Earlier in January, everyone was making a big to-do about the fiscal-cliff bill that would only raise taxes on those making above $400,000 per year. Congress actually patted itself on the back because they thought they saved the middle class from a nightmare.
One thing most people and congress ignored was the Payroll Tax. The Payroll Tax Cut has expired. During the first few weeks of January, many people have noticed less money in their checks. In fact, some people are seeing an average of $80.00 to $100.00 which amounts to $1,000 a year. Let’s take a look at what happened.
While Congress extended and made the tax rates permanent for those making less than $400-450,000 they failed to extend the temporary payroll tax cut. Because the payroll tax cut wasn’t extended again most of us will be paying 2% more in taxes this year.
Payroll tax cut of 2010 that was extended
- 2010 President Obama signed the Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act into law way back at the end of 2010 in which
- the law implemented a 2 year extension of the Bush era tax rates, extended expiring unemployment benefits, reinstated the estate tax and extended the $1000 child tax credit.
- Making Work Pay tax credit, was also passed as part of one of the stimulus bills, was expiring.
- This was part, of one of the stimulus bills, that was expiring. It was a refundable tax credit of $400 for individuals and $800 for couples. The president wanted to replace it to offset the impact of losing the extra $800 that most families were getting, and so the idea for the temporary payroll tax cut was born.
To replace the Making Work Pay tax credit Obama and Congress passed the temporary payroll tax cut of 2% in 2010, to be effective for the 2011 tax year. It was then extended for the 2012 tax year as well when the politicians decided that it might not be wise to let it expire in an election year.
The payroll taxcut is the FICA portion of your paycheck’s withheld taxes was cut by 2%. That part of your taxes, which is typically 6.2% of your income and funds Social Security and Medicare, was dropped to 4.2% for the 2011 and 2012 tax years. It is a tax cut that meant around $1000 annual tax savings. The Social Security tax is capped at 106,800, the maximun savings that could have een seen by a higher income individual was around $2136
The New Fiscal Cliff Does not Have the payroll tax cut extension.
The press didn’t want you to know this part and they only decided to talk about the fact about how they saved the middle class from large tax hikes. http://my.blogtalkradio.com/host/segments.aspx
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