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NATIONAL TAX PREPARERS OF AMERICA

TO BE THE BEST, YOU MUST WORK WITH THE BEST
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NATIONAL TAX PREPARERS OF AMERICA

TO BE THE BEST, YOU MUST WORK WITH THE BEST

A Quick guide to Capital Tax Rate

Our tax returns hold us accountable for all our belongings and assets. These include everything we own and use including our investments. All of these constitute our capital assets incurring a capital gains tax calculated using a set tax rate. When you sell a capital asset, the difference between the adjusted basis in the asset and the amount you gained from the sale is a capital gain or a capital loss.  You have a capital gain if you sell the asset for more than your adjusted basis <www.irs.gov/publications/p551>. You have a capital loss if you sell the asset for less than your adjusted basis.
To correctly arrive at your net capital gain or loss, capital gains and losses are classified as long-term or short-term.
·If you hold the asset for more than one year before you dispose of it, your capital gain or loss is long-term.
·If you hold the asset for one year or less, your capital gain or loss is short-term.
The term “net capital gain” means the amount by which your net long-term capital gain for the year is more than your net short-term capital loss for the year.
The term “net long-term capital gain” means long-term capital gains reduced by long-term capital losses including any unused long-term capital loss carried over from previous years.
·Capital gains tax rate
The tax rate on most net capital gain is no higher than *15%* for most individuals. The tax rate is further specified as follows-
1.Some or all net capital gain may be taxed at 0% if your taxable income is less than $80,000.
2.A capital gain rate of *15%* applies if your taxable income is $80,000 or more but less than $441,450 for single; $496,600 for married filing jointly or qualifying widow(er); $469,050 for head of household, or $248,300 for married filing separately.
However, a net capital gain tax rate of *20%* applies if your taxable income exceeds the above mentioned thresholds set for the *15%* capital gain rate.
There are a few other exceptions where capital gains may be taxed at rates greater than *20%*:
1.The taxable part of a gain from selling section 1202 qualified small business stock is taxed at a maximum *28%* rate.
2. Net capital gains from selling collectibles (such as coins or art) are taxed at a maximum *28%* rate. 3. The portion of any unrecaptured section 1250 gain <www.irs.gov/publications/p544>from selling section 1250 real property is taxed at a maximum *25%* rate.
Limit on the Deduction and Carryover of Losses
If your capital losses exceed your capital gains, the amount of the excess loss that you can claim to lower your income is the lesser of $3,000 ($1,500 if married filing separately) or your total net loss shown on line 21 of Schedule D (Form 1040) <www.irs.gov/forms-pubs/about-schedule-d-form-1040>.
The capital gain rate forms an integral part of one’s tax returns every year. Tactical knowledge and skills required for accurate filing of tax returns, is why one needs experienced teams like those at National Tax Preparers of America (NTPA). Enabling ease and ensuring accuracy of tax filings is our main goal.

How to save money on Capital Gains Tax

Every year, our tax returns to the IRS include taxes incurred on all our financial gains, including incomes and sales. One of the taxes incurred is called the Capital Gains Tax which deals with profits made on the sale of certain assets.
The capital gains tax <www.thebalance.com/capital-gains-tax-guide-for-investors-357401> is a government fee on the profit made from selling certain types of assets. These include stock investments or real estate property. A capital gain is calculated as the total sale price minus the original cost of an asset.
Depending on the time span for which the assets were owned, there are two types of Capital Gains Tax-
1.Short-term capital gains tax
This is incurred when you’ve owned an asset for a year or less. Short-term capital gains are taxed as ordinary income at rates up to 37 percent; long-term gains are taxed at lower rates, up to 20 percent. Taxpayers with modified adjusted gross income above certain amounts are subject to an additional 3.8 percent net investment income tax (NIIT) on long- and short-term capital gains.
2.Long-term capital gains tax
Long-term capital gains or losses occur if you sell an asset after owning it for longer than one year.
One major exception to a reduced long-term capital gains rate applies to collectible assets, such as antiques, fine art, coins, or even valuable vintages of wine. Typically, any profits from the sale of these collectibles will be taxed at 28% regardless of how long you have held the item.
Another major exception comes from the Net Investment Income Tax <turbotax.intuit.com/tax-tips/investments-and-taxes/what-is-form-8960-net-investment-income-tax/L15hpJmi9> (NIIT), which adds a 3.8% surtax to certain net investments of individuals, estates, and trusts above a set threshold. Typically, this surtax applies to those with high incomes who also have a significant amount of capital gains from investment, interest, and dividend income.
The main difference between the short term and long term capital gains is that short-term capital gains have a higher tax rate than long-term capital gains. This difference is essential to discourage short-term trading. Trading stocks and other assets frequently can increase market volatility and risk.
Some simple ways to decrease Capital Gains Tax are as follows-
1.Invest for the long term
Even though the instability of the stock market leaves little to personal choice, if you manage to find great companies and hold their stock for the long term, you will pay the lowest rate of capital gains tax.
2.Take advantage of tax-deferred retirement plans
When you invest your money through a retirement plan, such as a 401(k) <www.investopedia.com/articles/investing/102216/understanding-401ks-and-all-their-benefits.asp>, 403(b) <www.investopedia.com/terms/1/403bplan.asp>, or IRA <www.investopedia.com/terms/i/ira.asp>, it will grow without being subject to immediate taxes.
3.Use capital losses to offset gains
If you experience an investment loss, you can take advantage of it by decreasing the tax on your gains on other investments.While this helps decrease your capital gains tax, it also helps turn around an investment loss to one’s advantage.
Curbing one’s capital gains taxes requires more than just caution. Appropriate professional help, as provided by services like National Tax Preparers of America (NTPA), assures accuracy with our experienced tax preparers to help you save big, this tax season.

Tax Extensions- Filing a Tax Extension

A filing extension is an exemption that can be opted by either individual taxpayers or businesses that are unable to file a tax return by the due date. An explanation of the reason for the extension is not required. Some states accept IRS extensions, but others require taxpayers to file a separate state extension form.
Though tax extensions allow you longer time to file your taxes, it is often assumed that this might allow you a delay in the payment of the said taxes too, though that is not the case. Here are some basic points about Tax Extension to remember-
* An extension of time to file your return does not grant you any extension of time to pay your taxes. * You should estimate and pay any owed taxes by your regular deadline to help avoid possible penalties. * You must file your extension request no later than the regular due date of your return.
Even if you do not have enough money to pay the tax return to the authorities, you should always e-file a Tax Return or at least a Tax Extension. The potential IRS fees and penalties <www.efile.com/tax-penalties/> for not e-filing anything are on default a sum larger than on the taxes owed. Therefore, pay as much or as little as you can, but do e-file a Tax Extension or Return. The IRS will most likely add penalties and/or interest to the late payments but these will definitely be a smaller amount of money.
·How to file a Tax Extension
There are three ways for a taxpayer to request Tax extension to file an individual tax return:
1. Pay all or part of their estimated income tax due and indicate that the payment is for an extension. 2. File Form 4868 electronically by accessing IRS e-file <www.investopedia.com/terms/e/efile.asp> using a home computer or with the help of a tax professional who uses e-file 3. File a paper Form 4868 and enclose payment of the estimate of tax due.
Individual tax filers, regardless of income, need to bear the following points in mind while filling the tax extension form-
* Filing this form gives you a tax extension deadline of Oct. 15 to file a return. * To get the extension, you must estimate your tax liability on this form and should also pay any amount due.
Get an extension when you make a tax payment-
You can also get an extension by paying all or part of your estimated income tax due and indicate that the payment is for an extension using Direct Pay <www.irs.gov/payments/direct-pay>, the Electronic Federal Tax Payment System (EFTPS) <www.irs.gov/payments/eftps-the-electronic-federal-tax-payment-system>, or a credit or debit card <www.irs.gov/payments/pay-taxes-by-credit-or-debit-card>. This way you won’t have to file a separate extension form and you will receive a confirmation number for your records.
Filing a tax extension only gives you more time to file your tax returns but does nothing to reduce the tedious task of tax filing. Tax preparers like the professionals at the National Tax Preparers of America will help you file your tax extensions but also ensure accurate tax return filing without all its hassles for you.

Tax Liability- A Quick Guide

The IRS makes its rounds every year to collect taxes on all levels including federal, state and local. The amount of taxes we incur is known as the tax liability. Tax liability is the total amount of tax debt owed by an individual, corporation, or other entity to a taxing authority like the Internal Revenue Service <www.investopedia.com/terms/i/irs.asp> (IRS).  Tax liabilities are incurred when income is earned, there is a gain on the sale of an asset, or another taxable event occurs.
An individual’s or corporation’s tax liability doesn’t only include the current year but also any and all years for which taxes are owed. That means that if there are back taxes <www.investopedia.com/terms/b/back-taxes.asp> (any taxes that remain unpaid from previous years) due, those are added to the tax liability as well.
Your total tax liability is the total amount of tax you owe from liabilities like income tax, capital gains tax, self-employment tax, and any penalties or interest. These are all types of Tax Liabilities.
1.Sales tax
When a business sells a product, most state and local governments charge sales tax as a percentage of the total sale. This amount is included in the total charged to customers.
2.A capital gains tax
It is a tax on the growth in value of investments incurred when individuals and corporations sell those investments. When the assets are sold, the capital gains are referred to as having been “realized <www.investopedia.com/terms/r/realizedprofit.asp>.” The tax doesn’t apply to unsold investments or “unrealized capital gains <www.investopedia.com/terms/u/unrealizedgain.asp>,” so stock shares <www.investopedia.com/terms/s/shares.asp> that appreciate every year will not incur capital gains taxes until they are sold.
3.Self-employment tax
Self-employed individuals generally must pay self-employment tax (SE tax) along with a separate income tax. Before you can determine if you are subject to self-employment tax and income tax, you must figure your net profit or net loss from your business. You do this by subtracting your business expenses from your business income. If your expenses are less than your income, the difference is net profit. If your expenses are more than your income, the difference is a net loss.
·Zero Tax Liability
There are instances where one’s total tax was /zero/ or one didn’t have to file an income tax return for the previous year, yielding a zero tax liability. You may not have had to file an income tax return for the prior tax year if your gross income was below a certain threshold.For this exception to apply, two additional requirements must be met:
1.Your prior tax year was a taxable year of 12 months.
2.You were a citizen or resident of the United States throughout your prior tax year.
The different types of taxes and the amount of taxes one owes is essential to be calculated to utmost accuracy and with a headstrong consistency each month. Tax liability thus ensures that we carry out our civic duty with persistence every year.

US Tax Audits- How to deal with them?

Tax returns are filed every year by individuals and companies on all levels- federal, state and local. Smallest of discrepancies found in one’s tax returns can invite a tax audit from the IRS.A tax audit is when the IRS decides to examine your tax return a little more closely and verify that your income and deductions are accurate.
Sales tax audits are another type of audits. 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 could be a person, a building or any such affiliate.
Likewise State tax audits are carried out. State income tax is a direct tax levied by a state on your income earned in or from the state. Like federal tax, state income tax is self-assessed.
Once the Audit process is done, there are three possible outcomes-
1.If the IRS is satisfied with the documentation you provide, then it will not change anything on your tax return.
2.If the IRS proposes changes to your tax return, you can either agree and accept the changes or challenge the agent’s assessment. If you agree, you will sign an examination report or a form provided by the IRS and agree upon some type of payment arrangement.
3.If you disagree with the findings, you can set up a conference with an IRS manager to further review your case or you can request a formal appeals conference.
·How to Pass a Tax Audit?-
The news of being Audited can be harrowing itself, but one must remain strong throughout the process and get one’s wits together. Some tips to pass a Tax Audi are-
1.Collection of required documents-
If you are selected for a field audit, the IRS will provide a written request for the specific documents they want to see. That may include receipts, bills, cancelled checks, copies of contracts or other legal documents, loan agreements, travel logs and employment documents.
2.Look out for additional revenues
If you accidentally forgot to include some revenue on your return or erroneously claimed deductions for which you weren’t eligible, the IRS will assess the additional tax due.
Various companies like TurboTax provide audit defence services, including features like-
·Responding to audit notices on your behalf
·Defending your federal and/or state tax return in audit hearings or meetings with auditors
·Providing access to and support from audit representatives who may be tax professionals, such as Enrolled Agents or CPAs
·Helping you resolve tax debt or identity theft associated with the audit
·Paying any penalties or fees if you’re being audited because of a preparer’s or software’s mistake on your return
A US Tax Audit is an experience that can spell disaster if not handled well. A wrong step can penalise you or worse, end you up in jail. This calls for professional help in the form of companies to handle your tax audit and support you through the process.

How to Calculate US Income Taxes?

The US taxation system is applied to all individuals employed and living in the US. At the federal level, personal income, corporate income and capital gains are all taxed on a progressive scale, that is, corporations and companies are taxed more than individuals. The US taxation system functions at different levels of federal, state and local levels.
1. Federal income tax
The /federal income tax/ is the /tax/ levied by the Internal Revenue Service (/IRS/) on the annual earnings of individuals, corporations, trusts, and other legal entities.
The federal individual income tax has seven tax rates ranging from 10 percent to 37 percent. The rates apply to taxable income—adjusted gross income minus either the standard deduction or allowable itemized deductions.
The federal income tax calculator considers the following factors into account-
1. Household Income – Includes wages, salaries, investment returns, retirement accounts, and welfare payments 2. Location 3. It is the city or general vicinity where the primary place of business or employment is located, regardless of the location of the individual’s residence. 4. Filing Status- 5. The five filing statuses are: single, married filing jointly, married filing separately, head of household, and qualifying widow/er with dependent child. 6. 401(k) Contribution- 7.  A 401(k) Plan is a defined-contribution retirement account that allows employees to save a portion of their salary in a tax-advantaged manner. 8. IRA Contribution- 9. An IRA (individual retirement account) is an account set up at a financial institution that allows an individual to save for retirement with tax-free growth. 10. Itemized Deductions- 11. It is an expense that can be subtracted from adjusted gross income (AGI) to reduce your tax bill.
2. State income tax
State Income taxes, which vary by state, are a percentage of money that you pay to the state government based on the income you make at your job. Most states that impose income taxes, however, use progressive tax systems, where higher levels of income are taxed at a greater percentage rate, as is the case with the federal income tax system.
3. IRS income tax
The IRS encourages everyone to use the Tax Withholding Estimator to perform a “paycheck checkup.” This will help you make sure you have the right amount of tax withheld from your paycheck. The amount of tax withheld can be calculated using IRS income tax calculators.
4. Tax refund
Tax refunds are calculated by subtracting the amount of federal income taxes withheld from your total income taxes due for the year. If the amount withheld from your paychecks for taxes exceeds the amount you owe, then you will receive a refund.
As important as our social duty of tax payment is, it is all the more important to make sure that we conduct this duty right and by the law. We at NTPA (National Tax Prepares of America), resolve to help and support you through this tax season, ensuring accuracy like no other in your tax filings, helping you commit to your civic duty.

A Quick Guide to Tax Preparers

A Quick Guide to Tax Preparers

The Tax season is yet again upon us and we are all hustling to get our records and documents straight. It is realised that the taxation body, that is the IRS, takes notice of every folly that our tax returns might have. This not only raises the stakes this season but also raises the alarm that we need to get our taxes done from the best tax preparers near you, with the optimum qualifications.
Though tax preparers are allowed to function without an appropriate licence, the IRS warns against faults in tax returns which are the ultimate responsibility of the individual as opposed to that of the tax preparer. This makes it important to ensure that the best tax preparer is selected for you. The IRS hence recommends a set of guidelines for an eligible tax preparer-
1. Each tax preparer needs to have an IRS PTIN (Preparer Tax Identification Number) to be a legal tax preparer.
1. Unlimited Representation Rights- Enrolled agents, certified public accountants, and attorneys have unlimited representation rights before the IRS. Tax professionals with these credentials may represent their clients on any matters including audits, payment/collection issues, and appeals.
1. Limited Representation Rights- Some preparers without one of the above credentials have limited practice rights, that is, they may only represent clients whose returns they prepared and signed, but only before revenue agents, customer service representatives, and similar IRS employees. Tax return preparers with limited representation rights include Annual Filing Season Program Participantsand PTIN Holders.
* Software for tax preparer
Tax software is a type of computer software designed to help individuals or companies prepare for and file income, corporate and similar tax returns. Tax returns are expected with an accuracy that computer softwares can well provide. With some training and practice, tax softwares help us to calculate and file our taxes with ease.
Various softwares for tax preparers are available in the market for use. Individuals as well as tax preparers can use softwares like-
1. Tax Softwares 2. TurboTax 3. H&R Block 4. TaxAct 5. TaxSlayer Classic 6. Credit Karma Tax 7. FreeTax USA
* IRS certified tax preparer
To help individuals and companies determine tax return preparer credentials and qualifications, the IRS has a public directory<irs.treasury.gov/rpo/rpo.jsf> containing certain tax professionals. The searchable, sortable database includes the name, city, state, and zip code of attorneys, CPAs, enrolled agents, enrolled retirement plan agents, and enrolled actuaries with valid PTINs for 2016, as well as Annual Filing Season Program Record of Completion recipients.
Choosing the correct tax preparer for you is essential to make sure that your tax returns are accurate. Inaccuracy in tax returns is not only illegal by law but also results in potential losses to the individual and to the company. We at NTPA (National Tax Preparers of America), ensure that your taxes are prepared and filed accurately, easing your way through tedious tax preparatios.
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