Current actions in Congress are affecting the income tax filings, and returns, for Americans for the 2010 tax year. While payroll tax changes will allow for increases in employee’s take-home pay, coming tax reforms may eliminate many of the tax breaks that we now enjoy.
Increased Take-Home Pay
New cuts in payroll taxes for 2011 will increase take-home pay for most workers. The IRS recently released new income-tax withholding tables and instructions to help employers implement the 2011 cut in payroll taxes.
Millions of Americans will see their take-home pay increase during 2011 because the Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010. This allows for a two percent payroll tax cut for employees by reducing their Social Security tax withholding rate from 6.2 percent to 4.2 percent of paid wages. But this Social Security withholding change will have no effect on the employee’s future Social Security benefits. The new law though, also maintains the income-tax rates that have been in effect in recent years.
Workers won’t need to take any additional action, such as filling out a new W-4 withholding form, because employers and payroll agencies will handle the withholding changes.
Ending Tax Breaks is a Good Thing
While eliminating tax breaks may sound like bad news to some, it is actually good news. The more tax breaks we eliminate, the simpler the tax code gets. This is something we can all be in favor of.
Reducing tax breaks, for everyone, means that everyone is treated more equally. Hopefully it will also result in the 40% of “taxpayers” who presently pay no tax actually having to pay some taxes for the benefits they receive. This will cause them to truly have “some skin in the game”. All these are good things.
Until next time,