Tax Time is here again
I spent 4 hours Saturday and 2 hours Sunday organizing information for the tax preparer. This was primarily putting descriptions on the transactions that would be meaningful to another person, printing off Quicken reports, scanning them with Paperport by Scansoft so I had a copy of everything I sent to the tax preparer. I like to get the information to him early so he can prepare them and let me know what tax bracket I'm in and how much I owe or how much I get back. The reason the tax bracket is important is because decisions can still be made that can help with last years taxes even though the year is over. I don't pay much attention to the details, but I believe the lowest brackets are 10% and 15% so if I'm in a higher bracket, I'll buy traditional IRAs to lower my taxable income. The tax brackets are 10%, 15%, 25%, 28%, 33% and 35%. You can tell what bracket you are in by adding $1.00 to your income and looking at the additional taxes owed. If one dollar added $0.15 to the taxes owed, then you are in the 15% bracket. I don't like tying up the money in an IRA, but I still have access to it and it really isn't that tied up. A long time ago I had a good traditional job and put everything I could afford into a 401K. At that time I was in the 28% tax bracket. Later I became unemployed and took the maximum out of my 401K and still stay in the 15% tax bracket. Everybody says never do that. I didn't mind because I saved 28% when I put it in the 401K, and I only paid 25% when I took it out keeping in mind that I was in the 15% tax bracket and had a 10% early withdrawal penalty.