In 2018, there are seven federal tax brackets: 10%, 12%, 22%, 24%, 32%, 35% and 37%. The bracket depends on taxable income and filing status.

Our table shows the tax brackets and federal income tax rates that apply to the 2018 tax year and relate to the tax return you’ll file in 2019.

Single Filers

Married, Filing Jointly

Married, Filing Separately

Head Of Household

How Tax Brackets Work

The United States has a progressive tax system, meaning people with higher taxable incomes pay higher federal income tax rates.

• Being “in” a tax bracket doesn’t mean you pay that federal income tax rate on everything you make. The progressive tax system means that people with higher taxable incomes are subject to higher tax federal income tax rates, and people with lower taxable incomes are subject to lower federal income tax rates.
• The government decides how much tax you owe by dividing your taxable income into chunks — also known as tax brackets — and each chunk gets taxed at the corresponding tax rate. The beauty of this is that no matter which bracket you’re in, you won’t pay that tax rate on your entire income.
• Example #1: Let’s say you’re a single filer with $32,000 in taxable income. That puts you in the 12% tax bracket in 2018. But do you pay 12% on all $32,000? No. Actually, you pay only 10% on the first $9,525; you pay 12% on the rest. (Look at the tax brackets above to see the breakout.)

• Example #2: If you had $50,000 of taxable income, you’d pay 10% on that first $9,525 and 12% on the chunk of income between $9,526 and $38,700. And then you’d pay 22% on the rest, because some of your $50,000 of taxable income falls into the 22% tax bracket. The total bill would be about $6,900 — about 14% of your taxable income, even though you’re in the 22% bracket.

• That’s the deal only for federal income taxes; your state might have different brackets, a flat income tax or even no income tax at all.

How To Get Into A Lower Tax Bracket & Pay A Lower Federal Tax Income Rate

Two common ways of reducing your tax bill are credits and deductions:

Tax credits directly reduce the amount of tax you owe; they don’t affect what bracket you’re in.

Tax deductions, on the other hand, reduce how much of your income is subject to taxes. Deductions lower your taxable income by the percentage of your highest federal income tax bracket. So if you fall into the 22% tax bracket, a $1,000 deduction saves you $220.

In other words: Take all the tax deductions you can claim — they can reduce your taxable income and could kick you to a lower bracket, which means you pay a lower tax rate.

“Being ‘in’ a tax bracket doesn’t mean you pay that rate on everything you make.”

Next Steps…

If you’re ready to file, please feel free to request a free consultation so we can help you take care of your tax filings.

In the longer term, taking steps to reduce your taxable income can go hand in hand with financial planning and for estate planning.

The post Federal Income Tax Brackets first appeared on Brilliant Tax & Accountings.

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The Chief Financial Officer is one of the central figures in any early-stage company. Hiring a temporary CFO can be the difference between lasting decades and failing in your first year. Especially in a competitive market such as those found in the Los Angeles area, where any edge your competitor has can make or break your early-stage company.

A CFO can help you raise capital in the early stages of your company. A CFO lends credibility to your financial model and projections, and can be an asset in seeking funding. Some temporary CFOs in the Los Angeles and Glendale area already have connections that can help you seek or crowdfund your startup capital. This will only help you build credibility with a board of investors.

The decisions an early-stage company makes are the most important. An experienced CFO can help you avoid mistakes early on so that you aren’t learning the hard way at the time when your business is most vulnerable.

A CFO also can help you optimize your cash management through solid forecasting and extending your company’s runway, in effect buying time for your small business become more valuable.

A trusty CFO can also help early-stage companies run more smoothly by directing the financial departments, freeing up a CEO to tackle the big picture. Things CFOs tackle include: insurance, leases, bank lines, negotiating benefits, legal fees, and distinguishing between service providers.

An experienced CFO knows the best way to constructively challenge a plan, claim, or proposal, thus ensuring that the model can hold up to scrutiny, thus avoiding groupthink. This will increase your model’s chances of success.

A good CFO will increase the likelihood of refinancing. Companies with strong financial leadership from the beginning can help you exceed your financial goals through accurate on-time financial reports. Few financial surprises increase investor confidence. Similarly, a temporary CFO can help you build confidence among creditors, suppliers, banks, service providers, investors, and your employees themselves. You will attract better people, better clients, and operate on a larger scale.

If you early-stage company lacks strong financial leadership you will turn away the attention of merger and acquisition buyers. M & A buyers are always looking for young companies with strong financial, administrative, and operational management.

Ultimately, a temporary CFO thus helps you get the maximum return from your investment. IN the Los Angeles and Glendale area, it can be a cutthroat market, where a lot of small businesses fail in the first year. A strong CFO, even if temporary, can help you reap the rewards of a better lifestyle so that all your hard work turns into cash in your pocket! Can you afford not to have one?

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The post Temporary CFO Services in Los Angeles appeared first on Brilliant Tax & Accountings.

There are many important factors in determining whether or not your accountant cares about your success. Hiring any run of the mill accountant can be a poor investment, but an accountant that is devoted to your business or personal account can be an invaluable asset in ensuring your financial success.

Some of the most critical things to be asking in determining whether or not your accountant cares about your success are as follows:

• Is the service delivered in a timely fashion? If your CPA is not getting you the newest data quickly, then their services are obsolete. Data can become useless if is more than 10-30 days old.
• Are you always dealing with the same person? You should ideally be speaking with the same CPA, that can help get to know your business and understand the way you operate.
• What other services does your CPA offer you? A good CPA should be more than just a data entry clerk. They need to be advising you in your daily operations.
• Is your accountant saving you money? If your accountant has helped you generate a better profit, and is simply an added expenditure, you should seek out a new CPA that can help you begin to turn a better profit. This should also be heavily noticeable during tax season when your accountant should be finding innovative and unique solutions to paying the minimum possible.
• Is your CPA tech savvy? Has your CPA helped you install Quickbooks and other software programs, and has your CPA trained you in how to use these programs?
• Who are your CPA’s other clients? Find out if your CPA has had similar clients in the past. You wouldn’t want to hire a CPA that specializes in personal finances for a small business venture.
• What are your CPA’s credential? Tax professionals generally are Certified Public Accountants (CPAs), enrolled agents (AEs), or unenrolled preparers. Find out your accountant’s credentials!
• What is your CPA’s policy on returning phone calls? If your CPA isn’t returning your calls in a timely fashion, then it’s time to reevaluate your working relationship with this individual. This is a key sign that your CPA doesn’t care about your business. Make sure your CPA is available during hours that you need help!
• How long have you been a CPA? Experience is the test of a CPA that can make the difference and an inexperienced individual likely to be a liability to your business. Likely the most important question is making sure you have an experienced CPA on your side.

The post An Accountant That Cares About Your Success first appeared on Brilliant Tax & Accountings.

The post An Accountant That Cares About Your Success appeared first on Brilliant Tax & Accountings.

A financial plan is the most important thing a small business needs. It’s a road map, a guideline, a reminder of what your goals are–what you are trying to achieve in the short-term and the long-term. It lays out what your possible costs are, and it seeks out to address avenues for how to manage these costs. It is so important that investors, bankers, and creditors won’t even set up a meeting with you if you don’t have a financial plan for your small business.

Your financial plan helps you manage your cash flow. Most businesses have income that varies from season to season. A good financial plan takes these vicissitudes into account so that there aren’t shortages in the long term. Having a cash cushion helps ensure that your business can take a poor season and still come out on top. Planning your taxes, prudishly spending your cash flow, and budgeting carefully can result from careful financial planning.
When someone is in the thick of running his/her business, he /she can lose sight of the long term goals that ensure proper growth of your small business. A solid financial plan can be a reminder of all the necessary expenditures to keep your small business growing so as to stay ahead of the competitors in your market.
The decisions of the small business owner takes can have positive or negative consequences. A good financial plan can spot positive and negative trends where they may have become lost in a sea of numbers. This will help you better allocate funds to the areas that are making your business money, and avoid expenditures that didn’t yield enough results.
Financial planning can also help you prioritize expenditures. In small businesses, conserving financial resources is a must. A well thought out financial plan can help you prioritize what areas need to be funded immediately, and where your expenses can wait until you have a better season. Even the world’s largest corporations go through a process of prioritization of expenditures resulting from careful cost/benefit analysis.

Overall, the financial plan is there to help you measure your progress. How did your season go? What steps have been made in achieving your goals? When a small business owner is knee-deep in the day-to-day operations of running their business, they can often lose sight of what strides they have made to grow their small business. The financial plan helps the small business owner see precisely what is occurring through reviewing and analyzing the hard data.
In short, every small business owner must have a methodical business plan that is updated regularly if they want to operate successfully for years to come.

The post The Importance of Financial Planning for Small Businesses first appeared on Brilliant Tax & Accountings.

The post The Importance of Financial Planning for Small Businesses appeared first on Brilliant Tax & Accountings.