Congress Passes Bill to Avoid Fiscal Cliff

Share on LinkedIn Share on Facebook Share on Twitter Share on Google Plus Share this Page

In January of 2013, Congress passed a bill to avert the fiscal cliff, which maintains the Bush-era tax cuts for individuals earning less than $400,000 per year and couples earning less than $450,000.

The bill raises taxes for those making more than these income thresholds, increasing tax rates from 35 to 39.6 percent for individuals making more than $400,000 and couples making more than $450,000 per year. Taxes on capital gains and dividends will also increase to 20% for individuals and couples earning income above these thresholds.

The bill also contains other provisions. Among those, it extends unemployment insurance for a year; caps itemized deductions for individuals making $250,000 and for married couples making $300,000; permanently adjusts the alternative minimum tax for inflation; raises the estate tax to 40%; and renews many childcare, tuition, research and development, and business related tax credits. In addition, it delays a series of automatic cuts in federal spending for two months.

Despite this measure, Social Security tax rates will return to 6.2% for 2013, up from the temporary rate decrease (4.2%) last year.

Source: CNN, National Journal

Additional Resources

Tax Changes Affecting 2013 Payrolls – What You Need to Know (Source: ADP)
2013 Federal Tax Legislation - What to Expect  (Source: ADP)
Fiscal Cliff Tax Deal: What Does It Mean for Small Business? (Source: Forbes)
Here's What's in the Fiscal-Cliff Deal (Source: National Journal)
Congress Passes Fiscal Cliff Act (Source: Journal of Accountancy)

Supreme Court Upholds Health Care Reform Law

Share on LinkedIn Share on Facebook Share on Twitter Share on Google Plus Share this Page

On June 28th, 2012, in a 5-4 decision, the U.S. Supreme Court that the individual mandate portion of the health care reform law (the Patient Protection and Affordable Care Act), which requires that most Americans buy health insurance or pay a fine, is constitutional as a tax.

The Court agreed that while Congress could not use its power to regulate commerce between states to require individuals to buy health insurance, Congress could impose a tax penalty using its tax power for individuals who refuse to buy health insurance.

Because the mandate is constitutional, the Court did not need to determine whether other parts of the law were constitutional, according to the SCOTUS Blog.

The individual mandate was set to be implemented in 2014, however, many provisions of the health care reform law had already gone into effect in 2012. The ruling suggests that employers will still be responsible for the carrying out the provisions of the law which affect their organizations.

For more information about the Supreme Court decision, please visit the links below.

Source: SCOTUS Blog

Congress Passes Payroll Tax Cut Extension

Share on LinkedIn Share on Facebook Share on Twitter Share on Google Plus Share this Page

Congress had approved an extension of the payroll tax cuts and unemployment benefits from February 29th, 2012 to 2013. The extension was passed by both the House of Representatives and Senate, and President Obama has signed the legislation into law.

The extension of the tax cuts will reduce payroll tax by 2% to 4.2%. It will also extend federal unemployment benefits. 

Payroll Tax Cut Temporarily Extended

Share on LinkedIn Share on Facebook Share on Twitter Share on Google Plus Share this Page

In 2011, Obama signed The Temporary Payroll Tax Cut Continuation Act of 2011, which temporarily extended the payroll tax cut of 2% and the Social Security tax withholding rate reduction from 6.2% to 4.2% through February 29, 2012.

The new payroll tax rate was to be implemented by employers no later than January 31, 2012. If employers over-withheld any Social Security during January, they needed to make an offsetting adjustment to employees’ pay by no later than March 31, 2012.

Source: CNN