The idea is to eventually charge a fee that’s more or or less in line with the cost of obtaining health insurance, encouraging people to opt into the exchange rather than pay a high fee and received nothing in return.

Please let us know your experience in the comments section below–positive or negative–as it relates to obtaining health insurance on the newly created exchanges.

Do I Qualify for the Earned Income Tax Credit (EITC)?

Do You Qualify For The EITC?
Do You Qualify For The EITC?

Although the Earned Income Tax Credit (EITC) can sound daunting and confusing for taxpayers and tax professionals alike, there are ways to navigate the murky waters of this credit to maximize its benefits. This tool can be important for low- and middle-income families and singles looking to save money where they can. Breaking down this tax credit isn’t difficult once you understand what it is and how to file for it.

What is the EITC Credit?

Approved in 1975 by Congress, The EITC is a refundable federal income tax credit designed primarily for low- to middle-income working people to not only mitigate the burden of paying taxes for social security but also to give singles and families an incentive to work. The individual who qualifies for the EITC receives a tax refund, according to the Internal Revenue Service (IRS). Basically, the EITC increases a taxpayers refund by 100% of the value of the credit.  What exactly is earned income? Well, this includes all taxable income a person gets from working or obtains through payments for disability. Broken down in more detail, it includes any income received from salaries, tips and pay; benefits as a result of a union strike; long-term disability pay before the age of retirement; and net earnings from being self-employed.

Do I Qualify?

Taxpayers are required to meet certain requirements to be able to take advantage of the EITC. They must file a tax return even in the event they don’t owe taxes. If you don’t owe taxes, you don’t need to file a tax return typically, but to qualify for the credit you must file either way. The money you have earned must have come from gainful employment by someone else or through self-employment, plus it must meet rules set forth by the IRS. There are also additional rules for workers who do not have a qualifying child or do not have a child meeting those rules for them. In general, EITC rules state that:

  • you must have a valid social security number
  • you must currently be receiving income from some source, whether through someone else or self-employment
  • must file as married filing jointly
  • you must be a U.S. citizen, resident alien for the entire year, or a nonresident alien who is married to someone who is a U.S. citizen or resident alien.

Further rules state that you can’t be a qualifying child for someone else, you can’t file Form 2555 or 2555-EZ, you must meet certain gross and earned income limits, and income from your investments must not exceed certain stated limits. The IRS lists all the restrictions and EITC qualifications on its website. Keep in mind there are special rules that apply to the military, clergy members, those getting disability payments, and those affected by natural disasters.

Everything you want to know about EITC can be found here. The IRS recommends gathering all the necessary documents before filing your taxes. If you need assistance especially in regards to filing for the EITC, contact an R&G Brenner Tax professional today, and we will be happy to assist you.

H&R Block Files Client’s Tax Returns Early Delaying Refunds

Certain H&R Block Client's Refunds Are Delayed
Certain H&R Block Client’s Refunds Are Delayed

H&R Block (HRB)–the largest public retail tax preparation company in the United States–has confirmed that they have filed many tax returns containing certain delayed credits too early, causing their clients refunds to be delayed.  The primary issue is the Education Tax Credit which was not accepted for electronic filing until recently (February 22nd).  This has prompted the IRS to send letters to HRB clients instead of their expected refunds.  HRB has released the following statement:

“H&R Block has confirmed with the IRS that there was an issue with certain tax returns filed before February 22, 2013 that included certain education tax credits claimed on Form 8863.  We have worked with the IRS to expedite a solution to this issue for all of our affected clients.”

If you are a current HRB client, and have received notification from the IRS concerning the early filing of your tax return–or you think you may be affected–it is advised that you contact your local HRB office, or contact their executive headquarters by calling 1-800-HRBLOCK.

Source: ABC

Taxpayers: Protect Yourself From Identity Theft

Protect yourself from Identity Theft

Identity theft has become a huge problem for the IRS.  Last year alone, there were nearly 650,000 cases of Identity Theft reported to the IRS.  Some believe the skyrocketing amount of cases are a direct result that the IRS now requires all tax returns to be filed electronically.  The IRS has implemented “digital safeguards” this year to intercept returns which they deem have a high probability of identity theft, and have deployed a task force of 3,000 agents who’s job it is to investigate Identity Theft.  Unfortunately, many taxpayers who are legitimate “early filers” are bound to get caught up in the web of “digital safeguards” and have their much-needed refunds delayed. And while the Task Force the IRS has deployed to investigate cases is good, it’s effectiveness is limited to after identities are already stolen are returns are filed fraudulently; no real relief to the victims. While this influx of electronic data has clearly exposed the IRS safeguards of personal & private electronic data to be lacking, the are certain steps that the taxpayer can take to help secure their sensitive information:

  1. Avoid sending or receiving W2’s, 1099’s or any other personal tax documentation to or from anyone by e-mail.  Encryption offers some defense, but there are still safer ways to communicate your tax data.  REMEMBER: A single W2 or 1099 contains your name, address, social security number/EIN; all the info that any would be thief needs to file a fraudulent return.  An email server can be anywhere in the world and could be susceptible to attack.  Furthermore, the email accounts of the sender and receiver are susceptible to hackers as well especially since it has been shown that password security for the average user is sorely lacking.  The best alternatives are to a) send everything by mail or b) fax your documentation (however many fax services are increasingly turning to “E-Fax” technology whereby faxes are converted to emails…thats why option a) is still the most secure.)
  2. Do not carry your social security card with you, or supply your SS# to anyone over the phone/internet without confirming who they are and why they need it.  This appears to be a “no brainer”, but many taxpayers carry their Social Security numbers in their wallets/bags along with their driver’s licenses and IDs. Again, a lost wallet gives everything a thief needs to steal identities. Beware of online & phone scams as well asking for your SS#’s.  The IRS will NEVER request sensitive private information over the web/phone unsolicited.
  3. Maintain physical safe-guards to protect your private data.  This is as simple as a locking file drawer or cabinet.
  4. Maintain digital safe-guards.  Sometimes it is impossible to keep all your private information only in paper format.  If you keep data on your computer it is important to have in place: a) strong passwords which are changed frequently b) a firewall; never plug a wire directly into your computer from a your broadband modem c) anti-virus software.
  5. Verify your credit report.  This should be done once every 12-18 months.  Anything out of the ordinary like a steep drop in your rating is a good indicator that your identity may have been compromised.
  6. Optional: Obtain Identity Theft Protection.  If you have ever been a victim of identity theft, buying protection is recommended; who knows who still has your information out there?  If you relay or store a lot of personal data via the web, protection may be a good idea as well.  There are many affordable services that would be well worth the cost if you become a victim of Identity Theft just once.

While there is no “magic bullet” to prevent Identity Theft entirely, following the general rules above will limit your exposure. If you’d like more information on how to safeguard yourself and your family from Identity Theft–or have any tax related inquiries–feel free to contact and R&G Brenner professional here, or call us toll free (888) APRIL-15.

October 15 Extension Deadline Approaching

October 15th Extension Deadline

According to the IRS, over 11 million taxpayers who filed for an extension are due to submit their final tax return by October 15th.  Failure to do so can result in penalties and interest.  If you filed an extension, and have yet to file your final return, time is running out.  If you require assistance, R&G Brenner can help.  Please contact us here to schedule an appointment and/or to speak to a qualified R&G Brenner tax professional.

Below are a list supplied by the IRS of credits that are often over looked by tax filers:

  • Benefits for low-and moderate-income workers and families, especially the Earned Income Tax Credit. The special EITC Assistant can help taxpayers see if they’re eligible.
  • Savers credit, claimed on Form 8880 for low-and moderate-income workers who contributed to a retirement plan, such as an IRA or 401(k).

Call R&G Brenner toll-free (888) APRIL-15

IRS Plans To Increase Audits Of Small Businesses

IRS To Increase Small Business Audits

The IRS recently announced that it plans to increase audits of small businesses in the hopes of closing a $450 Billion gap.  This announcement is interesting because it come on the heals of a recent report that most audits of small businesses turn up nothing.  The eight significant audit areas the IRS will be concentrating are:

1. Fringe benefits. The IRS is completing its final year of research on employment tax compliance. Early findings from these audits indicate that employers are not reporting employees’ personal use of company vehicles on Forms 1099 or W-2. Look for the IRS to investigate the use of all company cars, especially luxury autos, in its audits.

2. High income/high wealth taxpayers. The IRS defines high income/high wealth taxpayers as those who bring in a total income of more than $200,000 a year. Total income includes all gross receipts and sources of income before expenses and deductions. Through 2013, the IRS will focus on taxpayers with a total positive income of more than $1 million who file a Schedule C business return. Last year, the IRS audited 12.5% of all individuals with incomes of more than $1 million, a significant increase from 8.4% in 2010.

3. Form 1099-K matching. The IRS announced that it will start Form 1099-K matching in late 2013. The IRS provided a reprieve from merchant card reporting on business returns for 2011 Schedule C and Forms 1065, 1120S and 1120; however, the IRS plans to change its approach after 2012 returns are filed. The IRS has indicated that it plans to pilot a business-matching program that can address a large amount of small business noncompliance.

4. Credit for small business employee health insurance. This credit, first available on 2010 returns, is now coming under IRS scrutiny. The IRS will examine small business employers and for compliance with eligibility requirements.

5. International transactions. The IRS will continue to focus on the international tax gap. The IRS’ third voluntary initiative for foreign bank account reporting is under way, and the IRS will be looking to aggressively pursue taxpayers who hide assets overseas. The IRS will also focus on offshore transactions for large and small businesses.

6. Partnerships. This is a new area of emphasis for the IRS. Expect the IRS to target large loss partnerships and specific abuses that emerge from early findings in this project.

7. S corporations. The IRS is interested in S corporation audits in which losses are taken in excess of basis on shareholder returns. The IRS will review basis computations in these audits to determine whether tax preparers are properly completing due diligence requirements before deducting losses on Form 1040. The IRS is also interested in the use of S corporation distributions to avoid payment of Social Security taxes. The IRS will focus on S corporations with income, distributions and little or no salary paid to officers.

8. Proper worker reclassification. Almost all business audits also include employment tax issues. In particular, the IRS is interested in worker status. The IRS understands that businesses have an economic incentive to misclassify workers as independent contractors rather than employees. It costs about 30% less for a business to employ an independent contractor than an employee. The IRS thinks there is significant noncompliance in worker classification and will continue to focus its field examination resources in this area.

 Source: Examiner.com