The National Hustle

Compared to the ginormous $170 billion apportioned to AIG to provide executive bonus compensation and a couple of other minor things, the $17.4 billion we put into GM and Chrysler’s coffers seems paltry.  Yet it seems as though the Obama administration is riding roughshod over the long-suffering domestic auto manufacturers.  I mean, lay off!  These guys have been going through a lot:

• First they had to deal with the American consumers’ notion that foreign cars were better built and lasted longer (a complete exaggeration, American cars are perfectly engineered… to last exactly 36,001 miles); Continue reading

Ben Bernanke (Federal Reserve Chairman) is pissed off.  In a recent 60 Minutes interview he expressed considerable chagrin at the financial situation the U.S. faces (of course, he has nothing whatsoever to do with it) in a rare face to face interview.  Because nearly everything the Federal Reserve Chairman says publicly could trigger massive fluctuations in the stock market, Bernanke decided to wait until things couldn’t get any worse before addressing the nation he serves.

Bernanke consented to an interview because of the “extraordinary times” we are experiencing in our country.  Now I don’t know about you my dear readers, but I might use “extraordinary” to describe Katy Perry’s ahem… lung capacity, but I would definitely not be using the word to describe the extreme economic conditions that a lot of American’s are facing today; an unemployment rate over 8%, spiraling personal debt, and 401k’s worth about…$401 (at least I hope mine is still worth that much).

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During my time spent in public accounting I had the opportunity to work daily on something most people don’t even like to see once a year: income tax returns.  While my day job no longer requires that I fill out clients’ 1040’s, 1120’s, and 990’s, I have managed to retain a few nuggets of tax knowledge.  And fortunately, I never had to worry about these types of tax issues.

With the individual filing deadline less than one month away, I’d like to share four of the most common income tax return misunderstandings that you’ve likely come across or will in the near future.

1. Getting “bumped up to the next tax bracket.” Years ago, a close friend of mine was complaining about his recent pay raise.  He told me, “Yeah, I got a ‘raise’, but I’m taking home less money now because I got bumped up to the next tax bracket!”  His thought process was not unusual, but I went on to explain how the federal graduated tax brackets work. Essentially, rather than his entire taxable income being taxed at a higher bracket, only the portion of income that exceeds the previous bracket ceiling is taxed at the new rate. More simply, if he was single and his taxable income (line 43 on 2009 Form 1040) was $60k in 2008, his tax would be calculated as follows:
   

   (a) First $8,025 of taxable income is taxed at 10%,
   (b) Next $25,425 is taxed at 15%,
   (c) Final $26,550 is taxed at 25%.

   The graduated brackets result in a tax of roughly $11k, not the $15k he was expecting.  His real “problem” had more to do with the next misunderstanding.

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