The scores are in! According to recently released IRS data for 2012, you have to make $434,682 or more in AGI (Adjusted Gross Income) to classify as the top 1% of taxpayers. This rare classification accounted for nearly 22% of the total AGI reported to the IRS, and 38% of the total income tax paid in 2012.
Astonishingly enough, you only need to bring in $36,055 to be in the top half of all taxpayers. Those in the bottom half, earned only 11.1% of total AGI reported and paid nearly 3% of the total income taxes paid. For comparative reference, when we look back to 1986, the top 1% only earned 11% of the total income and paid 26% of the total income tax collected, while lower income earners made 17% of income and paid 6% of the total taxes.
The top 1% of income tax payers have seen their tax liability, collectively, increase three-fold since 1986. The increase of tax rates on the top 1% is largely due to a propensity and belief that those who earn more money should pay more in taxes. With tax liabilities on the 1% increasing year over year, tax planning and wealth management has become an utmost necessity. By consulting with tax professionals, individuals who are faced with the tax burdens of being in the top 1% of taxpayers can engage in a practice called tax avoidance, which allows taxpayers to take advantage of credits and deferments inherent in the tax code. The other 99% of taxpayers can also participate in tax planning strategy sessions with a qualified tax professional. The goal with tax planning and wealth management is to utilize present strategies to help with future tax liabilities.
About Five Stone Tax Advisers
Five Stone Tax Advisers has years of experience negotiating directly with the IRS to get the best possible outcome. Our Tax Preparation and Planning unit has a team of tax attorneys, certified public accountants and enrolled agents that form a single sourced point of contact to ensure you stay compliant and pay less taxes.
