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Lzen
08-24-2010, 12:53 PM
Got this in an email. Can someone verify or disprove these things?



Tax Info




In just six months, on January 1, 2011, the largest tax hikes in the history of America will take effect.

They will hit families and small businesses in three great waves.

OnJanuary 1, 2011, here’s what happens... (read it to the end, so you see all three waves ...the worst is saved for last)

First Wave:

Expiration of 2001 and 2003 Tax Relief
In 2001 and 2003, the GOP Congress enacted several tax cuts for investors, small business owners, and families.

These will all expire on January 1, 2011.


Personal income tax rates will rise.
The topincome tax rate will rise from 35 to 39.6 percent (this is also the rate at which two-thirds of small business profits are taxed).
Thelowest rate will rise from 10 to 15 percent.
All the rates inbetween will also rise.
Itemized deductions and personal exemptions will again phase out, which has the same mathematical effect as higher marginal tax rates.

The full list of marginal rate hikes is below:



The 10% bracket rises to an expanded 15%
The 25% bracket rises to 28%
The 28% bracket rises to 31%
The 33% bracket rises to 36%
The 35% bracket rises to 39.6%




Higher taxes on marriage and family.
The"marriage penalty" (narrower tax brackets for married couples) will return from the first dollar of income.


The child taxcredit will be cut in half from $1000 to $500 per child.


Thestandard deduction will no longer be doubled for married couples relative to the single level.


The dependent care and adoption tax creditswill be cut.


The return of the Death Tax.

This yearonly, there is no death tax. (It’s a quirk!)For those dying on or after January 1, 2011, there is a 55 percent
top death tax rate on estates over $1 million. A person leaving behind two homes, a business,a retirement account, could easily pass along a death tax bill to their loved ones. Think of the farmers who don’t make much money, but their land, which they purchased years ago with after-tax dollars, is now worth a lot of money. Their children will have to sell the farm, which may be their livelihood, just to pay the estate tax if they don’t have the cash sitting around to pay the tax. Think about your own family’s assets. Maybe your family owns real estate, or a business that doesn’t make much money, but the building and equipment are worth $1 million. Upon their death, you can inherit the $1 million business tax free, but if they own a home, stock, cash worth $500K on top of the $1 million business, then you will owe the government $275,000 cash! That’s 55% of the value of the assets over $1 million! Do you have that kind of cash sitting around waiting to pay the estate tax?



Higher tax rates on savers and investors.

The capital gains tax will rise from 15 percent this year to 20 percent in2011.

The dividends tax will rise from 15 percent this year to 39.6percent in 2011.

These rates will rise another 3.8 percent in 2013.


Second Wave:

Obamacare


There are over twenty new or higher taxes in Obamacare. Several will first go into effect on January 1, 2011. They include:



The "Medicine Cabinet Tax"

Thanks to Obamacare, Americans will no longer be able to use health savings account (HSA), flexible spending account (FSA), or health reimbursement (HRA) pre-tax dollars to purchase non-prescription, over-the-<wbr>counter medicines (except insulin).


The "Special Needs Kids Tax"

This provision of Obamacare imposes a cap on flexible spending accounts (FSAs) of $2500 (Currently, there is no federal government limit). There is one group of FSA owners for whom this new cap will be particularly cruel and onerous: parents of special needs children.

There are thousands of families with special needs children in the United States, and many of them use FSAs to pay for special needs education.

Tuition rates at one leading school that teaches special needs children in Washington , D.C. ( National Child Research Center ) can easily exceed $14,000 per year.

Under tax rules, FSA dollars cannot be used to pay for this type of special needs education.


The HSA (Health Savings Account) Withdrawal Tax Hike.

This provision of Obamacare increases the additional tax on non-medical early withdrawals from an HSA from 10 to 20 percent, disadvantaging them relative to IRAs and other tax-advantaged accounts, which remain at 10 percent.


CONTINUED.....

Lzen
08-24-2010, 12:53 PM
Third Wave:

The Alternative Minimum Tax(AMT) and Employer Tax Hikes

When Americans prepare to file their tax returns in January of 2011, they'll be in for a nasty surprise-the AMT won't be held harmless, and many tax relief provisions will have expired.

The major items include:


The AMT will ensnare over 28 million families, up from 4 million last year.

According to the left-leaning Tax Policy Center, Congress' failure to index the AMT will lead to an explosion of AMT taxpaying families-rising from 4 million last year to 28.5 million. These families will have to calculate their tax burdens twice, and pay taxes at the higher level. The AMT was created in 1969 to ensnare a handful of taxpayers.


Small business expensing will be slashed and 50% expensing will disappear.

Small businesses can normally expense (rather than slowly-deduct, or "depreciate") equipment purchases up to $250,000.

This will be cut all the way down to $25,000. Larger businesses cancurrently expense half of their purchases of equipment.

In January of 2011, all of it will have to be "depreciated."


Taxes will be raised on all types of businesses.

There are literally scores of tax hikes on business that will take place. The biggest is the loss of the "research and experimentation tax credit," but there are many, many others. Combining high marginal tax rates with the loss of this tax relief will cost jobs.


Tax Benefits for Education and Teaching Reduced.

The deduction for tuition and fees will not be available.

Tax credits for education will be limited.

Teachers will no longer be able to deduct classroom expenses.

Coverdell Education Savings Accounts will be cut.

Employer-provided educational assistance is curtailed.

The student loan interest deduction will be disallowed for hundreds of thousands of families.


Charitable Contributions from IRAs no longer allowed.

Under current law, a retired person with an IRA can contribute up to $100,000 per year directly to a charity from their IRA.

This contribution also counts toward an annual "required minimum distribution." This ability will no longer be there.



PDF Version Read more: <http://www.atr.org/six-<wbr>months-untilbr-largest-tax-<wbr>hikes-a5171 (http://www.atr.org/six-months-untilbr-largest-tax-hikes-a5171)>; http://www.atr.<wbr>org/six-months-untilbr-<wbr>largest-tax-hikes-a5171#%<wbr>23ixzz0sY8waPq1 (http://www.atr.org/six-months-untilbr-largest-tax-hikes-a5171#%23ixzz0sY8waPq1)


And worse yet?


Now, your insurance will be INCOME on your W2's!

One of the surprises we'll find come next year, is what follows - - a little "surprise" that 99% of us had no idea was included in the "new and improved" healthcare legislation . . . the dupes, er, dopes, who backed this administration will beastonished!

Starting in 2011, (next year folks), your W-2 tax form sent by your employer will be increased to show the value of whatever health insurance you are given by the company. It does not matter if that's a private concern or governmental body ofsome sort.

If you're retired? So what... your gross will go up by the amount of insurance you get.

You will be required to pay taxes on a large sum of money that you have never seen. Take your tax form you just finished and see what $15,000 or $20,000 additional gross does to your tax debt. That's what you'll pay next year.

For many, it also puts you into a new higher bracket so it's even worse.



This is how the government is going to buy insurance for the15% that don't have insurance and it's only part of the tax increases.

Not believing this??? Here is a research of the summaries.....

On page 25 of 29: TITLE IX REVENUE PROVISIONS- SUBTITLE A: REVENUE OFFSET PROVISIONS-(sec. 9001,
as modified by sec. 10901) Sec.9002 "requires employers to include in the W-2 form of each employee the aggregate cost of applicable employer sponsored group health coverage that is excludable from the employees gross income."



- Joan Pryde is the senior tax editor for the Kiplinger letters.
- Go to Kiplingers and read about 13 tax changes that could affect you. Number 3 is what is above.



MY ADDED COMMENT!



LAST but far from least – effective January 1, 2013 – sell a property – PAY A FEDERAL TAX of 3.8% on gross sales price. Doesn’t matter if you make a profit on sale – it is on GROSS not net.

Worse part of this from my perspective is as a new tax it is an “opportunity” that the government can continue to exploit. No guarantee that the 3.8% won’t be increased in later years – remember social security was never suppose to exceed 1%. And of course there is the second shoe – since the Federal government is applying this tax, why not the State government too? As a potential source of large bucks – it may be too attractive for States to resist.

FD
08-24-2010, 12:56 PM
Not sure about all of it, most of it falls under the planned sunset of the 2001 and 2003 tax cuts. Many of these provisions will almost surely be extended by congress, some wont.

healthpellets
08-24-2010, 01:03 PM
afaik, the expiration of the bush tax cuts will alter the things you listed. but i'm not gonna go verify line by line. but generally, it looks accurate.

it's possible that some will be extended for two years, in theory because the Dems think they'll be back in power in 2012, so extending it for two years isn't a horrible deal for them.

what we have to watch out for is the "progressives" that believe a marginal tax rate of 75%-90% on the highest income earners is the way to fix this country. those are the people that want to kill this country.

those who advocate for the suffocating tax rates of post WWII are those who have no dreams and desires to be in the top 1%.

bobbymitch
08-24-2010, 01:17 PM
The W-2 information is false. See - http://www.kiplinger.com/businessresource/forecast/archive/health-care-reform-tax-hikes-on-the-way.html

vailpass
08-24-2010, 01:19 PM
Whatever the details the fact is that tax and spend is nails in obama's political coffin, nails I will happily help pound.

alnorth
08-24-2010, 01:21 PM
Briefly:

based on what we're hearing from the congress, the income tax rates for the lowest couple brackets will probably stay where they are, and the estate tax exemption (hilariously called "the death tax" here) will probably be revised to about $3.5M or so.

Capital gains are definitely going to 20%, there is no appetite at all in congress to keep that at 15%. I'll research the rest later, but I can definitely say this:

That silly fairy tale at the end (basically everything after "and worse yet?") is total crapola. Wrong, False, Internet Urban Legend, etc. It has been flying around the internet for a few weeks now.

What is going on is that congress is basically nosey. They want to gather data on how much employers are spending on health insurance. For what reason? No idea, but it certainly is not going to be taxable, anyone who says it will be is either lying or ignorant. Probably going to be used for some study in a few years or whatever, but if anyone does call for taxing employer contributions to health insurance (aside from the big cadillac plans we already know about), there will be a holy war.

alnorth
08-24-2010, 01:21 PM
The W-2 information is false. See - http://www.kiplinger.com/businessresource/forecast/archive/health-care-reform-tax-hikes-on-the-way.html

damn, you beat me.

Omaha
08-24-2010, 01:47 PM
Not sure about all of it, most of it falls under the planned sunset of the 2001 and 2003 tax cuts. Many of these provisions will almost surely be extended by congress, some wont.

This

Garcia Bronco
08-24-2010, 02:08 PM
Well if people can't use FSA money to purchase OTC drugs then this effectively kills the FSA.

mnchiefsguy
08-24-2010, 02:20 PM
Not sure about all of it, most of it falls under the planned sunset of the 2001 and 2003 tax cuts. Many of these provisions will almost surely be extended by congress, some wont.

Congress might very well extend some of these, but until they do, I would count on them going away, thereby raising our taxes.

tmax63
08-24-2010, 04:22 PM
Everyone keeps saying that some of the cuts will be extended but we are a 100 days from sunset and there hasn't been any action. I wouldn't bet on anything getting extended until they actually do it. Only hope is them doing it before this midterm election to try and buy votes. That makes it more like 50 days left.

Garcia Bronco
08-24-2010, 04:33 PM
None of those cuts are getting extended. Absolutely zero. Anyone who thinks so is fooling themselves. But you don't have to take it. Tell your rep in November on in 2012 that they are fired.

Chief Henry
08-24-2010, 05:00 PM
How many times did we hear Obama say he will not raise taxes on people who make under $250,000. So we have to take him on his word, right ?

alnorth
08-24-2010, 05:06 PM
Everyone keeps saying that some of the cuts will be extended but we are a 100 days from sunset and there hasn't been any action. I wouldn't bet on anything getting extended until they actually do it. Only hope is them doing it before this midterm election to try and buy votes. That makes it more like 50 days left.

For some strange reason you think this has to be done by the end of this year. Not sure why, there is no rush on this. I wouldn't be surprised at all if the election season makes tax reform impossible before 2011, but taxes in the 2011 year are not due until April 2012. They will probably work on what they want to do for the 2011 year in the spring or summer of 2011 with the new congress.

healthpellets
08-24-2010, 05:07 PM
How many times did we hear Obama say he will not raise taxes on people who make under $250,000. So we have to take him on his word, right ?

nope. HCR mandate to purchase insurance is a tax. done deal.

alnorth
08-24-2010, 05:08 PM
None of those cuts are getting extended. Absolutely zero. Anyone who thinks so is fooling themselves,

This statement has no chance of turning out to be true. Absolutely zero. (hint: they dont have to do anything until the end of 2011 or early 2012)

healthpellets
08-24-2010, 05:26 PM
This statement has no chance of turning out to be true. Absolutely zero. (hint: they dont have to do anything until the end of 2011 or early 2012)

huh? the sunset provision takes effect Dec 31, 2010. so they would have to do something pretty soon.

maybe they'll pass an extension right after they pass a budget. ROFL

alnorth
08-24-2010, 05:38 PM
huh? the sunset provision takes effect Dec 31, 2010. so they would have to do something pretty soon.

maybe they'll pass an extension right after they pass a budget. ROFL

yes, so think about it. Your 2010 income, the income you are earning now, will be taxed based on the law right now. When you file your taxes in April next year, it will still include the Bush tax cuts.

The tax cuts theoretically expire in January 1, 2011, but that is irrelevant. The congress can, and will, change tax law many times throughout the year. Sometimes they will even change tax law into the next year, cutting it close to the filing deadline. I think that actually happened with some of those house credits or cash for clunkers or whatever. When you buy your tax software, they always tell you to connect to the internet so it can check the server to make sure there is not an update. It is checking to make sure the tax law wasn't changed.

You do not file a tax return on your 2011 income until April 2012. Congress can change the tax law as many times as they want in 2011. We'd rather they didn't because it makes tax planning hell when they change something in November or December, but they can, and they do. If nothing is done with the tax sunsets this year, I will bet you a lot of money, even giving you 10:1 odds (so I win only 1 dollar for every 10 I bet) that at least one of the Bush tax cuts will be passed again next year. (especially the 10% bracket, that will get restored)

BigChiefFan
08-24-2010, 05:53 PM
"The dividends tax will rise from 15 percent this year to 39.6 percent in 2011."

That's a heck of an increase if it isn't changed by then.

Bewbies
08-24-2010, 06:01 PM
"The dividends tax will rise from 15 percent this year to 39.6 percent in 2011."

That's a heck of an increase if it isn't changed by then.

Small businesses formed under an S corp are extra excited about this one.

alnorth
08-24-2010, 06:08 PM
"The dividends tax will rise from 15 percent this year to 39.6 percent in 2011."

That's a heck of an increase if it isn't changed by then.

Yeah, that actually surprised me, I looked it up to be sure. It is a little bit more complicated than that, it is based on income, only the top bracket gets that jump. But still, even in the lower brackets it is about 28% or 31% (from 15%). If you are in the 10% bracket (0% rate now on dividends) it is going to 15%, but how many people in that bracket get dividends?

So yeah, though maybe not 2.5 times on the whole, it basically is about double what it is now for most people.

/rant on

OK, what the hell? Why are we nailing dividends like this, this is bad public policy in my opinion. Think for a moment, what is a dividend? A corporation fundamentally has no use for profits, it does not buy nice cars or go on vacations, other than setting money aside for unexpected expenses or needing a surplus to take advantage of growth opportunities or whatever, the company is owned by the stockholders. That money (which was already taxed at the corporate rate by the way, hooray for double-taxation) is our freaking money. As an investor who tends to like value stocks, this pisses me off.

When you have a gigantically high dividend tax rate, you discourage companies from paying dividends, and you discourage investors from demanding a dividend. What the hell is the company going to do with a big pile of cash that they have no use for? (presuming there is no growth opportunity, and all other forseeable needs and contingencies are well-funded and this is above and beyond this) Sure, the stock price will naturally rise, but the investor takes the risk that the company will do something stupid with all this unneeded excess profit and lose it all (or pay their executives even more money), when they otherwise would have paid it to me.

If a company has excess money that the investors think they should get instead of setting it aside for some other purpose, we should encourage the company to pay it out. The rich have most of the dividend paying stock? So what, I'm not rich, but I have some value funds in my 401k too. Don't you, the government, want me to retire with enough money to keep paying you your precious taxes for the rest of my life?

alnorth
08-24-2010, 06:24 PM
Figured I'd add on to the dividend tax news after researching a bit. Apparently Obama wants the dividend tax rate to stay where it is for those earning under 200k, and increase only to 20% for everyone else.

Fine. You promised it, it is time to freaking deliver. You have until the end of next year, preferrably sooner so value stocks/funds don't take a dump.

alnorth
08-24-2010, 06:52 PM
Just researched that last part highlighted in blue (after "My added comment!")

That part isn't TOTAL crapola like the W2 insurance thing, but it is mostly crapola, except for the fear on what congress may do with it in the future.

The tax only applies for the portion of profit that pushes your income past $200k/year (or $250k/year for married couples) Also, if it was a primary residence, the first $250k of profit (or first $500k of profit if married) is exempt. (no exemption for vacation property or second homes) For the amount of non-exempt profit over the threshold, the 3.8% tax applies.

Examples:

single person making $100,000, sells a home he's lived in for years for $750,000. His basis was $400,000, so the profit is $350,000. He pays no tax from this rule. (profit minus exemption is 100k, plus 100k equals 200k) He will still pay a little capital gains tax.

single person making $250,000, sells a vacation condo for $300,000, at a $100,000 profit. He pays $3,800. (250k + 100k = 350k, all 100k is past the 200k single threshold, so apply 3.8% to 100k) This tax is in addition to the capital gains tax.

married couple making $200,000, sells a home they lived in for years for $1.5MM, they originally bought it for $800,000. So, $700,000 profit. They pay $5,700 on that 700 grand profit. (700k - 500k = 200k. 200k + 200k, only 150k is above 250k. 3.8% applied to 150k) Again, this is in addition to the capital gains tax.

married couple making $100,000, sells a second home for $450,000, which they bought a really long time ago for just $100,000. So, $350,000 profit. They pay $7,600 in addition to capital gains taxes. (350k + 100k = 450k, only 200k is above 250k. 3.8% applied to 200k)

So yeah, this tax will hit almost nobody. I still dont like it, because once it is on the books at all, it is yet another tempting way to gradually hit more and more people by slightly adjusting the rates and exemptions. Why else would they put it in, if it wont do much? It just wont do much now, maybe it will be more serious when they tinker with it years from now.

petegz28
08-24-2010, 07:01 PM
For some strange reason you think this has to be done by the end of this year. Not sure why, there is no rush on this. I wouldn't be surprised at all if the election season makes tax reform impossible before 2011, but taxes in the 2011 year are not due until April 2012. They will probably work on what they want to do for the 2011 year in the spring or summer of 2011 with the new congress.

But, alnorth, that is exactly the kind of BS that contributes to the economic uncertainty we are facing. When compaines and people have no clue what is going to happen with their tax implications they sit tight on their money "just in case". It's BS like this that prolongs the slow and now again drooping economy.

alnorth
08-24-2010, 07:09 PM
But, alnorth, that is exactly the kind of BS that contributes to the economic uncertainty we are facing. When compaines and people have no clue what is going to happen with their tax implications they sit tight on their money "just in case". It's BS like this that prolongs the slow and now again drooping economy.

That uncertainty is nothing new and already priced in. It would be more serious if we are still haggling and no one knows what the rates will be in October 2011.

Really, the only relevance of the expiration date is for the GOP to gasp in horror at what the evil democrats have done (by not doing anything, and allow a sunset that was agreed upon years ago), then gleam triumphantly when they "save us all" with a new tax reform in the spring of 2011.

I don't care whether or not we have a new tax bill by the end of the year, because even if we do, the new congress will STILL want to fool around with it. "uncertainty" wont go away even if something is done right now.

I'm more interested in how much power the republicans are able to wrest away this november, and what they will actually be able to do next year when we start talking turkey. This silly January 1 date means nothing.

petegz28
08-24-2010, 08:48 PM
That uncertainty is nothing new and already priced in. It would be more serious if we are still haggling and no one knows what the rates will be in October 2011.

Really, the only relevance of the expiration date is for the GOP to gasp in horror at what the evil democrats have done (by not doing anything, and allow a sunset that was agreed upon years ago), then gleam triumphantly when they "save us all" with a new tax reform in the spring of 2011.

I don't care whether or not we have a new tax bill by the end of the year, because even if we do, the new congress will STILL want to fool around with it. "uncertainty" wont go away even if something is done right now.

I'm more interested in how much power the republicans are able to wrest away this november, and what they will actually be able to do next year when we start talking turkey. This silly January 1 date means nothing.


Priced in? I am talking about Main St., not Wall St.

alnorth
08-24-2010, 10:35 PM
Priced in? I am talking about Main St., not Wall St.

most people are not political nerds like us who obsess over taxes unless it's election time. Hell, most dont even know what their taxes are until the accountant or turbotax does it in March.

Withholding wont change. People wont care about a winter and spring of arguing. They wont even notice what happened until they get their refund. (barring extreme events like "hey free money for crappy cars! We'll also give you the down payment for your new mortgage!")

notorious
08-24-2010, 10:39 PM
None of those cuts are getting extended. Absolutely zero. Anyone who thinks so is fooling themselves. But you don't have to take it. Tell your rep in November on in 2012 that they are fired.



This. It's money in the bank for the douches in office. They would rather let go of their firstborn then give back our own money.

Hog Farmer
08-24-2010, 10:43 PM
How many times did we hear Obama say he will not raise taxes on people who make under $250,000. So we have to take him on his word, right ?

According to the Quran, muslims are allowed to lie if it helps further the islamic cause.