Software Club 210: Light Red/Club_Software_210_Light_Red_Micro_Star_1997.iso/sba/f246.sbe

Text File | 1997-01-29 | 29KB | 682 lines

@111 CHAP ZZ

        ┌───────────────────────────────────────────────┐
        │  INCOME TAXES AND ESTIMATED TAX REQUIREMENTS  │
        └───────────────────────────────────────────────┘

Individual federal income tax rates for 1997 (for joint
filers) are as follows:

            Taxable Income
               Bracket                Tax Rate and Amount
           ----------------          ---------------------
           $0 to $41,200             15% of Taxable Income

           Over $41,200, up          $6,180 plus 28% of
             to $99.600               excess over $41,200

           Over $99,600              $22,532 plus 31%* of
                                      excess over $99,600

           Over $151,750             $38,698.50 plus 36%* of
                                      excess over $151,750

           Over $271,050             $81,646.50 plus 39.6%*
                                      of excess over $271,050


(* The actual marginal rate for taxpayers with Adjusted
   Gross Income over $121,200 may be higher, by another
   1%, roughly, if they have certain kinds of itemized
   deductions which are subject to a phase-out, equal to
   a 3% reduction in allowable itemized deductions for AGI
   in excess of $121,200.  In addition, joint filers with
   AGI over $181,800 will have part of their personal
   exemptions phased out, at a rate of 2% of the exemption
   amount for each $2500 of AGI, or fractional portion of
   $2500, in excess of $181,800.  This would add 1/2% to
   3/4% to the effective tax rate for each personal exemption
   claimed, depending on the tax bracket.  Thus, for a
   family of four in the 36% tax bracket, with AGI in the
   phase-out range for both itemized deductions and personal
   exemptions, the effective marginal tax rate on each
   additional dollar of income would be about 37 to 38% in
   1997.)

Each of the rate brackets noted above is indexed for
inflation in each year.  If your filing status is other than
married, filing jointly, the size of each of the above
brackets is smaller.  For example, for a single person, the
15% bracket ends at only $24,650 of income, rather than at
the $41,200 level for married filing joint, in 1996.

1996 federal income tax returns for individuals are due on
April 15, 1997, although an automatic extension of time to
file (but not an extension of time to pay the tax due) to
August 15, 1997, is available, simply by filing Form 4868
and paying the approximate tax due on April 15th.  (An
additional filing extension to October 15, 1997 may be
available, by filing Form 2688, if you have a valid reason
for the delay.)

It is also possible to file your federal income tax return
electronically and the IRS has begun experimenting with
combined federal/state filing of electronic tax returns.

PAYMENTS OF ESTIMATED TAX.  For individual taxpayers, such
as self-employed persons (sole proprietors, partners in
a partnership, or members of a limited liability company),
whose tax liability is not substantially covered by
withholding from wages, it is necessary to make quarterly
payments of federal (and in most cases, state) estimated
income tax and federal self-employment tax.  The federal
tax payments must be made with Form 1040-ES by the 15th
day of April, June, September and on January 15th of the
following year.  Any remaining tax due (or refund) is
reported on Form 1040, individual income tax return, on
the following April 15th.

To avoid penalties for underpayment of estimated tax, the
amount of the quarterly payments must generally equal 90%
of the tax liability, with a "safe harbor" for most taxpayers
if they pay in an amount based on 100% of the PRIOR year's
tax liability during the current year.

NOTE: This 100% of prior year's tax "safe harbor" was not
allowed in 1993 for certain high-income taxpayers in certain
complex circumstances, which are now only of historical
interest to most of us (fortunately).

...However:  The 1993 tax act actually simplified things a
bit, thanks to some heavy lobbying by the American Institute
of CPA's.  Starting with 1994, the rules became somewhat
more straightforward for individuals:

    . If your AGI for the previous year was $150,000 or
      less, you can base your estimated tax on 100% of the
      previous year's tax liability.

    . If your AGI was over $150,000 the year before, you
      can base your 1995 or 1996 (or subsequent year)
      estimated tax on 110% of the prior year's tax, if
      that is less than 90% of the current year tax.

SCHEDULES C AND E.  There is no separate tax return form
for sole proprietors. A sole proprietor simply includes the
income or loss from his or her business on Schedule C of
form 1040.  For returns filed in 1993 or later, some sole
proprietors may file a simplified Schedule C-EZ, which has
only about 1/3 as many lines to fill in as the regular
Schedule C.  The firms who qualify to use Schedule C-EZ
must meet 10 requirements, including the following main
ones:

  . Gross receipts of $25,000 or less;

  . Business expenses of $2,000 or less;

  . Using cash method of accounting;

  . Have only one sole proprietorship business;

  . No employees, no inventory;

  . No net business loss for the year; and

  . Not deducting home office expense.

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@IF113xx]@NAME is a @ENTITY:
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Like proprietorships, partnerships and LLCs generally pay no
federal income tax either, although they file an information
return annually (Form 1065) on which the income or loss of
each partner or member is reported on a Form K-1.  Each
owner reports the income or loss items on the K-1 form on
appropriate schedules of his or her Form 1040 (mainly on
the Schedule E).

Accordingly, partnerships, LLCs, and proprietorships do not,
as entities, make federal estimated tax payments.

@CODE: AL
The maximum individual income tax rate in Alabama is 5%,
which starts at taxable income levels of $6,000 for married
persons filing jointly, or at $3,000 for other individual
taxpayers.
@CODE:OF
@CODE: AZ
Individual tax rates in Arizona have been steadily coming
down in recent years.  They were reduced after 1989 to a
maximum of 7% on income over $300,000 ($150,000 for single
or married filing separate), and were further reduced to a
maximum of 6.9% for 1994.  A further tax relief package,
enacted in early 1995, reduced the top individual tax rate
in 1995 and subsequent years to only 5.6% on income over
the above-mentioned bracket amounts.
@CODE:OF
@CODE: AR
Individual tax rates in Arkansas start at 1% and rise to
a maximum of 7% on taxable income over $25,000.
@CODE:OF
@CODE: CA
          ┌───────────────────────────────────────────────┐
          │        CALIFORNIA PERSONAL INCOME TAXES       │
          └───────────────────────────────────────────────┘

California personal income tax rates begin at 1% of income
and rise to a maximum rate of 9.3% on income over $32,207
(over $64,414 for married taxpayers filing jointly, and
$43,839 for head of household) in 1996, which is the same
top rate as the flat 9.3% rate at which California taxes
the income of corporations in 1996.  (However, the tax rate
on corporations drops to 8.84% in 1997.)  The top individual
tax rate in 1995 was 11% for individuals.  In addition, the
individual alternative tax rate dropped from 8.5% in 1995
to 7% in 1996.  A November 5, 1996, ballot initiative would
have reimposed the 10% and 11% individual tax brackets on
high-income taxpayers, if approved by the voters, but it
failed to pass.

Starting with the 1996 filing season, Form 540EZ tax
returns can be filed by phone, by certain qualifying
taxpayers, who have touch-tone phones.

California's estimated income tax payment system parallels
the federal rules rather closely, with payments made on
Form 540-ES.  Since 1993, California individual taxpayers
are also subject to the same new rule as was briefly adopted
for federal tax purposes.  While most taxpayers can still
use the