Category Archives: Taxes

New Tax Deduction for North Carolina Business Owners

A few weeks ago the North Carolina General Assembly passed law G. S. 105-134.6(b)(22).

Why is that important to you? Because if you are a business owner, beginning with the 2012 calendar, you have a new way to save some money.

Here is the verbiage directly from the North Carolina Department of Revenue Directive:

This directive addresses a new deduction available for taxpayers who include net business income in federal adjusted gross income (AGI) as reported on the North Carolina individual income tax return. The law allows a deduction of up to $50,000 of net business income included in AGI that is not considered passive under the Internal Revenue Code (IRC). In the case of a married couple filing a joint return where both spouses report a net business income, the maximum dollar amount applies separately to each spouse’s net business income included in AGI, not to exceed a total of $100,000 (maximum $50,000 each). This deduction is available for tax years beginning on or after January 1, 2012.

Now that you’ve read the official verbiage – here it is broken down in layman’s terms.

–> The deduction can be for both spouses (husband and wife). So if your spouse doesn’t have any ownership in the business – it may be time to reconsider that. If you both are bringing in business income then you can get a deduction of up to $100,000 total.

–> The deduction is not for passive income. It only applies to your business if your are actively participating in the day-to-day workings of the business. If you are an entrepreneur who owns and runs his own company – this deduction is for you. If you own a business, or part of a business, strictly in a financial sense then you won’t receive a deduction.

–> The deduction is for individuals that OWN a business. Businesses owned by individuals include proprietorships, partnerships, LLCs, LLPs and “S” corporations.

–> The deduction is for NET business income. For example, if you have $55,000 of business income but $75,000 of business losses, you have 0 net business income, and therefore no deduction.

–> A $50,000 deduction does not save you $50,000. The full benefit comes from multiplying the net business deduction by your NC tax rate (up to 7.75%). This means that a full deduction at the top tax rate will save you AT MOST $3,875 per taxpayer ($7,750 per married couple).

If you have any additional questions about the new tax deduction and want to know if you qualify, feel free to give us a call at 919.267.6740.

Despite Consumer Confidence Growth, We Still Fear Tax Hikes

According to a recent report from Bloomberg News, “the number of Americans saying the U.S. economy is getting better rose in March to the highest level since 2004 as a decline in claims for unemployment benefits offered more evidence of a labor-market recovery.”

The Labor Department showed jobless claims had decreased by 5,000 to 348,000 last week. That number represented the lowest since February 2008.

Despite those positive numbers, the fear of tax hikes coming down, and coming down soon, has consumers running scared.

Economic prognosticators are sure those tax hikes are coming soon due to tax cuts, wars, the recession and our growing population of retirees. Plus the federal government continues to spend more than it takes in.

These same experts say that in 2013 the top U.S. income bracket will go from paying 35% to almost 30%.

Tax Hike Fear Fueling Roth IRAs

Already the most popular retirement saving product, holding $4.7 trillion in assets as of the end of 2010, according to Mintel Market Research, Roth IRAs are gaining popularity as consumers look for savvier ways to protect their money.

Now read this breakdown from Ross Kenneth Urken on why consumers are doing the flocking to Roth IRAs:

The Roth Individual Retirement Arrangement is a retirement plan that allows you to withdraw money tax-free in retirement. That contrasts with traditional IRAs and retirement plans, that let you deposit pre-tax funds, but tax your withdrawals.

Now, in a traditional IRA, you can deduct your contribution (up to $5,000 annually) from your taxable income. But let’s think about the future.

There’s an old business school trick called the Rule of 72 for estimating how many years it will take for an investment to double: Divide 72 by your average return on investment percentage, and you have a rough answer. So, if someone earns 8% on a Roth IRA, — 72/8 = 9 — their money will double every 9 years. Thus, $5,000 invested at age 30 will become $10,000 at 39, $20,000 at 48, $40,000 at 57 and $80,000 at 66. If that were a traditional IRA, the investor would then have to pay income taxes on the $80,000.

With the Roth, you don’t get a deduction for your contribution, so you pay the taxes on the initial $5,000 you put in. Your investment grows the same way, but when you take money out, it’s tax free. Basically, you’re choosing between paying taxes on the seeds or on the crops.

The crux of the matter comes down to people’s belief that taxes will continue to increase. Based on that premise, it’s better to pay the taxes on your initial investments now, while rates are lower, than to wait and pay a higher rate on your total returns when you remove the money at retirement.

Bottom line – your Roth is never going to be taxed again, has capital appreciation as long as it grows and you get it back tax free. This means even more to younger workers who are unsure that Social Security will be available to them once they retire.

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What do you think? Do you have a Roth IRA? How are you feeling about the economy in 2012?

2011 North Carolina Tax Return Pocket Card

The WolfBridge Financial blog has been focusing a lot on taxes lately – in case you hadn’t noticed.

We know firsthand how stressful tax season can be, and want to help prepare everyone in the Triangle so that you can focus more on your family and friends, instead of how much money you owe.

Here are a few things we’ve covered so far:

Today we want to help you even more.

As a sports fan, I’ve always been fond of pocket schedules and calendars because you can keep them in your wallet and they don’t make you look like George Costanza (see below).

Introducing the 2012 North Carolina Tax Return Pocket Card

It may not be all that fancy, but we managed to put together a pocket card that has many of the key dates and details you’ll need leading up to April 15, 2012.

So instead of having to dig around on the Internet, or calling the (yikes!) NC Department of Revenue, you can simply download our card and fold it up. Then just place it in your wallet, purse, carry-on, tablet cover or anything else readily accessible and you’re ready to file those pesky taxes.

Enter the WolfBridge Financial Military Veteran Tax Services Giveaway

Have a military veteran of the Persian Gulf War (Operation Iraqi Freedom) or Afghanistan War (Operation Enduring Freedom) in your family?

As a veteran owned business, WolfBridge Financial prides itself on giving back to our military veterans. To showcase that support we thought a giveaway of financial services to military veterans would be a great way for families to show their heroes just how much they mean to them!

If someone in your family is a military veteran of the Persian Gulf War (Operation Iraqi Freedom) or Afghanistan War (Operation Enduring Freedom) then entering them into the contest is simple:

1. Pull together your heroes name, military branch, war served and a few words about them.
2. Place the information, along with a way for us to contact you, on the WolfBridge Financial Facebook Page or in the Comment section below this blog post.
3. Each time your heroes entry is “liked” on Facebook, someone comments on your post in the blog, or your post is linked to on Twitter using the Hashtag #WolfbridgeHeroes– you get 1 point. The military veterans with the most points at the end of the contest will receive the following prizes.

**After you nominate someone make sure you tell your friends and family so they can help you win!**

1st Place: Free 2011 or 2012 Tax Services – State and Federal Filing
2nd Place: Free Financial Assessment with Michael Kothakota, CEO of WolfBridge Financial & Military Veteran
3rd Place: $200 Donation to either the Wounded Warrior Foundation, Special Operations Warrior Foundation or Iraq and Afghanistan Veterans of America.

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To help get you started, below is a sample contest entry put together by our staff for WolfBridge Financial CEO and military veteran, Michael Kothakota:

“Michael Kothakota, North Carolina National Guard, Veteran of Operations Iraqi Freedom and Enduring Freedom. Loving father and proud veteran.“

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Please spread this to as many people as you possibly can so we can shine a little extra light on our heroes at home and remind everyone who keeps us all FREE!

If you have any questions about the WolfBridge Financial Military Veteran Tax Services Giveaway please CONTACT US.

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Additional Giveaway Details

Giveaway Entrance/Point Gathering Period: March 1, 2012 at 12:00 AM through March 24, 2012 at 11:59 PM

Winner’s Announcement: The winners will be contacted on March 25, 2012 and announced publicly on March 26, 2012 on the WolfBridge Financial Blog and Facebook Page.

Prizes: Each winner will speak with a WolfBridge Financial representative about how and when they would like to receive their prize. Prizes may be redeemed for 2011 or 2012 tax season.

Entrants: Must nominate a veteran of one of the aforementioned wars. The veteran must also be a resident of North Carolina.