Tag: Congress

Posted on by Jan Roberg

Now that Congress has Passed a Tax Plan, What Happens to Us?

The White House blanketed in snow

Photo by U.S. Embassy Jakarta, Indonesia at Flickr.com

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.

Posted on by Jan Roberg

Walking on the Edge of the Fiscal Cliff?

Happy new year

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.

Posted on by Jan Roberg

What’s the Fiscal Cliff?

Cliffs of Moher 3

Photo by mith_y on Flickr.com

I was watching my Sunday morning news program and some talking head said the term “fiscal cliff” 10 times before I quit counting and started on the crossword puzzle instead.  I really wasn’t going to write about it—I figure that plenty of more important people are talking about it and certainly plenty of better writers are explaining it.  ­­­­

 

But my son talked me into it.  Not with, “Oh Mom, it will make so much more sense if you explain it,” of course not.  He said, “Yeah, Fiscal Cliff sounds like a Highlights series.  You know, Fiscal Cliff saves all his receipts for his taxes and, Irresponsible Andy writes bad checks.”

 

While I realize that everybody knows that Fiscal Cliff is not a real cartoon character (well almost everybody anyway) I guess I should spell it out just to make sure you know what’s going on.

 

The fiscal cliff is like a one two punch to the American economy that basically involves tax hikes and government spending cuts that are going to happen if Congress and the President don’t get off their doofusses and come up with a better plan.

 

First the taxes, this is what will happen starting January 1:

  1. Bush tax cuts expire and taxes will go up for most Americans
  2. The temporary 2% payroll tax cut expires
  3. The AMT patch is not extended

These tax issues are expected to make everybody’s taxes go up from between $2,000 to $3,000 a year.

 

Next, we have the immediate reduction in government spending that hits on January.  Some of the budget cuts include, but are not limited to:

  1. a $55 billion reduction to the Pentagon’s budget
  2. a reduction of payments to physicians participating in Medicare
  3. substantial cuts to FEMA
  4. and substantial cuts to the Department of Education

The combination of tax increases and government spending cuts are expected to take $800 billion out of the U.S. economy.  That could be devastating to us.

 

So—what’s next?  You tell me and we’ll both know.  It’s not like Congress and the President didn’t know it was coming.  These issues have been in the works for quite some time.  The idea of punting until after the election seems to be standard operating procedure for our elected officials.   Now that the election is over, they don’t have a lot of time to fix this mess.

 

I don’t know what the right solution is, but I do know that this is what’s going to be the headlines for the next few weeks.

Posted on by Jan Roberg

What Happens to Me When the Government Shuts Down?

Government shut down and debt ceiling

 

Revised January 22, 2018  (We keep seeing this issue, I keep re-running the same post!)

 

What actually does happen when the government “shuts down?”  Basically, items that are deemed “essential services” will still get funded.  Social Security and veteran’s payments will still get made.  The post office will remain open.  Medicare and VA health care will still run as usual.  And of course our military will still be there to protect us.

 

So where will we experience problems?  National parks will be closed to visitors.  Close to ¼ of all federal workers will be staying home.  Federal contractors could be furloughed and that could really hurt some folks here in St. Louis.  But, there could be an exception for jobs relating to national security so we’ll have to see how that plays out.

 

And what about the IRS?  Income processing positions will remain open.  That is; if you owe money, those folks are still working.  Refunds, on the other hand, could be delayed.  The information hotline would probably be closed as far as talking to humans.  But they’ve got a lot of electronic messages available.  If you can get your answers online that’s the best way to get information right now.    That’s right, it’s tax season you need help and they send home all the help desk people.  It makes about as much sense as taking a one week vacation when you’ve got something really important to do.

 

By the way, Congress is deemed to be essential so it will remain open during the government shutdown, as will the White House.  (Forgive me, I try not to be political, but if they shut the government, I think Congress shouldn’t get paid.  Only my opinion but to me it means they are not doing their job.)

 

 

 

 

Posted on by Jan Roberg

Small Business Bill Passes!

The small business bill that’s been kicking around in Congress (for what seems like ages) has finally passed. I usually don’t get too excited about small business bills because what Congress considers to be a small business is much bigger than the business I’m in or the ones that I work with. I have what’s called a “micro business”, us micro business owners work alone or have up to three employees. I even belong to a group called “Tiny Business/Mighty Profits”, we’re all in the same boat–we own tiny businesses and hope to earn mighty profits. We’re like the silent majority of the business world, we’re out there in great numbers but we are not who Congress is catering to with their tax bills.

Congress generally considers small businesses to have 100 employees or less. There are different standards for different industries. For example my industry is tax preparation. According to the standards set forth by the U.S. Small Business Administration, to qualify as a small business, a tax preparation service’s annual receipts must be $7 million dollars or less. I’m definitely in the “or less” category.

For us micro business owners, most of the legislation allowing increased deductions for new equipment and research and development won’t be affecting us. We’re not big enough to even reach the limits that were already available.

But the small business bill does throw a bone to us little guys! Now, we can write off our health insurance as an expense against our business income. We’ve been able to take a deduction for our health insurance to offset our regular income in the past, but now our health insurance reduces our self employment tax. Last year, I paid $6,000 for my private health insurance. Self employment tax is 15.3%–that would save me $918 on my health insurance. Woo Hoo!

The best part–this new rule is retroactive for the 2010 tax season.  The worst part, is it’s only good for the 2010 tax season.  It may be a one shot wonder, but take it while you can get it.