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 Post subject: Taxes and the Fiscal Cliff
PostPosted: Tue Jan 01, 2013 4:52 pm 
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Well, Congress has yet to come to an agreement so as of today, we go back to 2001 tax law. This means that a whole lot of credits change or disappear. It also means that the tax brackets will change and for most of us, our withholding for the past year may be inaccurate; so many people who usually get small refunds may end up owing this year. And even if you get usually large refunds, it will be smaller this year, since the withholding may be a bit short. For those of you that have kids, your refunds will be much lower this year, due to the end of the Additional Child Tax Credit and lower amounts on EIC. If you have kids in college, you can now only get a credit for the first two years of college. And for those of you in the upper income brackets, you are now much closer to the Alternative Minimum Tax, which will affect you, even if you don't have to pay it. Oh, and just to make it more fun, the IRS is reimplementing their fraud checks that slowed down the process last year. For this reason, they have decided to not issue a refund cycle chart this year. So you will not when your refund is coming, until the IRS tells you. Right now, they are saying up to 21 days from the day you file to getting your refund. And that is assuming the IRS doesn't find anything they don't like about your return.

I will be working two jobs this year. AMSCOT bailed in early September, so I have been scrambling to get my CEs and work for this year. I will be working part time for Jackson Hewitt and full time at a position through Randstad I have been at for the past few months. Therefore I do not know how much I will be up here, but I will try to answer any questions you have. And if I can't, there may be some other people up here who can.


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 Post subject: Re: Taxes and the Fiscal Cliff
PostPosted: Tue Jan 01, 2013 6:13 pm 
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Thanks, bunniee. This sounds like a huge bummer. I was counting on a good return this year because I paid a ton of interest on my student loans.

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 Post subject: Re: Taxes and the Fiscal Cliff
PostPosted: Tue Jan 01, 2013 8:09 pm 
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The filing we do at the beginning of this year is based on 2012 -- I'm thinking these changes won't affect our returns until next year. Assuming their compromise doesn't help. They can do retroactive changes. I'm betting they will and just wanted to cause drama.


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 Post subject: Re: Taxes and the Fiscal Cliff
PostPosted: Tue Jan 01, 2013 8:37 pm 
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I'm still really confused on this all. I understand they can't go back and say last year should've been taxed at a different rate, but at the same time there is a lot of talk about the AMT not being adjusted (so people will have to calculate their adjusted minimum tax if they made more than something like $35k vs the currently much higher number). Also without a patch, state taxes can't be claimed as a deduction. I'm just not sure if that affects the taxes I will try to file in January. I was really hoping to get a size-able return this to cover some repairs on the house year but now I'm not sure if I should expect much of anything and am wondering if I should hold out on filing until closer to April to see if the congress can pull their heads out of their asparagi and sort some kind of deal out.

No matter what, I have a really hard time seeing Boehner keeping his leadership position, unless the GOP really does indeed like being the party of "we can't get anything done".

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 Post subject: Re: Taxes and the Fiscal Cliff
PostPosted: Tue Jan 01, 2013 8:40 pm 
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Since this is really deep into Parlor territory, I moved it.


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 Post subject: Re: Taxes and the Fiscal Cliff
PostPosted: Thu Jan 03, 2013 8:33 am 
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I was looking at my pay statement and I think I've been paying a lot more than usual in taxes. The problem for us is we usually run close to the penalty for underpaying taxes for the year so I know I upped it last year. I hope it is enough though because I'd hate to not only have to pay taxes but pay a penalty for not withholding enough.

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 Post subject: Re: Taxes and the Fiscal Cliff
PostPosted: Fri Jan 04, 2013 8:27 pm 
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Well the good news is that Congress did pass a last minute fiscal cliff act. They have made the Bush tax cuts permanent, so our withholding will be correct. The AMT has been linked to the inflation rate, so Congress will never need to fiddle with it again, or at least not for a long time. The Child Tax Credit and EIC have been extended for five years, so if you had a big refund last year you should have a fairly big one this year also. The American Opportunity credit was also extended for five years, so you still have a partially refundable credit for college tuition. The only big thing they got rid of was the lowering of the deduction for Social Security to 4.2 from 6.2. I would be that most of you didn't even really realize that you were paying less in Social Security anyway, so I doubt many will miss it. The 2% we weren't paying were coming from the general fund and were probably borrowed anyway, so maybe this will help the debt a bit.

As for your student loans, ijustdiedinside, that only affects your adjusted gross income by lowering it up to $2500 dollars. Since this lowers your AGI, it lowers the total tax that you end up owing, since you end up with less income that is taxable. Depending on other factors, you may still end up with a decent refund this year.

And kerichelle, believe it or not, this was for this tax year, or tax season 2013. So everything that was passed will affect 2012 taxes and beyond.

And alden, unless you fall into AMT territory, I wouldn't worry about your return right now. In fact, you can probably go ahead and get a return started, since you really can't efile until the IRS lets you on January 22. The IRS and efile providers do need to do some software reprogramming, but most of that relates to the AMT and they will have to delay filing, since that will take a few weeks. Other than that, you should be able to file as soon as you get your W2. However, I will warn you that if you got a RAL last year, it most likely will not be available this year. Republic Bank has stopped doing them and no one else wants to touch them. So you are just going to have to wait until the IRS sends out your refund to get it.

Hopefully, with what Congress voted, linanil, your withholding will be high enough to not get hit with the underpayment penalty. As long as you are within 10% of what you owe on taxes, you should be alright. I had a couple last year, and they had to pay the underpayment penalty because their income went up $30,000 and they didn't realize it, so their withholding was way off.


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 Post subject: Re: Taxes and the Fiscal Cliff
PostPosted: Sat Jan 05, 2013 11:08 am 
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Quote:
They have made the Bush tax cuts permanent.


So this means that the super rich not only won't have to pay more taxes, they'll get to maintain their tax breaks? (Apologies if that's a dumb question. I have pretty vague OCCUPY! ideas floating around in my head.)

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 Post subject: Re: Taxes and the Fiscal Cliff
PostPosted: Sat Jan 05, 2013 11:56 am 
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I just don't get why they would make the tax cuts permanent. Obama actually has a mandate and some support behind actually taxing the rich. One of the big issues in this election was that it is forked up that billionaires pay less in taxes than their secretaries? Why would he give up leverage to close some of the loopholes, raise taxes and not gut services to the bone? Well besides that both parties are the tools of the megarich.

Seriously, I'd love to understand why, and don't have time to do research today, so any links are appreciated.

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 Post subject: Re: Taxes and the Fiscal Cliff
PostPosted: Sat Jan 05, 2013 12:02 pm 
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lutin wrote:
Quote:
They have made the Bush tax cuts permanent.


So this means that the super rich not only won't have to pay more taxes, they'll get to maintain their tax breaks? (Apologies if that's a dumb question. I have pretty vague OCCUPY! ideas floating around in my head.)


I found a site that went over the tax brackets and it affects almost every tax bracket. The lowest tax bracket was 10% under the bush cuts but without them, it was 15%.
http://www.forbes.com/sites/moneybuilde ... nal-rates/

I wouldn't have minded personally seeing my taxes go up, but I would've liked to have known prior to the tax year being over.

And overall, the loop holes are really the problem because even if the 'super rich' are in the 35% tax bracket, they are most likely paying much, much less. I know even without a fancy CPA and some pretty standard deductions, I pay under 20% for a fairly high worker bee income. Imagine someone who is rich and works the system.

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 Post subject: Re: Taxes and the Fiscal Cliff
PostPosted: Sun Jan 20, 2013 5:01 pm 
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Actually, had the Bush tax cuts not been made permanent, most of us would have potentially owed some taxes or gotten much smaller refunds. The reason would have been that all of our withholdings would have been off and the tax brackets would have gone back to what they were in 2001. And for people who would have changed tax brackets, they would have been the ones really harmed. If they usually get a fairly large refund, that refund may have been either mostly wiped out, or they would owe a small amount. I know back in the early 90s when they changed the withholding in the middle of the year, I went from a small refund, to owing a couple hunder dollars. And this was making minimum wage and working at McDonalds. By keeping the tax brackets the same, our withholding is correct. When the withholding is wrong, that is the biggest thing that can affect your return. I had a couple last year at Amscot whose income had gone up 30,000 and they did not adjust their withholding, because apparently they did not realize that their income had gone up that much. Not only did they owe a lot, they had to pay a penalty for the underwithholding. Yes, you can be penalized for that.

Oh, and some updates for you all. In case you have not heard, the initial file day is now the 30th of January, and no longer the 22nd. The IRS had to change the date so that the EIC and Child Tax Credit forms could be finalized by the initial filing day. However, their are still about 30 or so other forms that will not be final on that day, so depending on your circumstances, your return may be delayed. Also, AMT is not yet programmed into the IRS computers, so if you fall into that bracket, you may have to delay your return to the end of March, but the IRS has not sent out any advisories on this, so we are in a wait and see situation for that at the moment.


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