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Discussion Starter · #1 · (Edited)
Here is the possible 2011 tax changes, once again knowledge is power. I know many of the villagers like being in the know, being prepared and if you have to make adjustments in your budgets or plans to accommodate.


Employers in U.S. Start Bracing for Higher Tax Withholding - Business Exchange


Bloomberg
Employers in U.S. Start Bracing for Higher Tax Withholding
October 27, 2010, 12:22 AM EDT

By Timothy R. Homan

(To see examples of changes in withholding taxes for different income levels, click here.)

Oct. 27 (Bloomberg) -- Employers in the U.S. are starting to warn their workers to prepare for slimmer paychecks if Congress fails to vote on an extension of Bush-era tax cuts.

“I’ve been doing payroll for probably close to 30 years now, and never have we seen something like this where it gets that down to the wire,” said Dennis Danilewicz, who manages payroll services for about 14,000 employees at New York University’s Langone Medical Center. “That’s what’s got a lot of people nervous. All we can do is start preparing communications with a couple of different scenarios.”

Lawmakers won’t start debating whether to extend the cuts, which expire Dec. 31, until after the Nov. 2 elections. Because it takes weeks to prepare withholding schedules, the Internal Revenue Service will probably have to assume the cuts will expire and direct employers to increase payroll deductions starting Jan. 1, experts say.

“We’re kind of stuck between a rock and a hard place,” said Ron Moser, head of human resources for the school district of Kenmore-Town of Tonawanda, New York, which pays about 1,900 teachers, custodians and aides each month. In upstate New York, where winter heating costs are among the highest in the country, many school employees earn between $20,000 and $40,000 a year, he said, and losing $50 in a paycheck is “a significant dollar amount.”

Employees Calls

“We’re starting to get the calls” from employees asking what they need to do for the next tax year, Moser said.

President Barack Obama and most Democrats want tax cuts extended for middle-income earners and to end for the wealthiest Americans, the top 2 or 3 percent of earners. Republicans want tax cuts extended for everyone, arguing that an increase makes little sense as the economy recovers from the worst recession since the 1930s. Tax cuts went into effect in 2001 and 2003.

For Moser, the challenge of the moment is keeping people in the Buffalo suburb, home to about 78,000 residents, calm about what will happen in January. The area has several manufacturing employers -- including 3M Co., General Motors Co. and Praxair Inc. -- and unemployment is 7.6 percent, lower than the national rate of 9.6 percent. Still, many people are worried, he said.

“The bulk of our employees don’t understand” the coming tax debate in Congress, Moser said. “When they see this type of thing happening they go into panic mode. They don’t follow what’s going on.”

June 2001 Rates

If Congress fails to act, income tax rates will revert to higher levels dating from June 2001.

For a married couple with an income of $80,000, that would drain an extra $221.48 in withholding from a semi-monthly paycheck, according to calculations by the Tax Institute at H&R Block. Married individuals earning $240,000 a year would lose an additional $557.78 to withholding in a single semi-monthly paycheck. The Tax Institute at H&R Block calculated federal tax rates for single-income earners and married taxpayers without children.

Paychecks could shrink in January and into February, depending on how long it takes Congress to act.

January could well be a time of “sticker shock” for salaried employees and their employers, said Kathy Pickering, executive director of the Tax Institute, an independent research division at Kansas City, Missouri-based H&R Block Inc.

“If the laws get passed late in December, it’s just necessarily going to take one to three weeks to get those payroll tables updated and implemented into the system,” Pickering said.

Blow to Spending

Allowing the tax cuts to expire, even temporarily, would deal a blow to disposable income and could curtail the consumer spending that accounts for about 70 percent of the economy, said Alec Phillips, a Washington-based economist at Goldman Sachs Group Inc.

“The longer the expiration lasts, the more significant the impact will be,” he said.

Economists raised estimates for consumer spending in the third quarter to 2 percent from 1.9 percent, according to the median forecast on a Bloomberg News survey this month. Spending rose at a 2.2 percent pace in the second quarter. The Commerce Department will release third-quarter data on Oct. 29.

Making a withholding-rate change could take longer for small businesses that don’t outsource payroll services, experts said. If a business can’t react fast enough, employees could recoup any over-withholding by filing a new W-4 tax form to temporarily lower their federal withholding rate.

Another option is to wait until 2012 when workers file their tax returns for the previous year.

Taxpayer Strategy

Taxpayers could use the same strategies if Congress reinstates the tax cuts next year and they need to recoup the extra withholding.

Jodi Parsons, manager of payroll and accounts payable at IFMC, a health care management company based in West Des Moines, Iowa, said if the IRS issues two sets of withholding tables, her two-person office could be overwhelmed with processing changes to W-4 forms.

“We’d have to basically go back and hand calculate checks for all 800-900 employees to determine whether or not we need to deduct additional taxes from them or refund taxes,” Parsons said. “We’d like to see changes in mid-November just to make sure we have time.”

There are now six federal tax brackets, ranging from 10 percent to 35 percent. If Congress doesn’t act, there will be five rates with the top bracket reaching 39.6 percent.

Nov. 20 notice

Last year, the IRS alerted payroll departments on Nov. 20 about the 2010 tax tables, said Scott Mezistrano, senior manager of government relations at the American Payroll Association in Washington. He said a delay in guidance from the IRS could increase costs for some small businesses.

The Treasury Department last week issued a statement that it was “maintaining flexibility” with regards to the release of the withholding tables for 2011.

If the IRS issues tables in mid-November and then again later, businesses will double their programming costs, Mezistrano said. A related concern, he said, is if Congress makes a last-minute decision to extend the cuts and companies aren’t able to implement the change before January.

Business owners may face “tons of angry employees pounding at my office door saying, ‘What have you done to my paycheck?’” Mezistrano said.
 

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Discussion Starter · #2 ·
Here is another one:

2011 Tax Changes

The 2011 tax changes are coming and for most of us, expect to pay more. It is important to understand and note the income tax changes for 2011 as these changes can have a significant impact on what you receive in a refund or owe as a tax liability. Understanding how tax laws affect you can potentially save (or cost) you hundreds if not thousands of dollars. Many of the tax cuts that were enacted by President Bush in 2001 and 2003 are due to expire, resulting in significant changes in the next year. Here we look at the 2011 income tax changes that may affect your personal finances in a major way.

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o
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Tax rates increase:

In 2011 top earners will see the end of reduced tax rates. For individuals in the top 2 tiers, the tax rate will return to the rates seen in 2000. This means today's tax rates of 33 and 35 percent will return to 36 and 39.6 percent for individuals and married couples that fall into the top earner category.

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o
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Federal estate tax:

The federal estate tax (or the death tax) is currently zero as a result of a 2001 tax bill (and the failure of legislators to make changes in 2009). This will change back to previous tax rates in 2011. This means you can expect to see a top tax rate of 55-60 percent on estates valued at more than $1 million.

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Higher taxes on investment gains:

The maximum long term capital gain tax rate has been 15 percent, however that is going to change back to 20 percent in 2011. Dividend income will be taxed as ordinary income, possibly up to the rate of 39.6 percent.

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Earned Income Tax Credit:

Filers with three or more children who are in the highest income levels will see temporary increases repealed.

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Child Tax Credit:

In 2011, the child tax credit will return to $500 from the current $1,000. Taxpayers must earn more than $12,550 in order for the child tax credit to be refundable.

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Mortgage insurance premiums:

After December 31, 2010, the special itemized deduction allowable for mortgage insurance premiums will expire.

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Alternative minimum tax:

It is anticipated that in 2011, an automatic annual inflation adjustment will be applied to this exemption. Currently hitting the middle class more than the intended higher class, this change will account for inflation.

These are just a few of the changes we are likely to see in the year 2011. Knowing in advance what type of changes are on the horizon makes it possible for the individuals who will be most affected by these changes to prepare in advance. For those in the two highest tax brackets, many of these changes could have a major impact, therefore consulting with a tax professional as to how you can mitigate the damage may be a wise move. While there is not much we can do about these changes in the tax law, the opportunity to develop a strategy to deal with changes is available since we are aware of changes that will take place after the new year.
 

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People mad about paying taxes? That's nothing new. :)

I imagine if people in the US had to pay as much in taxes as other countries, they'd just throw their hands up in the air and give up.
 

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Discussion Starter · #4 ·
People mad about paying taxes? That's nothing new. :)

I imagine if people in the US had to pay as much in taxes as other countries, they'd just throw their hands up in the air and give up.
MTTB,

I have heard Canada taxes are real high, I think many of you here do such a great job budgeting with food etc costs.

My friend works in human resources and her company is worried as things are up in the air for what needs to be withdrawn from peoples taxes. The average will be 200.00 per pay period more for anyone over 85,000 until the issue is decided which won't be until after Jan. So it will be very hard for many people not expecting it. Not speaking for anyone not sure they will be mad as much as lost what to do if not expecting if, if you know what I mean. Hopefully if that is the case though everyone can prepare.
 

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Times are tough, people are hurting financially, so yeah....let's tax them more! BRILLIANT idea! (Sarcasm, another service I offer...lol)

I'm hoping for a last minute reprieve on more taxes but I won't hold my breath for it to happen in a timely manner. More likely it would be a retroactive change, creating that many more headaches for payroll departments everywhere.
 

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every one in the us forgets we have a war to pay for..where did bush think the money was coming from? that crap is going to take decades to pay off..:puke: i mean really how we going to pay for that and the deficet(yes i still cant spell)..:soapbox:
 

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MTTB,

I have heard Canada taxes are real high, I think many of you here do such a great job budgeting with food etc costs.

My friend works in human resources and her company is worried as things are up in the air for what needs to be withdrawn from peoples taxes. The average will be 200.00 per pay period more for anyone over 85,000 until the issue is decided which won't be until after Jan. So it will be very hard for many people not expecting it. Not speaking for anyone not sure they will be mad as much as lost what to do if not expecting if, if you know what I mean. Hopefully if that is the case though everyone can prepare.
The tax system here is something I haven't really delved into, other than to file DH's taxes. I know that there's a certain amount that you're taxed based on a low figure and then any amount after that until another figure, you're taxed more on it. The idea is that the more money you make, the more that you're taxed.

When I lived in the US, I didn't think I got taxed all that much and I was in the military too. I saw returns with one child totally at least $3k. I know that here since I've had both kids, I get a tax credit every month and then DH gets both a GST/HST credit and his tax return. However, he gets taxed at least 17% on an amount up to a certain figure and then from that figure onwards, it's another 22% on top of it.

I think a lot of people have to realize that infrastructure, war, education, health care, etc aren't going to pay for themselves. Quality of life is also coincidental with how much a government is willing to spend and where do they get that money?

Taxes :)
 
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Discussion Starter · #9 ·
Somebody's got to pay more taxes to pay for all those things. Most of these things affect higher income households, so I don't worry. I just hope that the tax credit for the kids won't decrease.

Tax credit is suppose decrease from 1,000 per child to 500 per child unless voted otherwise.
 

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I don't like taxes - who does? - but I also don't like seeing cuts in essential services. I agree with the other posters - someone has to pay for them. I know that it will really hurt those who are struggling, and many are. But just in my own small work environment, I am seeing huge cuts projected for higher education in next year's budget, one hospital is closing, and two in small towns are going to be cutting back services because there just isn't the money to fund them any more. This hurts people too. And let's not even talk about the state of the roads and other infrastructure. I agree - someone has to pay for all these things. I wish it didn't have to be me, but I use some of these services and depend on government to do what individuals can't. Everything comes with a price tag.
 

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I have appreciated the extra cash in my net pay since Obama took office and lowered my taxes.

I have not appreciated earning less money since the state began giving me 'furlough' days to try to save money since Bush and Arnold cut the school budgets so much. {sigh}

Who knows what's going to happen next ....
 
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Discussion Starter · #12 ·
Here is some scenario numbers for people. I found this very interesting:

The Tax Foundation - Report Compares Typical Family Tax Bills for 2011 Under Three Scenarios

October 13, 2010
Report Compares Typical Family Tax Bills for 2011 Under Three Scenarios

Washington, DC, October 13, 2010 - The Tax Foundation has calculated what 11 typical tax returns will look like in 2011 under three scenarios:

* If Congress does not intervene to prevent the expiration of all the Bush and Obama tax laws that are set to expire this December 31;
* If the Congressional Republican plan is enacted, which with some modifications extends the Bush tax cuts but not the Obama tax credits; and
* If the Congressional Democratic plan is enacted, which with some modifications extends the Bush tax cuts and some Obama tax credits for those who earn less than $200,000 ($250,000 for couples).

"A total expiration of tax cuts enacted during the Bush and Obama years was considered highly unlikely a few months ago," said Tax Foundation Staff Economist Mark Robyn, who authored the new report, "but as year's end approaches, an unprecedented tax expiration that would raise taxes on almost every filer can't be ruled out."

The report only looks at tax bills in 2011, excluding tax increases enacted as part of health care reform which don't go into effect until later in the decade.

Tax Foundation Fiscal Fact, No. 251, "Family Tax Returns in Doubt As Expiration Approaches for Bush and Obama Tax Cuts: Three Likely Policy Scenarios," is part of a series answering frequently asked questions about tax expiration. Online, see the study, The Tax Foundation - Family Tax Returns in Doubt As Expiration Approaches for Bush and Obama Tax Cuts: Three Likely Policy Scenarios, and the FAQ, The Tax Foundation - Frequently Asked Questions on the Expiring Bush-Era Tax Cuts.

Four of the 11 typical families were families of four:

* A married couple (one earner) making $50,000 a year with two children would owe the federal government $690 in 2011 under either the Democratic plan or the Republican plan, but $2,833 under total expiration.
* A married couple with two children, but with both spouses working and together earning $85,000, would owe the federal government $5,385 in 2011 under either the Democratic plan or the Republican plan, but $7,235 under total expiration.
* A married couple with two children, both spouses working and together earning $150,000 ($135,000 in wages and $15,000 in long-term capital gains) would owe the federal government $17,800 in 2011 under either the Democratic plan or the Republican plan, but $21,602 under total expiration.
* A married couple with two children, with both spouses working and together earning $300,000 and claiming a $20,000 deduction for mortgage interest would owe the federal government $64,971 in 2011 under the Republican plan, $68,392 under the Democratic plan, and $76,616 under total expiration.

The Fiscal Fact also presents the effective tax rates (taxes as a percentage of income) for all 11 families and includes breakdowns of the typical deductions, exemptions and credits.

The Tax Foundation is a nonpartisan, nonprofit organization that has monitored fiscal policy at the federal, state and local levels since 1937.
 

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Ummm, there is no Obama budget bill, all of those things in the above articles will take place and there will be lots of people with children who are going to lose the child credit. His budget was to let the tax cuts lapse and do nothing else. In essence there is nothing being done on any front.
 

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Discussion Starter · #16 ·
I know these articles are long....lol but thought they might interest others , as we are using many things to help people plan in a budgeting class this month:) Just wanted everyone aware for budgeting purposes. Sorry hope I am not boring anyone, but I love to play with figures as I map out scenarios for my financial plans and goals. Being ahead of the game , and knowledge is power will help you succeed and plan.

Here is the Link: The Tax Foundation - The Potential Impact of Expiring Tax Cuts on Low-Income Taxpayers

The Potential Impact of Expiring Tax Cuts on Low-Income Taxpayers

by Nick Kasprak

Fiscal Fact No. 250

Introduction

On December 31, 2010, a decade's worth of tax code changes will expire. Most pundits have been predicting for months that Congress and the President would only permit the expiration of tax cuts for high-income people, but if election year politics create gridlock, the Internal Revenue Service will be ready to roll the clock back ten years.

Most of the changes will kick in because of the sunset provisions of the 2001 and 2003 laws, known popularly as the Bush tax cuts. But other, more recently enacted tax cuts—temporary tax provisions passed in early 2009 as part of the stimulus bill—are scheduled to expire at the same time. Both sets of changes would have substantial effects on low-income taxpayers.

While many people view the Bush tax cuts as targeted towards the wealthy, taxpayers across the entire income spectrum received a significant tax cut. It's certainly true that wealthier taxpayers received a bigger cut as measured in dollars because they were paying higher taxes to begin with. However, a better measure of tax cuts is the percentage change in after-tax income, which reflects tangible lifestyle benefits and is intuitively understood.

Comparing changes in after-tax income shows that the benefits of the tax cuts were distributed much more equally along the income spectrum because the Bush tax cuts included a number of provisions targeted specifically at low-income people. Moreover, low-income taxpayers also benefitted from some temporary stimulus measures enacted in 2009 that are also set to expire at the end of this year: an expansion of the earned income tax credit (EITC) and the child tax credit, as well as expanded credits for college education.

The various tax proposals made by the parties in Washington all extend most of these low-income tax cuts. However, the current Congress has shown itself to be unusually susceptible to gridlock. No vote will occur before the midterm elections, and although both parties plan to address the matter during a lame duck session after the election, there's no certainty of legislative agreement then, either. Therefore, the threat of automatic, full expiration of all these cuts is quite real, and with that in mind, it is worth considering what effect such a scenario would have on low-income taxpayers, as well as the differences between the various proposals to extend most of the tax cuts.

Expiring Provisions Important to Low-Income Workers

Earned Income Tax Credit

The EITC is a sizeable tax credit for the working poor, designed as an anti-poverty measure. Workers with wage income within a certain range and limited investment income are eligible. The credit is also "refundable," which means that workers whose tax liability has been reduced to zero before the credit receive the value of the credit in the form of a check. Technically, those checks are not refunded tax payments; in the U.S. Budget, these payments count as government expenditures similar to transfer programs like TANF (i.e., the traditional "welfare" program). For many recipients, the credit amount exceeds their income tax liability considerably.

The EITC is probably one of the most complicated provisions of the tax code due to its "plateau" shape. The value of the credit rises as wage income increases until it reaches an amount at which a larger dollar amount of assistance is deemed unnecessary—this is the edge of the plateau. For several thousands of dollars of additional wage income, the credit is constant. When the worker reaches an income level at which the maximum credit is considered unnecessary, he has reached the far end of the plateau, and the credit starts to decline. When wage income increases beyond another threshold, the credit falls to zero. The exact shape of this plateau depends on both filing status and the number of dependents on the return.

Prior to the Bush tax cuts, the credit amounts were the same for both single and married filers. This was one component of the "marriage penalty," because if two single EITC recipients married, their combined income would often be enough to make them ineligible to receive the credit. The Bush cuts mitigated this by lengthening the plateau—that is, by increasing the income threshold at which the credit starts to phase out for married filers.

The 2009 stimulus bill expanded the EITC further in two ways. In the same way Bush had, Obama increased the phase-out threshold for married filers. Secondly, the stimulus bill added a new, more generous EITC category for tax returns claiming three or more dependent children. Previously, a family with two children could get the largest credit, and the birth of a third child did not increase it.

The current Republican proposal is to extend all of the Bush tax cuts without extending any stimulus bill provisions. Congressional Democrats extend both the Bush EITC expansion and some of the stimulus provisions. They include the additional marriage penalty relief, but not the new EITC category for three children. Obama's budget proposal goes the furthest, including even the three-children EITC category.


Child Tax Credit

Prior to the Bush tax cuts of 2001 and 2003, most taxpayers could receive a tax credit worth $500 for each qualifying child they claimed as a dependent. This credit benefits low- and middle-income people because it starts to phase out once income exceeds a certain threshold ($110,000 for couples, $75,000 for single parents). The Bush tax cuts doubled the credit amount to $1,000 per child.

While the credit was refundable prior to the Bush tax cuts, the refund (that is, the amount that the credit reduced the filer's income tax burden below zero) was capped by the amount of payroll taxes paid, and only applied to returns with three or more children. The Bush tax cuts eliminated the three-child requirement and changed the law so that the cap no longer depended on payroll taxes but instead was set at 15 percent of the worker's income in excess of $12,800. The 2009 stimulus bill lowered this threshold to $3,000, expanding the refundable credit further. Both the Obama budget proposal and the congressional Democrats' plan would extend this lower threshold into 2011.

Table 1
Child Tax Credit under Various Policy Scenarios
Tax Year 2011




If Bush Cuts Expire


If Bush Cuts Are Extended


If Obama Budget Adopted


If Cong. Democrats' Plan Adopted

Credit Amount


$500 per child


$1,000 per child


$1,000 per child


$1,000 per child

Refundable Cap


Payroll taxes paid


15% of AGI over $12,800


15% of AGI over $3,000


15% of AGI over $3,000

Making-Work-Pay Credit

The broadest tax-cutting measure in the 2009 stimulus bill was the introduction of a new, refundable tax credit called the making-work-pay credit, equal to 6.2 percent of the taxpayer's wage income, up to a maximum of $400 ($800 for joint returns). The credit phases out as income rises above $75,000 (or $150,000 for joint married returns), so this is a provision that benefits low- and middle-income people. The credit is set to expire at the end of 2010, and aside from Obama's budget proposal, none of the plans currently under consideration calls for extending this credit into 2011.

Education Credits

There are several ways taxpayers who pay college tuition expenses can reduce their income tax liabilities. Lower-income taxpayers are better off claiming an education credit instead of deducting expenses. At higher incomes, it is usually more advantageous to deduct tuition expenses from gross income, because like many other tax credits, education credits phase out once income rises above a defined threshold.

The best-known education credit was the Hope credit and was worth up to $1,800 per student, determined according to a formula that depended on total tuition expenses. The 2009 stimulus bill essentially replaced the Hope credit with the new American Opportunity credit (AOC), which has a much higher phase-out threshold, so it benefits most middle- and upper-middle-income taxpayers as well. It is worth more, too, up to $2,500 per student. Additionally, the new credit is partially refundable, whereas the Hope credit was limited by the amount of total income tax owed. The AOC will expire at the end of 2010, and Obama's budget proposal is the only tax plan that calls for its extension into 2011.

Table 2
Education Tax Credits under Various Policy Scenarios
Tax Year 2011




Hope Credit If Bush Cuts Expire


Hope Credit
If Bush Cuts Are Extended


American Opportunity Credit* If Obama Budget Adopted


Hope Credit
If Congressional Democrats' Plan Adopted

Max Credit Amount


$1,800
per student


$1,800
per student


$2,500
per student


$1,800
per student

Refundable?


No


No


Up to 40%


No

* Under President Obama's Budget, the Hope credit would still exist in law, but taxpayers would only be allowed to take either the Hope credit or the new American Opportunity credit, the latter being more generous in almost all circumstances.

10-Percent Tax Bracket

The biggest single tax cut among all the provisions in the Bush tax cuts was the introduction of a new low tax rate on the first $6,000 in income ($8,500 in 2011 dollars). Previously, taxable income up to $27,950 ($34,500 in 2011 dollars) fell into the 15-percent bracket. The Bush cuts split this bracket into two, and set a rate of 10 percent on the lowest bracket. This provision affected all taxpayers; even billionaires saw a small savings because their first $6,000 in income was taxed at the lower rate. However, the change had the biggest effect on low-income earners from a percentage standpoint. This new tax bracket, along with the rest of the Bush tax cuts, is set to expire next year. All the current proposals call for extending this provision. Only if the Bush tax cuts expire on schedule with no legislative intervention would the 10-percent bracket disappear.

Standard Deduction Marriage Penalty

Taxpayers are allowed to subtract a variety of expenses from their taxable income, saving quite a bit on their federal tax returns: interest on loans, state-local tax payments, charitable gifts—the list goes on and on. The process of claiming these deductions is called itemizing, and because low-income people don't have many of these expenses, itemizing mainly helps higher-income taxpayers. However, for lower-income taxpayers, a "standard" deduction is available. It acts as a proxy for itemized deductions.

Prior to the Bush tax cuts, the standard deduction for married joint returns was less than twice the standard deduction for single returns. This was another component of the "marriage penalty," because two newly married filers who had previously both claimed the single standard deduction found that their new combined deduction was less than the sum of their individual deductions. The Bush tax cuts changed the law so that the standard deduction for married joint returns was exactly twice the deduction for single returns.

Percentage Change in Take-Home Income for Various Taxpayers

To demonstrate the effects of the expiring provisions, consider the change in after-tax income for two lower-income tax returns (see Table 3). A family of four with $40,000 in income will see its after-tax income rise between 6.8 percent and 9.8 percent if tax cuts are extended, depending on which version becomes law. A single-parent family of three with $20,000 in income would see similar gains: between 4.4 percent and 9.7 percent gains in after-tax income.


Table 3
Effects of Various Proposals on Sample Low-Income Tax Returns
Tax Year 2011
Married Couple, 2 Dependent Children, $40K Income
Tax Calculation If Bush Cuts Expire If Bush Cuts Are Extended If Obama Budget Adopted If Cong. Democrats' Plan Adopted
Pre-Tax Income $40,000.00 $40,000.00 $40,000.00 $40,000.00
Taxable Income $15,550.00 $13,600.00 $13,600.00 $13,600.00
Tax Before Credits $2,333.00 $1,360.00 $1,360.00 $1,360.00
Child Tax Credit -$1,000.00 -$2,000.00 -$2,000.00 -$2,000.00
Making Work Pay $0.00 $0.00 -$800.00 $0.00
EITC -$203.00 -$873.00 -$1,256.00 -$1,256.00
Total Income Tax $1,130.00 -$1,513.00 -$2,696.00 -$1,896.00
After-Tax Income $38,870.00 $41,513.00 $42,696.00 $41,896.00
Change in After-Tax Income 0% (baseline) 6.8% 9.8% 7.8%
Single parent, 2 Dependent Children, $20K Income
Tax Calculation If Bush Cuts Expire If Bush Cuts Are Extended If Obama Budget Adopted If Cong. Democrats' Plan Adopted
Pre-Tax Income $20,000.00 $20,000.00 $20,000.00 $20,000.00
Taxable Income $400.00 $400.00 $400.00 $400.00
Tax Before Credits $60.00 $40.00 $40.00 $40.00
Child Tax Credit -$60.00 -$1,120.00 -$2,000.00 -$2,000.00
Making Work Pay $0.00 $0.00 -$400.00 $0.00
EITC -$4,415.00 -$4,415.00 -$4,415.00 -$4,415.00
Total Income Tax -$4,415.00 -$5,495.00 -$6,775.00 -$6,375.00
After-Tax Income $24,415.00 $25,495.00 $26,775.00 $26,375.00
Change in After-Tax Income 0% (baseline) 4.4% 9.7% 8.0%

For comparison, let us consider an example on the opposite end of the income spectrum (see Table 4). A family of four with $1 million in income would see its after-tax income rise as much as 6.7 percent or drop as much as 1.3 percent, depending on which version of extension becomes law.

If the Republican version of extension—full extension of the Bush-era laws but not the credits included in 2009's stimulus bill—becomes law, the two tax returns whose after-tax income would increase the most in 2011 are the low-income, two-parent family (6.8 percent) and the high-income family (6.7 percent).

If the Obama budget or the congressional Democrats' plan becomes law, a substantial additional benefit from stimulus provisions for low-income families would bump up the gains in after-tax income of both low-income tax returns: to as much as 9.7 percent for the single-parent family of three and 9.8 percent for the low-earning family of four.
Table 4
Effects of Various Proposals on a Sample High-Income Tax Return
Tax Year 2011
Married Couple, 2 Dependent Children, $1 Million in Income
Tax Calculation If Bush Cuts Expire If Bush Cuts Are Extended If Obama Budget Adopted If Congressional Democrats' Plan Adopted
Pre-Tax Income $1,000,000 $1,000,000 $1,000,000 $1,000,000
Taxable Income* $844,914 $805,200 $842,376 $842,376
Tax Before Credits $298,646 $251,692 $307,473 $290,331
Tax Credits (all) $0 $0 $0 $0
Total Income Tax $298,646 $251,692 $307,743 $290,331
After-Tax Income $701,354 $748,308 $692,257 $709,669
Change in After-Tax Income 0% (baseline) 6.70% -1.30% 1.20%
*We assume itemized deductions equal to 18 percent of adjusted gross income.

In summary, low-income and high-income families alike have significant tax payments at stake over the next two months.

About these Numbers

These calculations are based on the Tax Foundation's projected 2011 tax bracket levels, which are calculated by the IRS according to inflation statistics from the Bureau of Labor Statistics (BLS). While the IRS has not officially released tax brackets for 2011 due to uncertainty about tax law changes, we use their formula to calculate bracket levels for many possible policy scenarios.

Note: To plug in your own example to see how a hypothetical family of your choosing, would fair under these alternative policy scenarios (as opposed to our three chosen examples above), visit the Tax Foundaton's MyTaxBurden.org calculator.
 

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This is quoted from the Tax Foundation.

President Obama has proposed extending or making permanent most of the Bush-era tax cuts, that is, all those that benefit families making less than $250,000 ($200,000 for a single filer). He proposes letting expire all those that benefit taxpayers over those thresholds. He has also proposed a few new tax policies:

* increasing the EITC for taxpayers with 3 or more children;
* further expanding eligibility limits for married taxpayers claiming the EITC;
* reducing the requirements for qualifying for the refundable portion of the child tax credit; and
* extending the new making-work-pay tax credit through 2011.

Here's the link:
{I can't post a link because I'm new here, but it's TaxFoundation . org}

And on the home page there is a like to a number of FAQs.

The site looked calm and non-hysterical to me, lol.
 

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Discussion Starter · #18 · (Edited)
This is quoted from the Tax Foundation.

President Obama has proposed extending or making permanent most of the Bush-era tax cuts, that is, all those that benefit families making less than $250,000 ($200,000 for a single filer). He proposes letting expire all those that benefit taxpayers over those thresholds. He has also proposed a few new tax policies:

* increasing the EITC for taxpayers with 3 or more children;
* further expanding eligibility limits for married taxpayers claiming the EITC;
* reducing the requirements for qualifying for the refundable portion of the child tax credit; and
* extending the new making-work-pay tax credit through 2011.

Here's the link:
{I can't post a link because I'm new here, but it's TaxFoundation . org}

And on the home page there is a like to a number of FAQs.

The site looked calm and non-hysterical to me, lol.
Yes thank you , it seems like good site, I have a couple of the above articles from them posted as well. There is a calculator there to figure out your own examples as well. There is many different ways it can go or scenarios, but if you are aware then won't affect you as much. Thanks so much for your reply and quote etc.

Welcome to Frugal Village by the way! I look forward to reading your posts and getting to know you. I use to live in California and miss it very much.
 

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Thanks. I really agree with what you said above, "Knowledge is Power"
I try to read as much as I can ... there's so much. And so much we won't know until new laws are actually passed. I'm determined to remain positive, sigh.

Thanks for the welcome. This place is amazing! It's a little weird to jump into threads -- almost like interrupting, but I want to get involved.

I've already learned sooooo much!!! (I made my very first signature and this is it's very first post, lol)
 

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Discussion Starter · #20 ·
Thanks. I really agree with what you said above, "Knowledge is Power"
I try to read as much as I can ... there's so much. And so much we won't know until new laws are actually passed. I'm determined to remain positive, sigh.

Thanks for the welcome. This place is amazing! It's a little weird to jump into threads -- almost like interrupting, but I want to get involved.

I've already learned sooooo much!!! (I made my very first signature and this is it's very first post, lol)
I am so glad you did jump it! I use to be on the school board in California, so I know your job is a tough one that is very much appreciated by the kids, parents and community. By the way I love San Fran! I am sure we are destined to be good friends here:)

Yes, you will love the village!
 
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