Now that Congress has finally passed the tax legislation, I have to quit complaining about their not doing it. Although I’m not completely happy with the bill (who is on either side?) at least we’ve got something to work with, and that’s better than nothing.
So what does it mean for you and me? The first thing that’s going to happen is the 2 percent increase in the payroll tax. You should expect to see that with your next paycheck. Here’s how it will work:
Let’s say you make $400 a week. The quick and dirty answer is that your take home pay will be 2% less than what it used to be. That would be $8. It won’t kill you, but over the course of a year it’s $416.
Now if you make $2000 a week, you’re losing $40 a week or $2,080 over the year.
So, how’ve you been doing? Are you completely strapped for cash or have you been making ends meet okay? How are you going to deal with that 2%? Thinking it through is going to be your best help.
Now for people with incomes over $200,000—you can expect to see an increase in your Medicare withholding—but don’t expect to see that until you reach that $200,000 threshold. You know how later in the year your social security tax goes down because you’ve crossed the line? I expect your Medicare increase will be handled the same way. You’ll be dealing with the same 2% payroll tax increase that everybody else is—but you won’t see the Medicare tax hit you until you’ve actually hit the $200,000 mark.
If your income is over $400,000 a year, then you will definitely see a difference in your withholding right away. Remember, the tax rate goes to 39.6% for single persons making over $400,000 a year and married persons making over $450,000 a year. That’s a 3.9% increase. But remember, that’s a 3.9% increase on amounts over the $400,000 mark only.
Although you should see a difference right away, remember that your employer has until February 15th to make the adjustment so keep an eye on your paycheck to make sure it’s correct.
There were lots of tax issues that Congress dealt with all at the last minute. The best summary I’ve seen of them is from a place called “The Tax Book”. That’s a reference guide that I buy every year to use when working on tax returns. They posted on their website a good summary—in plain English—of what Congress passed. Here’s a link to their summary: http://www.thetaxbook.com/updates/TheTaxBook/Updates/2013-01-02_Fiscal_Cliff_News.pdf
So how are you going to deal with your 2% payroll tax increase? Is it hurting? Will you manage? What will you do that’s different from what you did last year? Leave a comment. We would love to hear from you.
Happy New Year! Do we know where we’re going? Does our government?
Turn on the news and all you hear is the blame game—it’s the other guy’s fault. I was listening to the news and the politicians were “posturing”. They weren’t solving a problem—just posturing how they’ll explain their votes. No matter what happens, there will be losers. I’m not sure if there will be any winners. It seems that no matter what happens we’ll all be losers.
That said, real people like you and me still have to get up in the morning and go to work. We still have to pay our rent and mortgage. We still have to feed the kids. Life goes on.
Unlike the Mayan end of the world clock, remember we’re all supposed to be dead now right? The “fiscal cliff” isn’t going to be the end of the world. It will be a pain in the behind. That’s for certain. But life will go on.
So, starting this month, pretty much no matter what Congress decides, your paycheck will be lower. Your take home pay will be lower because the “payroll tax holiday” is now gone. That was that 2% reduction in payroll taxes that we’ve had for the last two years. If Congress doesn’t pass anything, our withholding will be higher too. We’ll be going back to the tax rates from the year 2000.
Here’s an example: let’s say you make $600 a week and claim no exemptions. In 2012, your federal withholding would be $75.45. Starting in 2013, your federal withholding will be $90.67. Plus, there will be an extra $12 taken out for your payroll tax—that means your weekly take home pay will be about $27 less a week than it was before. That’s going to take some getting used to.
Of course, everybody will have a different situation, that’s just one example. The point is, you’re still going to work, and you’ve still got bills to pay. Those of us in the middle class, the ones who make the world go ‘round, we’ll still be grinding away. Like I said, the world won’t end with the fiscal cliff. But it’s not going to be very pleasant.
I opened up my newspaper on Thursday morning and there it was on the front page, “New Tax Collector Hasn’t Paid Hers.” Once again, someone in charge of making us pay our taxes doesn’t see to paying her own. See link: http://www.stltoday.com/news/local/metro/st-louis-county-tax-collector-owes-personal-property-taxes/article_08e2dd2a-f9e2-59f4-b1e9-a7d99fe01ed6.html.
It’s not that difficult to check if someone has paid their property taxes in St. Louis County. You can check on real estate taxes here: http://revenue.stlouisco.com/ias/ and you can check on personal property taxes here: http://revenue.stlouisco.com/Collection/ppInfo/. Would it really be that difficult for the county officials who do the hiring to check these things? It’s really not rocket science. (And yes, you can go to that website and check which of your neighbors has or has not paid their taxes as well.)
But it’s not just here in St. Louis County, it’s all over. The example that still makes me angry after four years is Secretary of the Treasury, Tim Geithner. If you recall, he was appointed to his cabinet position despite the fact that he had “erroneously” failed to pay his Social Security and Medicare taxes on income he earned in 2001 and 2002. http://articles.businessinsider.com/2009-01-13/wall_street/30038796_1_imf-medicare-taxes-tax-audit
Now, I can actually understand that mistake, but he was audited for that same issue on his 2003 and 2004 tax returns, so it’s not like he didn’t know that he had done wrong here. Granted, he did pay the tax after Obama’s team vetted him for the position, but being realistic, I’m pretty sure those taxes would never have been paid had he not been trying for the Secretary of the Treasury job. If you want to be the Secretary of the Treasury—you should have paid all of your taxes before the president’s team asks you to.
It looks like Mr. Geithner will be leaving us soon and the Obama administration will need to appoint a new Secretary of the Treasury. Is it really asking too much to want someone at Treasury who obeys the same rules that the rest of us are required to obey? I don’t think so.
I’d like to see some type of rule that says a person running for public office needs to be in compliance with all their federal, state, and local tax laws before they’re even allowed to run for office. I’d have a lot more confidence in our elected and appointed officials handling our taxes if I knew they took care of their own first.
This is from the American Institute of Certified Tax Coaches. They had a link on their site allowing me to copy and paste; this is not original work by me. But I thought it was informative and for me, if you put things into cartoons, I understand it better. If you’d like to learn more about their organization, here’s a link to their website: http://www.certifiedtaxcoach.org/
Tax Proposals Infographic by: Certified Tax Coach
I recently watched President Obama’s LinkedIn townhall meeting on Facebook. Talk about a double dose of social networking media!
I haven’t really blogged about the tax proposals because quite frankly, I prefer to wait until something is actually the law before I post about it. But I found the comments that people were making about the economy and their concerns were pretty relevant and important. If you’d like to read the comprehensive fact sheet, here’s a link to that right here: http://www.whitehouse.gov/the-press-office/2011/09/08/fact-sheet-and-overview
This certainly isn’t every Facebook post from the meeting, I couldn’t keep up with all of them and I did omit items that were off topic. But I found that these posts reflected issues that are certainly facing people today. And I felt they were worth sharing.
• Charles B
I agree that best way to keep Social Security is raise the salary cap. I would recommend a tax rebate, and reinstating the consumer loan interest tax deduction. This would be more effective than deducting the amount going into Social Security using the payroll tax cut.
• Morrie E
How about coming up with an export program that supports already successful small to medium US manufacturers ship their products to the international markets? This takes companies that are already having success and expands their market so they will have to hire more people to meet the increased demand.
• Daisy H
When we have 14 – 26 million Americans unemployed and only 3.5 million jobs available; as Jeff of LinkedIn previous stated, it is obvious, that we need to put lots and lots of resources into helping Americans to create small businesses and hire each other.
• Wendy D
Mr. President: I have been looking for a permanent job fo 15 months. I have found that employers are reluctant to hire the long term unemployed. Can an incentive be given to employers for hiring someone who has been searching for a long time as opposed to hiring someone who alreayd has a job? Thank you.
• Morrie E
Why can’t growing small businesses like mine access the SBA for small working capital loans. Without a good FICO score, the banks will not underwrite the loan. Of course, many small businesses are just recovering from 2008 and now the business owners personal FICO score is now being used instead of the D&B for just the business even if your business is a C corp.
• W Reynolds W
It is a known fact that employers discriminate the unemployed. Even if legislation is passed trying to ban discrimination, the legislation won’t be worth the paper it is written just as it has been ineffective to control discrimination based on race. We need a universal employment policy that is based on economic reality.
• Norman Wade P
When the times are tough, you take care of home first. America is our home, take care of schools, manufacturing, construction, medical invsestment, transportation, environment.
• W Reynolds W
The President has been pushing infrastructure repair as part of his American Jobs Act bill. He would be wise to focus on repairing employment legislative infrastructure to stimulate true jobs growth.
• Shashank M
The guy who has obviously made tons of money in Silicon Valley business stands up and wants his taxes to be raised. Fine – do that. Why wrap the rest of us in it. Not all of us have minted money so we can afford to be “unemployed out of choice”! And no – you did not invest in my education. I paid every dollar out of my earnings.
• Susan S
What is the point of all this discussion when we all know the rep are never going to allow your reforms. I have been out of work for 2 yrs due to medical issues and am still waiting for a hearing with SSD I will lose my home before I even get to Hearing after owning my home for 25+ yrs. whats fair about that after paying into SS all these years They are dragging their heels long enough to lose it after all these years
• Vickie T
Mr. President, I have been laid off for almost two years. Working in the IT world. I need the immediate training and now!!! Not next week! Now!
• Ben K
In the current economy, a lot of people, myself included are working as contract workers, and not employees and receive limited or in some cases no benefits, and are part of what has come to be called the Permanent Temporary Workforce and have been for a year or longer, as I have been. What is your plan to help companies hire contractors and other temporary workers as employees?
• Wendy D
Retraining will work for most. But there are many like me, 60 yrs +, who don’t have time to retrain. We need jobs now, in our areas of expertise, or we are domed to living in poverty as we age.
Mr. President , take the debt off the backs of the American not the big corporations and banks, have a good day!
•Joseph G Jr.
I don’t have problems finding work even though for the past 10 years it has come in the form of contract work but finding a permanent job or starting my own business is my motive though I can’t seem to make enough money to make my business grow and getting a small business loan is out of the question in this economy. I’m a contractor in the Information Technology field who badly wants to start my own business and I’m full of ideals and have a deep passion for technology and a desire to lead and help others, how can I get the funds I need to grow, hire employees and compete in today IT industry without going into financial ruins getting business loans?
Education is important but at this point and time it is secondary until we manage to keep jobs in the US. Also we can’t all be in management. We need the blue collar worker too.
Back to me again. Here’s a link to the White House Press Release about the event. http://www.whitehouse.gov/blog/2011/09/26/president-obamas-town-hall-linkedin-we-are-thing-together?utm_source=092711&utm_medium=blog&utm_campaign=daily It has the video and the written transcript if you’re interested. Thanks for reading.