Category Archives: Government Contract Accounting

Tax Bracket, Tax Rate, What’s the Difference?

The difference between your tax bracket and your tax rate is more than a trick question. For example, knowing your tax rate gives you an accurate reflection of your tax liability in relation to your total income. Knowing your tax bracket is useful for planning purposes. For instance, you may want to spread a Roth conversion over several years in order to stay within the income limits of a particular tax bracket.


So, what’s the difference between the two? The main difference is that a tax bracket is a range of income to which a specific tax rate applies, while your effective tax rate is the percentage of your income that you actually pay in tax. Put another way, not every dollar is taxed at the same rate. Your tax bracket shows the rate of tax on the last dollar you made during the tax year. Your effective tax rate reflects the actual amount you paid on all your taxable income.

For example, say you’re single and in the 25% bracket for 2016. That means your taxable income is between $37,650 and $91,150.

Yet the tax you pay is less than 25% of your income. 8koeusir1zm-jimi-filipovski

Why? Because the 25% tax rate only applies to the amount of taxable income within the 25% bracket. The tax on income below $37,650 is calculated using the rate that applies to income in the 10% and 15% brackets.


So, if your 2016 taxable income $40,000, only $2,350 is taxed at 25%. The remainder is taxed at 10% and 15%, leading to a “blended” overall rate. The result: a tax bracket of 25%, and an effective tax rate of less than that.

Good tax advice can affect both your bracket and your rate. Want to know how? Contact us. 

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Start Smart: Five Items to Focus on When Starting a New Business.

Start Smart: Five Items to Focus on When Starting a New Business.

Are you starting a new business in the New Year? Put these items on your to-do list. Business plan. Outline who will own the business and what the legal form will be, your qualifications to run the business, the competitive market you face, the products or services you will sell, and how you intend toContinue Reading

FAR 31.205: Improving Employee Moral, Health, and Welfare

FAR 31.205 discusses Unallowable Cost rules and regulations for government contractors but FAR 31.205-13 in particular discusses what costs are unallowable/allowable to improve employee moral, health, and welfare. To find out more read our article Loyalty, Fitness, and Employee Welfare from our newsletter last week. Feel free to sign up for our newsletter and/or contactContinue Reading

Flow-Down Clauses

If you missed out on our newsletter last week there was an interesting article titled When in Doubt, Flow It Down. The article discussed what needs to be included in subcontracts so that your company is ensured protection within the FAR. Please sign up for our newsletter and if you have any questions feel freeContinue Reading

Incurred Cost Submission Tips

Do you find that incurred cost submissions are draining your business of time and resources? For some tips on how to help your company prepare for incurred cost submissions read this article from our newsletter last week. If you have any other questions about incurred cost submission and/or government contracts please contact our office!

DoD Makes Big Changes to IR&D Reporting

As of January 30th, 2012 the DoD added reporting requirements to Unclassified Independent Research and Development (IR&D) projects.  DFARS 231.205-18 and specifically section DFARS 231.205-18 (c)(iii) now requires contractors to report unclassified IR&D projects to the Defense Technical Information Center (DTIC) in order to claim the costs as allowable.  To be able to claim theContinue Reading

Gold Coast 2012

Last week Peter Witts, CPA PC’s Government Consultant Mike Gitlen attended the Navy Gold Coast/NDIA Small Business Procurement Event at the San Diego Convention Center in San Diego, Ca.  The event brought in over 1500 attendees that ranged from small business owners to government officials within the Deparment of Defense, specifically the Navy. The purpose ofContinue Reading

Department of Energy: Compliance Audit Information

When receiving financial assistance from the Department of Energy (DOE) there are certain regulatory rules that must be followed.  One important regulation for for-profit financial assistance recipients is 10 CFR 600.316.  This regulation states that any for-profit assistance that exceeds $500,000 or more in a year under Doe Financial Assistance awards must have a complianceContinue Reading