Month: January 2012

Chris Christie and Taxes At 10% Realistic Or Rediculous

A ten percent income tax for every citizen in New Jersey is Governor Chris Christie‘s plan. His belief is that to change the present economic crisis requires a radical approach to income taxes. A fiscal conservative he proposing to cut the state’s spending at the same time he is promoting income tax cuts.

Christie views himself as an economic visionary who is willing to take tough actions to pull his state out of its economic quagmire. His speaking engagements on radio, television, and at town hall meetings make him appear as a current Republican candidate for president, but his goal is the 2016 election. He is confident his plan will work for New Jersey and the Nation. In California, Illinois, and New York, Democratic governors are taking an opposite approach to his plan. They are raising taxes for all citizens and making sure the upper-class proportionally pay an equal share of their taxes. These Democratic governors want to lower the deficits in their states. Borrowing on empty bank accounts will only create more debt. States cannot be competitive if their economic standing is low and they have no money for their states infrastructure and basic needs.

Tax policies, which put on increased burden a state’s ability to be economically solvent are seen by many leaders as unrealistic. His plan which borrows from a bankrupt account may not be what New Jersey needs. His plan is radical, but similar to elective surgery the people of his state may want a second opinion.

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What are Our Income Taxes Used For?

No one likes to pay taxes. In fact, you may even wonder where your hard earned money goes. It’s especially upsetting to hear that government money was used to fund some insane research, like whether or not mice like cheese. Regardless, you have to pay them. Still, it helps to know where that money goes. This April, maybe you’ll be a bit more at ease knowing that your tax dollars are actually be used for some pretty amazing things.

How Are Federal Income Taxes Used?

It may surprise you, because our military gets paid so little, but over 50% of our federal tax dollars in 2009 went towards our current military members, veterans and the current wars that we’re fighting. This includes the costs of weapons, housing, etc. The rest of our tax dollars are spent on human resources (education, medical), general government (government officials’ salaries) and physical resources (agriculture). The government includes Social Security in their figures. However, many point out that Social Security is collected separately from federal income taxes and is thus a trust fund. When we think of what the government does individually with our income tax dollars, defense and wages for government employees eat up a large chunk of our income taxes, but it’s important to remember that our taxes cover the costs of thousands of expenses. While our government does spend money on unwise decisions, it also spends money on Pell grants for college students, food for needy families and other important expenses.

How Are State Income Taxes Used?

State income taxes may be used differently in different states. However, many states use state income taxes to pay for education, government officials’ salaries, police forces, EMTs, health and social services and even public transportation. What a state uses it’s money on will depend on what the state’s government determines needs the most help. However, not all states have state income taxes. States like Tennessee only charge federal income taxes, but have a much steeper sales tax than states that do have an income tax.

While paying federal and state income taxes may not be ideal, chances are these taxes have paid for something in your life. It may have been the schools you attended or the roads you drive on. Either way, income taxes are a necessary evil. After all, if we were given the chance to pay for these items, instead of being forced to, chances are many people wouldn’t shell out their own money willingly.

About the Author: Manuel Phyfe is a volunteer with an organization that helps senior citizens find free tax support. He finds that many are angry at tax time not because they have to file a return, but because they don’t understand where their money has gone.

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How to Avoid Meeting the Inheritance Tax Threshold

Did you know that whenever anyone dies, the money and the property which is left to the beneficiaries are subject to an inheritance tax? This tax is usually 40% of anything above the threshold, which in the UK at the moment is £325,000.

However, if you are like most people you will not want to see a large chunk of your inheritance go towards taxes. Luckily, there are ways that you can avoid meeting the inheritance tax threshold and not have to pay. Effectively planning your inheritance can save your family hundreds of thousands of pounds.

As house prices have increased over the years but the inheritance tax threshold has not, more people than ever have been liable to pay it. To avoid this, you will need to split up your estate in your will so that you can make sure that each of your loved ones inherits an amount which is under the threshold.

Leaving Money to Your Spouse or Civil Partner

Did you know that if you leave your money to your spouse or civil partner, they will be exempt from paying inheritance tax on any of it? This can be a way for you to pass along your estate without having to worry about meeting the inheritance tax threshold. In the future when your partner dies, the estate will be subject to an inheritance tax threshold again, but the threshold will be higher at $650,000.

Setting up a Trust

Many people place their money in a trust fund in order to avoid paying inheritance tax. Although this was a very popular method in the past, the HMRC has become aware of this practice and has been cracking down on using trusts for this purpose. However, you still might be able to exempt your money from inheritance tax in some cases, such as trusts for someone who is disabled or certain trusts for your children. To make sense of the complicated rules and restrictions, you should talk to someone who specializes in these types of trusts.

Give it Away

One of the simplest ways of protecting your assets from inheritance tax is by giving your estate away in the form of gifts. Any money that you give to your benefactors is exempt from inheritance tax as long as you continue living for more than 7 years after giving the gift. You will also be able to give away £3,000 per year of your assets, and this will be exempted from your inheritance tax threshold. This concession allows parents and grandparents to give money to their children without fear of exceeding the inheritance tax threshold down the line.

These are just a few ways that you can deal with the inheritance tax threshold and make sure that more of your worldly possessions get passed along to your loved ones.

Simon Grant produced this content on behalf of Access Legal solicitors, whose site has pkenty of advice on the subject of making a will.

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Proper Bookkeeping for a Solid Business Future

Business owners would agree that a proper bookkeeping system is not only essential, but it’s also the foundation that will secure your company’s financial future.

Running a business means more than just keeping your clients happy; it requires proper systems that are in place to secure your company’s future, whether this is looking after your employees, providing top-notch customer service, or maintaining a decent set of books. Bookkeeping is one of the most important aspects of managing an organization and failing to look after this important part of your office can ultimately lead to a financial disaster.

The Basics of Bookkeeping

The main purpose of bookkeeping is to keep an accurate record of a company’s financial transactions. This can be done in-house, but you may also find a bookkeeper from an external source to handle your company’s books. The person does not necessarily need to be qualified, but he or she should be very knowledgeable regarding the functions of a bookkeeper and the specific guidelines and State laws that your company should adhere to.

Bookkeeping also entails proper record keeping of the company’s various spending and income activities; such as supplier payments, customer payments, employee salaries and advertising costs. These items should be categorized and properly filed, in a way that the records are easy to find. Financial statements are also an important aspect of every company’s books, and they give you an accurate overview of your performance, and they are reliable measuring tools when comparing your performance against those of your competitors.

Budgeting is equally important and allows you to set sustainable financial goals and constantly guard against overspending. Comparing your budgets against your actual spending also gives business owners a good indication of the goals accomplished, and the areas that can be improved. If you are looking to hire an individual that can accurately prepare budgets on you company’s behalf, try to find a bookkeeper that has significant experience and sufficient knowledge to assist you.

Complying with tax laws is also an area that every business needs to focus on. Filing tax returns is very important and if your financial system is in order, it will make this task so much easier. Your tax returns need to accurately reflect your company’s profit, turnover and spending. This is best done by a professional and it is advisable that you hire such a person to oversee these activities.

The Importance of Record Keeping

Document retention is something that every business should adhere to, and it can help a company with litigation and to ensure that all State laws and regulations are met. Here are the basics that every business owner should be aware of:

  • Records can refer to both hard- and soft copy documents; for example a physical receipt for goods purchased, or an email from a customer.

 

  • The length that you keep these records will differ, for example sales receipts are only valid up to the time the limitations expire. Important documents such as cancelled checks, duplicate bank deposits and employment records should be kept for a few years.

 

  • Documents are kept to avoid the burden of proof in the future. Documentation would need to be provided in case any issues or claims arise a few years from now.

 

Anthony Azevedo, CPA is the managing member of EZCFO, an accounting and bookkeeping company specialized in payroll, human resource and employer solutions.

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Small Money Mistakes With Large Financial Consequences

All of us are liable to make mistakes every now and then; after all, we’re only human. But there are some seemingly small mistakes that can snowball into something big and bring irreparable consequences to businesses.

If you have typos in a book report, or forget to pay a bill on time, it is easy to be forgiven for these minor errors. However, when you are part of a large company, a simple mistake can turn into a million dollar lawsuit that can render your business helpless or bring it to the brink of bankruptcy.

Listed below are some of examples of little mistakes that resulted in some of the most terrifying losses for businesses.

Website Blunder

In 2006, Alitalia made one wrong move on their website that cost the company millions of dollars. By leaving out a couple of zero’s in the cost of their Toronto to Cyprus fare, the company had to shoulder 2,000 tickets at only $39, when in fact the tickets were worth $3,900. A $3,900 plane ticket for $39!  Surely you won’t find a bigger discount out there.

In light of this huge slip-up, Alitalia tried their best to cancel all the tickets purchased at the incorrect price.  Eventually, though, they had to honor the $39 price tag to appease their disgruntled customers and protect their company name. Now, you do the math.  For 2,000 tickets, Alitalia had to cover roughly $7.72 million from their own funds.

Wrong Move on the Stock Market

One stock broker in Japan will probably never forget the fateful day in 2006 when he encoded the wrong digits on his stock market ledger. Instead of selling each share of J-Com stock for ¥610,000, he ended up selling 610,000 shares for a measly ¥1 with a few doomed key strokes. Despite attempts to correct the oversight, the error was not corrected in time and cost the company a whopping $240 million.

Wrong Punctuation

Surely all of us misplaces a comma from time to time, but no businessman would want to forget this grave error in comma placement.  In a contract with Aliant Inc, Rogers Communications made a tiny error in one clause that resulted in an 18-month long court battle which required them to pay an additional $2.13 million to Aliant. The culprit? A simple comma that should not have been present in the first place!

A Grave Oversight that Clouded Sunny Hawaii

Back in 2009, Hawaii was experiencing a daunting budget deficit made infinitely worse because of a small clerical error.  As the 2009 fiscal year was about to come to a close, one government department posted an $8 million growth, when in actuality the department was facing a $34 million budget deficit. Before they even realized what had happened, the Hawaiian government spent the money, digging themselves further into debt.

Looking at these examples might give you pause and serve as a reminder to be extra careful from now on and avoid following in their footsteps.

If you love to budget and the idea of a misplaced decimal point haunts your dreams, you may be a natural born accountant. Take a look at your options for accounting degrees online, such as these accounting associate’s programs.

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