Staying Prepared to Counter Tax Hikes by mytaxfiler


More Info
									                            Staying Prepared to Counter Tax Hikes

By organizing finances in a way that takes advantage of the many rules to maximize the amount of
income, it is possible to be prepared to successfully handle any tax hike. Considering the fact that there
is a lot of uncertainty regarding the tax codes, it is most likely that before the end of the year, federal
tax increases will go into effect the following year, increasing levies on income, capital gains, dividends,
wages, gifts, estates, and more.

With a number of tax breaks expiring and new taxes taking effect, most of the lower tax rates are set to
expire at the end of 2012. Here are some of the key tax policy issues to look out for:

    ● The tax cuts enacted by Congress in 2001 and 2003 provided a broad range of tax relief,
        including lower tax rates on income, long-term capital gains, and qualified dividends. With cuts
        are set to expire on December 31, 2012, any action will lcome down to the wire as it did in 2010.

    ●   Income tax rates need consideration. Without action, the 25%, 28%, 33%, and 35% tax rates will
        increase, and the 10% tax bracket will ne eliminated.

    ● The tax rates on long-term capital gains and qualified dividends, which are currently 15% (0%
        for taxpayers in the lowest two income brackets) are also set to change. Without action, the
        long-term capital gains rate would revert to 20% for most taxpayers and to 10% for those in the
        15% income tax bracket in 2013. Qualified dividends, would go back to being taxed as ordinary
        income, so for some investors, the top tax rate could rise to 39.6%

    ●   Although estate and gift taxes were part of the 2001 tax cuts, for 2012, beneficiaries need to pay
        estate tax on amounts over $5.12 million at a top rate of 35%. The exemption is scheduled to
        revert to $1 million in 2013, and the top rate will increase to 55%.

    ● The limitation on certain itemized deductions and the phaseout of personal exemptions also
        need to be addressed. These provisions have the effect of further increasing the tax rate of
        people in higher income tax brackets. While PEP and Pease are currently suspended, they are
        most likely to come back in 2013.
Many of these tax provisions including others are certain to be in play at the end of the year
approaches. Taxpayers with the assistance of their tax advisors, should undertake a careful review of
their personal tax situation to take advantage of any year-end tax planning opportunities for 2012.
Maximize your tax-advantaged savings, seek the guidance of a financial professional with experience in
income and investment planning strategies for minimizing personal income taxes.

Read More About: IRS Amnesty, Foreign Bank Account, FBAR, Overseas voluntary disclosure

To top