By Stacey Gorowitz, CPA, MBA
If you’re like most people, you’re heaving a sigh of relief this week and feeling like a huge weight has come off your shoulders, all because this year’s taxes are over and done with at long last. From finding the documents you need to writing the check (or waiting to get your refund), none of the tax-associated activities are likely to be at the top of your “favorite things about spring” list.
Handing the task over to a good CPA makes it much less of an ordeal, but even if you did so you probably picked up some general tax season angst from friends and colleagues who weren’t as smart about outsourcing the job to a professional. It seems there is no escape from the stress of taxes. That makes sense, given that American citizens file over 146 million returns (just counting individual filers, not business) that represent $1,371,402,000,000 in taxes! That’s an awful lot of money, especially considering that the median adjusted gross income was just $34,794 in 2011, according to the IRS. On the other hand, to boast that you’re a part of that famous 1% of top earners, you’d have to have reported an AGI of $399,799 in the same year. Only 304,118 filers claimed a 2011 AGI of over a million dollars. (Facts in this paragraph all come from the IRS’ web page http://www.irs.gov/uac/SOI-Tax-Stats-Tax-Stats-at-a-Glance.)
Think you’re paying too much in taxes? Consider yourself lucky you’re filing in 2014 and not 1945, when the top marginal tax rate was 94%! High-earning filers paid a rate ranging from 82-92% of their incomes after World War II to pay off the war debt, among other goals, and the rates didn’t begin to seriously decline until 1963.
Refunds are more fun than tax payments, of course, but they’re also a sign that you may be over-withholding during the year. Still, it’s fun to get that check, which averages $2953 according to Robert Wood writing in Forbes. Wood also tells us that the deductions for state and local taxes paid are the largest, followed by interest deductions (with mortgage interest leading that list). Nothing surprising there, but you may be truly startled by some of these less predictable taxes levied by various states:
- In Maryland and Virginia, each flush of the toilet earns a tax. Try not to think of the obvious tax savings strategy there, if you can.
- Do you play cards? You can earn a free deck in Nevada when you file your state return. In Alabama, however, you’ll be paying an extra ten cents in tax for each deck you purchase.
- Tattoos are more expensive in Arkansas, where you’ll incur a six percent sales tax when you visit a tattoo parlor.
- If your hot air balloon stays tethered to the ground in Kansas you’ll owe taxes, but soar up for a better view and you’ll escape the tax, as your beautiful balloon qualifies as a means of transportation.
- Tennessee supports healthy lifestyle choices for all its citizens, but if you live there and use illegal drugs, you’ll need to pay taxes on them. The tax is anonymous, but Tennessee collects significant revenue – $1.5 million in 2006!
It’s fun to learn about goofy taxes, but planning wisely to minimize the impact of your business’s tax obligation is no joke. Now is the time to talk with your CPA and take steps to reduce the burden you’ll face next April and for years to come. Feel free to call our office and schedule an appointment now so that you’re feeling better than ever when tax time comes around again.