By AccountingWEB Staff
"The AICPA has a long-standing commitment to helping Americans take accountability for their financial health. One critical step in achieving financial well-being is to understand your tax payment and how it impacts your financial decisions. We have introduced this new calculator to help Americans grasp how much they are paying in combined federal, state, and local taxes," said Barry C. Melancon, CPA, CGMA, AICPA president and CEO.
"Our recent national poll showed that taxpayers do not know the percentage of their income that goes to pay taxes or how many types of taxes they pay annually. AICPA's goal is to make federal, state, and local taxes more transparent, and the Total Tax Insights calculator does that," Melancon said.
Reducing Taxes - Quick Tips
Source: Surviving Financial Downsizing: A Practical Guide to Living Well on Less Income by Gail A. Perry, CPA
- Have your tax return checked by a professional. Chances are excellent you are missing opportunities to lower your tax bill
- Review last year's tax return. Use last year's tax return as a guide to help you remember all the items you reported the year before.
- Clump medical expenses. Try to clump as many medical expenses as possible into one tax year in order to take advantage of the itemized medical deduction.
- Deduct automobile property taxes. If you pay property tax on your automobile when you purchase it or renew your plates, this counts as an itemized deduction on your federal income tax return.
- Give to charity. Even if money is tight, you can still be generous and get a tax deduction if you give noncash items to charity.
- Keep track of your miles. When you drive your car for charitable purposes, you are entitled to increase your deduction for charitable expenses by 14 cents per mile for each mile you drive.
- Keep track of job search expenses. If you are looking for a new job, you may qualify for a deduction of certain expenses you incur in a job search, as long as this isn't your first job and as long as you are looking for a job in the same occupation as your last job.
Although the average American may pay more than twenty different taxes during the course of a year, an AICPA poll showed that a majority (54 percent) estimated they pay less than ten different taxes. Only 11 percent of those surveyed said they had recently added up the total amount of annual taxes they pay to federal, state, and local governments.
The poll also showed that two-thirds (67 percent) said they could not accurately estimate the percentage of income they paid last year in all taxes to federal, state, and local governments. That number is even higher among those who make less than $100,000 a year; nearly three-quarters (72 percent) said they could not come up with an accurate estimate.
"CPAs know better than anyone how important it is for taxpayers to understand what they are paying in taxes. This new tool is designed to increase awareness of how much people pay in taxes and the importance of factoring this knowledge into everyday financial planning. Using the Total Tax Insights calculator is a simple step taxpayers can take to gain greater control over their financial future," said Edward S. Karl, CPA, AICPA's vice president for taxation.
Only basic information is required to use the free Total Tax Insights calculator. At a minimum, visitors to the website input the county or city in which they live, their marital status, their federal adjusted gross income, and their number of dependents. Based on the information provided by the user, the Total Tax Insights calculator estimates what that taxpayer is paying on an annual basis for approximately twenty different taxes, and it provides a pie chart that shows the percentage of their total tax bill by category. A user's privacy is protected – the Total Tax Insights calculator does not require individuals to identify themselves in any way, and the data is erased when a user leaves the website.
The AICPA encourages taxpayers to use the Total Tax Insights information and resources to improve their overall tax and financial well-being. The calculator only provides estimated amounts, and a taxpayer's actual taxes may vary significantly depending on his or her particular situation. For example, income tax calculations do not take into consideration certain deductions, credits, or other adjustments. The Total Tax Insights calculator is not a tax preparation tool or a substitute for the expert tax and financial advice of a CPA.
The AICPA will periodically update the calculator to reflect the most recent changes in federal, state, and local taxes. Taxpayers should consider using the calculator several times a year to get the most accurate estimate of their current situation.
Clarus Research Group conducted the telephone survey on behalf of the AICPA within the United States between April 24 and 25, reaching a nationally representative sample of 1,000 adults aged eighteen and older by landline and mobile phone. For full results and methodology contact Diane Zyats at (202) 434-9266 or firstname.lastname@example.org