CPA Explains Tax Changes Following New Legislation
Some people will see changes in their taxes now that Congress has passed legislation to avoid the fiscal cliff.
David McDaniel, a certified public accountant in Indianapolis, says the first thing we'll see is an increase in FICA tax. He says the 4.2% tax employees saw in 2011 and 2012 has expired and has returned to 6.2%. He says that tax will affect everyone who earns a paycheck.
Some other changes will affect people depending on their income level. McDaniel says beginning at about a $300,000 income for joint tax returns, people will see a loss of itemized deductions and personal exemptions which will be an increase in tax. He says those in the top tax bracket will go from 35% to 39.6%. He says that starts at taxable incomes of $450,000 for joint returns and $400,000 for single returns.
McDaniel says some new taxes were created including a new Medicare tax for those making $250,000 per year on a joint return and $200,000 on a single return. He says there is also a new investment tax of 3.8% percent on interest, dividends and capital gains for those making $250,000 in joint income.
McDaniel says because of the last-minute changes made by Congress, the IRS will have to take extra time to update their software to accommodate the changes.