Congress passes tax bill

Wall Street Journal– Congress passed the most far-reaching tax bill in a decade late Thursday, averting across-the-board tax increases, enacting new breaks for individuals and businesses and laying a marker for how Washington might work in an era of divided government.


Zuma PressSpeaker of the House Nancy Pelosi leaves the House Democratic Caucus meeting Thursday morning at the Capitol.

The measure includes retention of the Bush-era tax rates and breaks for all earners for two years, as well as protection through 2011 from the Alternative Minimum Tax for more than 20 million mostly middle-class households. It includes a new payroll-tax credit for virtually all workers, as well as a 13-month extension of benefits for the long-term unemployed. The wealthy won a lowered estate tax rate for the next two years of 35% on estates of more than $5 million.

Middle-income Americans fared best from the deal, due in large part to the new payroll-tax holiday, according to the nonpartisan Tax Policy Center. Those with the largest average gain in after-tax income, compared with current tax policies, earn between $35,000 and $64,000. They gain about $613, or 0.9% of their income.

Source: Wall Street Journal, December 12, 2010

When President Obama signs the bill, it will keep in place the so-called Bush tax cuts for another two years (2010 and 2011), offer a 2% reduction in FICA taxes (Social Security) for one year and offers another AMT patch.

The 2% reduction in FICA tax applies to self-employed workers also!

This bill means good news for most of my tax clients. It also means I better get signed up for a Continuing¬† Professional Education (CPE) class in January so I know the details of the bill. I’ve already taken two tax classes in October and November understanding the bills passed in 2010. Ohio CPAs who sign tax returns are required to take 24 hours of classes in taxes every year.

The IRS will be frantic trying to get forms and their programs ready. Be prepared for some delays this tax season.

Carol Topp, CPA