Category: National Tax Preparers of America – Blog

A deferred tax asset is an item on the balance sheet that results from overpayment or advance payment of taxes. On a company’s balance sheet that may be used to reduce taxable income in the future are called deferred tax assets.
Why is deferred tax assets used?
The situation can happen when a business overpaid taxes or paid taxes in advance on its balance sheet. These taxes are eventually returned to the business in the form of tax relief. Therefore, overpayment is considered an asset to the company.
The simplest example of a deferred tax asset is the carryover of losses. If a business incurs a loss in a financial year, it usually is entitled to use that loss in order to lower its taxable income in the following years.^In that sense, the loss is an asset.
Another scenario where deferred tax assets arise is when there is a difference between accounting rules and tax rules. For example, deferred taxes exist when expenses are recognized in the income statement before they are required to be recognized by the tax authorities or when revenue is subject to taxes before it is taxable in the income statement. Essentially, whenever the tax base or tax rules for assets and/or liabilities are different, there is an opportunity for the creation of a deferred tax asset.
What is tax deferred annuity?
A tax-deferred annuity is an investment vehicle used by an individual planning his retirement income. It is sold by insurance companies, and it offers fixed or variable rates of return. A tax-deferred annuity grows tax-free until retirement. The funds accrue through monthly premiums and get converted into monthly payments made to the individual at retirement.
What is tax deferred growth?
Tax-deferred growth is investment growth that’s not subject to taxes immediately, but is instead taxed down the line. Perhaps the most common example of tax-deferred growth is that which you’ll get in a retirement plan like a traditional IRA or 401(k). Annuities also offer tax-deferred growth, making them a viable though perhaps less popular option for generating retirement income.
What is tax deferred savings plan?
A tax-deferred savings plan is an investment account that allows a taxpayer to postpone paying taxes on the money invested until it is withdrawn, generally after retirement. The best-known such plans are individual retirement accounts (IRAs) and 401(k)s.
Conclusion
Deferred tax assets are some of the many taxes imposed by the IRS which are beneficial to the tax payers. But these have to be used tactically and professionally. Our tax experts at the National Tax Preparers of America (NTPA) will help you file your tax returns accurately.

Various taxes like sales tax, income tax, capital gains tax, etc on commodities and finances owned and used by us. Similarly, a severance tax is imposed on commodities used by tax payers involved in businesses dealing with natural resources. These “severance” taxes—taxes applied to materials severed from the ground—tax the extraction or production of oil, gas and other natural resources.
·What is Severance Tax?
Severance tax is a state tax imposed on the extraction of non-renewable natural resources that are intended for consumption in other states. These natural resources include such as crude oil, condensate and natural gas, coal bed methane, timber, uranium, and carbon dioxide.
Severance tax is charged to resource producers, or anyone with a working or royalty interest in oil, gas, or mineral operations in the imposing states. The tax is calculated based on either the value or volume of production, though sometimes states use a combination of both. The severance tax is imposed to compensate the states for the loss or “severance” of the non-renewable source and also to cover the costs associated with extracting these resources.
·How do different states calculate Severance Tax?
States differ in how to impose taxes on oil and gas, generally taxing a fraction of the market value, the volume produced or some combination thereof. Most states have enacted tax incentives, credits and exemptions to encourage or discourage production from certain well types. Many states impose oil and gas conservation fees, levies or assessments in addition to or instead of a traditional production or severance tax.
Thirty-four states currently produce natural gas. Of the 31 crude oil-producing U.S. states, the five highest producing states included Texas, North Dakota, New Mexico, Oklahoma and Alaska. In total, 34 states have enacted fees or taxes on oil and gas production.
Severance taxes are set and collected at the state level. States usually calculate the tax based on the value and/or volume produced; sometimes the method differs for oil, natural gas, and condensates
·Incentives for Severance Tax
Over the past several years, many states have considered measures to benefit from these newly accessible resources and to ensure that communities are reimbursed for the impact that oil and natural gas development may have on infrastructure.
Several tax incentives in the form of credits or lower tax rates are often allowed in situations where the tax rate might be burdensome enough for extractors to plug and abandon the wells.Thus; these tax breaks are provided to encourage the production and expansion of oil and gas operations.
·Conclusion
Severance taxes are primarily imposed because of the damages done to the environment by oil and natural gas extraction. Other taxes imposed to benefit the environment and the tax payers in some form or the other. Taxation is hence an important duty and needs to be dealt with tact and precision. These skills are provided by our tax experts at National Tax Preparers of America (NTPA) to help your duty in an accurate and hassle free manner.

A sales tax is a consumption tax imposed by the government on the sale of goods and services. A business is liable for sales taxes in a given jurisdiction if it has a nexus there, which can be in terms of location, an employee, an affiliate, or some other presence, depending on the laws in that jurisdiction.
·Types of Sales Tax
There are the three general types of sales taxes:
1.*Seller (vendor) privilege taxes*.
These taxes are imposed on retailers for the privilege of making retail sales in the state. Retailers usually have the option of absorbing the tax (that is, paying the tax out of their own pockets) or passing it along to their purchasers, which may increase the prices paid by the customers.
2.*Consumer excise (sales) taxes*.
A consumer sales tax is imposed on the person who makes retail purchases in the state. Because the tax is primarily the purchaser’s responsibility, sellers don’t have the option of absorbing the tax and usually must separately state the tax on the receipts or invoices they provide their purchasers.
3.*Retail transaction taxes*.
These taxes are imposed on the retail sale transaction itself, with the primary liability for paying the tax falling upon both the sellers and the purchasers. Sellers are responsible for collecting and paying the tax, and purchasers are responsible for paying the tax that the sellers must collect and pay. In essence, this type of sales tax is a hybrid of the other two types.
·Different Sale Tax Rates
California has the highest state-level sales tax rate, at 7.25 percent.[2]<taxfoundation.org/2021-sales-taxes/#_ftn2>
Four states tie for the second-highest state-wide rate, at 7 percent:
1.Indiana,
2.Mississippi,
3.Rhode Island, and
4.Tennessee.
The lowest non-zero state-level sales tax is in Colorado, which has a rate of 2.9 percent.
Five states follow with 4 percent rates:
1.Alabama,
2.Georgia,
3.Hawaii,
4.New York, and
5.Wyoming.
·Sales Tax Calculator
If you sell from one location, like a retail storefront, find out your local sales tax rate and might want to charge that rate to all customers.
You can find your sales tax rate with a sales tax calculator or by contacting your state taxing authority. If your local sales tax rate is 8.5%, then you would charge 8.5% sales tax on all transactions. This is as long as the item you’re selling is subject to sales tax.
Sales Tax is an important tax that affects businesses, retailers and customers alike. Hence an understanding of the same is very essential. Our tax experts at National Tax Preparers of America (NTPA) can help you understand and utilise these taxes to accurately help you file your tax returns.

Many think of the IRS only during tax season and when they await their tax refund. But if the agency believes an individual or business hasn’t filed appropriate tax returns, or has committed any other tax related discrepancy, the IRS makes its presence felt. In such instances, the person or company in question might need tax resolution services to help resolve the said issue.
Tax resolution is the process of working with the IRS and tax professionals to find a solution to your tax problems. The IRS might have an issue with your tax return or tax situation in a few instances like to verify you are reporting the appropriate amount of income and claiming legitimate deductions. Such cases call for tax resolution. Some exact instances when you might use tax resolution services include:
1.Audit Representation
The IRS audits taxpayers for a range of reasons. Hiring a professional tax resolution specialist to help put together an audit defense as your representative in front of the IRS can assure you a professionally sound defense.
2.Transcript Protest
There are instances when the IRS misunderstands the amount you owe. Here tax professionals can help you put together a transcript protest, so you don’t have to pay money you don’t owe.
3.Non-Collectible Debt
The IRS does offer a form of relief when you can’t pay your tax debt. During what’s known as a “Currently Not Collectible” status, the IRS won’t try to collect the debt you owe. Using tax resolution services can help you see if you qualify for the status and can help you understand the benefits and drawbacks of using it.
4.Tax Penalties
The IRS tends to charge interest and tax penalties when individuals or businesses for late or no payment of taxes. Fortunately, there are some instances when the IRS will waive the penalty. Tax resolution specialists can help you determine your eligibility for the same.
5.Compromising With The IRS
If you owe a hefty amount and aren’t able to pay it, the IRS’ Offer in Compromise program might accept a payment that is less than what you owe.
·Who is a Tax resolutionSpecialist?
A tax resolution specialist is a tax expert who represents taxpayers in their dealings with the IRS. Whether you need to pay back taxes, handle an IRS audit, or fix other tax issues, the specialist will use his or her extensive knowledge of tax laws to serve as a liaison between you and the IRS.
A tax resolution expert may work in a private firm that provides tax resolution services, operate his or her own tax resolution firm, or work as an accountant who performs a variety of tax-related tasks.
Tax issues are common when it comes to the IRS and the tax returns filed every year. Tax resolution specialists help the tax payers get out of the said tax issues, in a manner professional and accurate. Our tax experts at National Tax Preparers of America assure to help you get through any tax issue that you as a tax payer might face.

Annual tax returns filed to the IRS are accompanied by a tax schedule. A *tax schedule* is a form used when you have certain types of income or deductions. These include significant amounts of interest income, mortgage interest or charitable contributions.
Deductions like the tax refund schedule can be checked on the Where’s My Refund? <www.irs.gov/refunds> tool within 24 hours if you submit your tax return electronically and within 3 weeks if filed by mail. If you don’t receive your refund in 21 days, your tax return might be incomplete or incorrect. The IRS may send you instructions through the mail if it needs additional information in order to process your return.
Other deductions can be figured using the Schedule A (Form 1040 or 1040-SR) <www.irs.gov/pub/irs-pdf/f1040sa.pdf>. For individual taxpayers, Schedule A is used in conjunction with Form 1040 <www.hrblock.com/tax-center/irs/forms/form-1040/> to report itemized deductions. If you choose to claim itemized deductions instead of the standard deduction, you would use Schedule A to list your deductions. Your itemized total is then subtracted from your taxable income.
These deductions are dependant n the amount of tax filed. The Tax rate schedule is *rate* sheet used by individual or corporate taxpayers to determine their estimated taxes due.
*2020 Tax Brackets and Tax Rates (for filing in 2021)*
*Single-*
If taxable income is over—

but not over—

the tax is:
$0

$9,875

10% of the amount over $0
$9,875

$40,125

$988 plus 12% of the amount over $9,875
$40,125

$85,525

$4,618 plus 22% of the amount over $40,125
$85,525

$163,300

$14,606 plus 24% of the amount over $85,525
$163,300

$207,350

$33,272 plus 32% of the amount over $163,300
$207,350

$518,400

$47,368 plus 35% of the amount over $207,350
$518,400

no limit

$156,235 plus 37% of the amount over $518,400
*Married Filing Jointly or Qualifying Widow (Widower)-*
If taxable income is over—

but not over—

the tax is:
$0

$19,750

10% of the amount over $0
$19,750

$80,250

$1,975 plus 12% of the amount over $19,750
$80,250

$171,050

$9,235 plus 22% of the amount over $80,250
$171,050

$326,600

$29,211 plus 24% of the amount over $171,050
$326,600

$414,700

$66,543 plus 32% of the amount over $326,600
$414,700

$622,050

$94,735 plus 35% of the amount over $414,700
$622,050

no limit

$167,308 plus 37 % of the amount over $622,050
*Married Filing Separately-*
If taxable income is over—

but not over—

the tax is:
$0

$9,875

10% of the amount over $0
$9,875

$40,126

$988 plus 12% of the amount over $9,875
$40,126

$85,525

$4,618 plus 22% of the amount over $40,126
$85,525

$163,300

$14,605 plus 24% of the amount over $85,525
$163,300

$207,350

$33,271 plus 32% of the amount over $163,300
$207,350

$311,025

$47,367 plus 35% of the amount over $207,350
$311,025

no limit

$83,654 plus 37% of the amount over $311,025
*Head of Household-*
If taxable income is over—

but not over—

the tax is:
$0

$14,100

10% of the amount over $0
$14,100

$53,700

$1,410 plus 12% of the amount over $14,100
$53,700

$85,500

$6,162 plus 22% of the amount over $53,700
$85,500

$163,300

$13,158 plus 24% of the amount over $85,500
$163,300

$207,350

$31,830 plus 32% of the amount over $163,300
$207,350

$518,400

$45,926 plus 35% of the amount over $207,350
$518,400

no limit

$154,794 plus 37% of the amount over $518,400
The above given details are extremely crucial for tax returns. Our expert team at National Tax Preparers of America (NTPA) can take care of your tax returns for you and ensure no tax delays.

Tax reforms are basically reforms or improvements done in the existing tax laws for various purposes. But the main goal remains the betterment of the taxpaying society. Tax reforms are imposed only after a corresponding law is passed. The main law that allowed this provision of tax reformation is the Tax Reform Act of 1986.
The Tax Reform Act of 1986
The Tax Reform Act of 1986 is a law passed by the United States Congress to simplify the income tax code. Some salient features of the Tax Reform Act were-
1. To increase fairness and provide an incentive for growth in the economy, the passage of the Act reduced the maximum rate on ordinary income and raised the tax rate on long-term capital gains. 2. The Tax Reform Act of 1986 lowered the top tax rate for ordinary income from 50% to 28% and raised the bottom tax rate from 11% to 15% 3. The Tax Reform Act of 1986 also provided for the elimination of the distinction between long-term capital gains and ordinary income. 4. The act mandated that capital gains be taxed at the same rate as ordinary income, raising the maximum tax rate on long-term capital gains to 28% from 20%.
Importance of Tax Reforms
Though tax reforms may differ depending upon the type of tax that is affected, all tax reforms have these basic advantages at their core-
1. Tax reform is generally undertaken to improve the efficiency of tax administration and to maximise the economic and social benefits that can be achieved through the tax system.
2. Tax reform can reduce tax evasion and avoidance, and allow for more efficient and fair tax collection that can finance public goods and services.
3.It can make revenue levels more sustainable, and promote future independence from foreign aid and natural resource revenues.
4. It can improve economic growth and address issues of inequality through redistribution and behaviour change.
Examples of Tax Reforms
Various Tax Reforms have been imposed throughout the decades and many more will be imposed still with changing times. Some examples of Tax Reforms would be-
1. Consumption taxes:
One major reform would replace the current income tax system with one that taxes consumption. There are many forms that a consumption tax could take. Most proposals exempt income used for savings and investment. To protect lower-income taxpayers, some proposals would exempt income used for housing, food, medical care, and other defined purposes up to a specified level. Other proposals would tax the consumption by lower-income families at reduced rates.
2. Carbon taxes:
Some have suggested introducing a carbon tax to achieve two goals: raising revenues and discouraging the use of carbon-intensive energy, which would ultimately have positive environmental effects. A carbon tax could also enable the government to reduce other taxes while still generating additional revenue for deficit reduction
Changes in the tax laws in the form of tax reforms are often seen in the legislature. Their direct impact is felt by the common tax payers. It is hence necessary to deal with these ever changing laws with professional tact. Our tax experts at the National Tax Preparers of America (NTPA) are at your disposal to understand and implement the changes in your annual tax returns.

Gross receipts are sales of a business that form the basis for corporate taxation in a handful of individual states and certain local tax authorities. It is the total amount of all receipts in cash or property without adjustment for expenses or other deductible items.
Gross receipts capture anything that is not related to the normal business activity of an entity — tax refunds, donations, interest and dividend income, and others. Also, gross receipts do not account for discounts or price adjustments. Some states and local tax jurisdictions impose taxes on gross receipts instead of corporate income tax or sales tax.
What do Gross Receipts include?
Gross receipts vary from state to state but usually include the following-
1. Each sale of tangible personal property if the property is delivered or shipped to a buyer in the state. 2. Each service performed in the state 3. Each rental of property situated in the state 4. The use of a patent, copyright, trademark, franchise or license in the state 5. Each sale of property located in the state, including royalties from oil, gas or other mineral interests 6. Other business transacted in the state
What is Gross Receipt Tax?
A**gross receipt tax (GRT), also called gross excise tax, is a state tax on the gross sales of a business. States often impose a gross receipts tax in lieu of a corporate income tax or sales tax. Thus GRT is imposed on the above mentioned inclusions of Gross Receipts.
Gross receipts taxes might look like sales taxes at first glance, but they tax the sellers, not the retail buyers, at least directly. They’re imposed at several levels and even between businesses in the purchase of raw materials, supplies, and transportation.
How to calculate Gross Receipt Tax?
The following factors are taken into consideration when calculating Gross Receipt Tax-
1.Establish the time period you wish to measure. Common time periods to consider when measuring a business’s activity are monthly, quarterly and annually.
2.Determine if your business operates under the cash or accrual accounting system. The cash accounting system recognizes sales upon receiving the cash from the customer, while the accrual system recognizes income when the product is delivered or the service to the customer is completed
3.Gather all receipts and invoices of product sold or services rendered for the period. These provide you with the amounts you need to add together to determine gross sales.
4.Add all relevant sums from produce sold or services rendered during the financial period in question to determine business gross receipts. If you operate under the accrual system, add only those sales where you delivered the goods or completed the service within the specified time period you are considering. If you operate on the cash basis, recognize only the sales where you received payment within the time period.
The various taxes imposed on tax payers and businesses can make tax returns filing a difficult process. For technical issues like these and more, our tax experts at the National Tax Preparers of America (NTPA) will help you through the technical expertise and accuracy required in your tax returns.

Taxpayers, including individuals and businesses are liable to file tax returns for their incomes and assets every year to the IRS. But what if a tax payer is also liable to pay taxes to a foreign government for the businesses or asset they have in the foreign land? Are the required to pay twice the taxes to the two governments? The answer is no, because of the concept of the Foreign Tax Credit.
What Is Foreign Tax Credit?
The foreign tax credit is a non-refundable tax credit for income taxes paid to a foreign government as a result of foreign income tax withholdings. The foreign tax credit is available to anyone who either works in a foreign country or has investment income from a foreign source.
The foreign tax credit is a tax break provided by the government to reduce the tax liability of certain taxpayers who have assets or work in a foreign country. Generally, only income, war profits, and excess profits taxes qualify for the credit. The credit can be used by individuals, estates, or trusts to reduce their income tax liability.^In addition, taxpayers can carry unused amounts forward to future tax years, up to ten years.
How isForeign Tax Credit calculated?
Your foreign tax credit is your total U.S. tax liability multiplied by a fraction. The numerator of the fraction is your taxable income from sources outside the United States. The denominator is your total taxable income from U.S. and foreign sources. Foreign Tax credit is limited by this fraction.
A tax credit is applied to the amount of tax owed by the taxpayer after all deductions are made from their taxable income, and it reduces the total tax bill of an individual dollar to dollar. If an individual owes $3,000 to the government and is eligible for a $1,100 tax credit, they will only have to pay $1,900 after the credit is applied.
A tax credit can be either refundable or non-refundable. A refundable tax credit usually results in a refund check if the tax credit is more than the individual’s tax bill.
Exemptions from the Foreign Tax Credit Limit
You will not be subject to the foreign tax credit limit and will be able to claim the foreign tax credit without using Form 1116 if all of the following requirements are met.
1.Your only foreign source gross income for the tax year is passive income, as defined in Publication 514 under Separate Limit Income.
2.Your qualified foreign taxes for the tax year are not more than $300 ($600 if filing a joint return).
3.All of your gross foreign income and the foreign taxes are reported to you on a payee statement (such as a Form 1099-DIV or 1099-INT).
4.You elect this procedure for the tax year. If you make this election, you cannot carry back or carry over any unused foreign tax to or from this tax year.
Various other benefits like the Foreign Tax Credit are provided by the IRS for the taxpayers. But these benefits are a subject to the taxpayers’ knowledge. Our tax experts are the National Tax Preparers of America (NTPA) will help you take due advantage of all such benefits you are eligible for, to ensure a profitable tax season.

We are a population of diversity and the financial divide between our social classes are now as gaping as ever. The US government takes into consideration this gap in finances and provides the appropriate support to helpour population survive against all odds. One such support system is the social welfare system.
A social welfare system provides assistance to individuals and families in need. The types and amount of welfare available to individuals and families vary depending on the state, or region. In the U.S., the federal government provides grants to each state through the Temporary Assistance for Needy Families (TANF) program. This multibillion dollar social welfare system is of enormous size and complexity. Millions of Americans receive benefits under such social welfare programs as Social Security, Aid to Families with Dependent Children (AFDC), and food stamps.
How does a Social Welfare System Work
Social welfare systems provide assistance to individuals and families through programs such as health care, food stamps, unemployment compensation, housing assistance, and child care assistance. In the U.S., a caseworker is assigned to each individual or family applying for benefits to determine and confirm the applicant’s needs.
Within each state, social welfare systems may go by different names, but they often serve similar functions. This can cause confusion when attempting to compare one state’s program to another. Additionally, the requirements to qualify also vary, depending on the poverty line in a particular state. This allows for adjustments based on items such as cost of living that are not standardized across the country.
Eligibility for Social Welfare Schemes
The benefits available to an individual vary by state. Eligibility is determined based on factors like-
1.The person’s financial status and how it relates to the minimum acceptable levels within a particular state.
2.The size of the family unit,
3.Current income levels, or
4.An assessed disability.
Is Social Welfare Tax Exempt?
By long-standing IRS policy, social welfare payments or public assistance payments are excluded from gross income. According to the pertinent IRS publication, a taxpayer should not include as taxable income “benefit payments from a public welfare fund, such as payments due to blindness.” Thus, the value of AFDC, SSI, food stamps, Medicaid, and housing assistance benefits are not subject to income taxation.
The IRS and the federal government work together to provide financial assistance to the financially backward classes to rise up from their difficulties. The tax exemption provided is yet another benefit of the various social welfare schemes provided. Informing the public about the same is hence necessary to ensure that the eligible candidates do receive the benefits that the government provides for them.

A Wealth Tax is usually defined as an annual tax levied on the net worth, or total assets net of all debts, of an individual or household above an exemption threshold. Net worth is made up of financial assets — such as bank accounts, bonds, stocks, and mutual funds — as well as non-financial assets — such as real estate, luxury goods, and family heirlooms.
Why is a Wealth Tax needed?
Amid debates that the Wealth Tax is probably unconstitutional, the data in support of imposing a Wealth tax is unquestioned. Data from the Federal Reserve shows the following trends over the past decades-
·The top 1% owned nearly one-quarter of all U.S. household wealth 30 years ago- and now owns nearly one-third.
·The bottom 50% of the population has gone from 3.7% of the wealth in 1989 to 1.9% today.
·As of 2016, the median family income in the U.S. was nearly $65,000 — not quite one-third of what the 90th percentile household had. But the median family wealth was around one-twelfth of the 90th-percentile family, with nearly $1.2 million. (The ratio for the 10th-percentile household to 90th-percentile is far more gaping — the 10th-percentile family has -$950 in wealth.)
This intense inequality in wealth is why the need for a wealth tax has now come into being.
How is a Wealth Tax imposed?
Wealth taxes are imposed on the market value of total assets minus the market value of total liabilities owned by households. In the current U.S. tax system, the estate tax is a special case of the wealth taxes, imposed at a single point in time. Property taxes are superficially similarly to a wealth tax; however, they do not subtract out liabilities.
Economically, this makes them more akin to a user fee of sorts. Comprehensive wealth taxes have never been implemented in the United States, and as such, American taxpayers are largely unfamiliar with this type of a tax. Thus, it may be easier to understand the basics of a wealth tax by comparing it to individual income taxes, which have been a main source of U.S. federal revenue since the late 1940s.
Most proposals suggest levying a wealth tax as an addition to existing forms of taxation, not as a substitute. A number of wealth tax proposals also include an “exit tax” on assets transferred abroad to curb tax avoidance.
Conclusion:
The US tax scene is an ever changing one as it inculcates the changes in the society and the economic state of its population. But no matter what the changes are and will be, the IRS maintains its level of strictness to all its matters, including the annual tax returns. For which our tax experts at the National Tax Preparers of America (NTPA), are here to assure relief from all tax related problems.