Six Months to Go Until The Largest Tax Hikes in History

[Valin]

Americans For Tax Reform:

Ryan Ellis on
7/1/10

In just six months, the largest tax hikes in the history of America will take effect. They will hit families and small businesses in three great waves on January 1, 2011:

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 top income 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). The lowest rate will rise from 10 to 15 percent. All the rates in between 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 tax credit will be cut in half from $1000 to $500 per child. The standard deduction will no longer be doubled for married couples relative to the single level. The dependent care and adoption tax credits will be cut.

The return of the Death Tax. This year, there is no death tax. 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 and a retirement account could easily pass along a death tax bill to their loved ones.

Higher tax rates on savers and investors. The capital gains tax will rise from 15 percent this year to 20 percent in 2011. The dividends tax will rise from 15 percent this year to 39.6 percent in 2011. These rates will rise another 3.8 percent in 2013.

Second Wave: Obamacare.....(Snip)

Obama Tax Hike Exemption Card Click Here





How to use the card:

Step 1: Present the card to merchants, employers, and tax authorities.

Step 2: If challenged, pleasantly ask: “Are you calling President Obama a liar?”

[Argyle58]

For those of us who must work with this mess, the situation is maddening. Since Congress keeps telling us that they are going to address SOME of these issues, but without any specifics, we have no way to advise our clients. Add to the mix, the additional taxes added by Obamacare.

 

I had an interesting discussion with a client a few days ago about how to avoid paying the 10% Tanning Tax. The law is fraught with loopholes, but to exploit them most businesses will need to change their business model.

 

Then there is the ethical problem for tax professionals who must deal with walking the fine line between aggressive planning and outright cheating.

 

Thanks a lot, ZERO.

[Valin]

 

 

I had an interesting discussion with a client a few days ago about how to avoid paying the 10% Tanning Tax. The law is fraught with loopholes, but to exploit them most businesses will need to change their business model.

 

 

Here we see the problem with the tax code.

Has Congress ever heard of KISS...Keep It Simple Stupid?