The “Fiscal Cliff” or the “Fiscal Curb or the “Fiscal AIEEE What is Wrong With You People Why Won’t You Work Something Out?”–whatever you want to call it, it created more than a few headaches for lawmakers in Washington, and for Americans in general. With new legislation recently signed by President Obama, some of that headache has been alleviated, but for those in or who have to deal with the IRS, headache time isn’t quite over.
The real problem, of course, was that until the fiscal wranglings were done, no one was certain as to what tax laws would revert to older levels and which tax laws would continue. Would everyone’s taxes go up or would that change only hit a select few? And now that we know (for now) who owes what, the IRS has been very quick to release revised withholding tables, with new guidelines for employers covering how much to withhold from workers’ paychecks this year.
The change best covered by the press is the increased tax rate on those couples earning more than $450,000 per year, and those singles with an annual income greater than $400,000. Less well known, then, is the higher tax rate on capital gains and dividends on those households.
But the one what will be effecting the most Americans involves Social Security. Employers will need to start withholding 6.2% from paychecks for workers’ Social Security taxes, which is an increase from the 4.2% of the past two years. That break in payroll-tax was part of a cut pushed by the Obama administration to encourage the rebound of the economy, but wasn’t included in this latest legislation.
All this uncertainty is also affecting when people can file their tax returns. Months ago, the IRS set the start of the electronic-return filing season for January 22nd, a few days later than usual. On Wednesday, January 2nd, the IRS noted that they would need to review the details of the new law and determine what impact it would have on the year’s filing season. While some large tax-preparation firms are optimistic that the 22nd will remain the start date for electronic filing, it’s still a little up in the air just now.
As though tax time isn’t troublesome enough, eh?
Helping you through this trouble is what we do; for the best in all aspects of your financial well-being, please feel free to contact us.
