President Obama on January 2 signed the American Taxpayer Relief Act of 2012. The new law makes permanent Bush-era tax rates for individuals and couples with annual income of $400,000 and $450,000, respectively. The law also permanently indexes the alternative minimum tax for inflation, extends unemployment insurance benefits for one year and extends numerous business benefits. The law does not continue the 2012 reduction in employment tax rates from 6.2 percent to 4.2 percent.
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- Ready For a Take-Home Pay Cut?
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For two years, employees have enjoyed a 2% reduction in the FICA payroll tax. That will all come to an abrupt end beginning with their first payroll check in 2013 when the FICA rate returns to 6.2% (up from 4.2% in 2011 and 2012). Self-employed individuals will have a corresponding increase in their SE tax.
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- Are We Headed for a Fiscal Cliff?
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For several years now, Congress has left the taxpaying public hanging to the last minute with tax changes and extensions. And each year, the political gridlock seems to get worse, leaving taxpayers pondering how to plan their finances and businesses undecided about capital investments and hiring new employees, not knowing what the tax laws will bring in the next year.
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- Year-End Tax Planning Moves for Individuals
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Uncertainty dominates year-end tax planning this year. Unless Congress acts, the Bush-era tax cuts will expire and bring higher tax rates and the loss of many deductions and credits starting in 2013. More individuals will be snared by the alternative minimum tax, which has not been patched for 2012 as it has for many years in the past.
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- Year End Tax Planning Moves for Businesses
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As the end of the year approaches, many are looking for ways to reduce their business profits before year’s end. Here are some possible moves that might apply to your situation.
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- Education Credit Going Away in 2013?
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Unless Congress extends it, the American Opportunity Tax Credit (AOTC) expires at the end of 2012, leaving only the Hope and Lifetime Learning credit for 2013 and subsequent years.
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