A new tax season means new tax law and the 2011 tax season is no different.
Tax returns are to be filed by April 18th.
Tax rates have stayed the same.
Low income taxpayers still benefit from the 10% tax bracket while the High-income tax payers remain in the 35% tax bracket.
The marriage penalty is void and no longer in effect until 2013 because lawmakers felt that too many families would struggle in this economic turmoil.
For wage earners a temporary reduction in payroll tax (6.2%-4.2%) will be applied to the first $106,800.
This means that if a person earned $50,000 a credit of $1,000 is earned.
Estate tax has returned after a year absence.
Without estate tax a person could pass all lifetime-accumulated wealth to their heirs tax-free.
Under the reinstated law a 35% estate tax will be imposed.
The estate tax rate is expected to rise in 2013.
The estate tax is the most controversial tax on the books.
Often referred to as the “Death Tax,” a person’s wealth, which has already been taxed in its lifetime, will be taxed again upon transfer.
According to Curtis Dubay of the Heritage Foundation, “the death tax slows economic growth, destroys jobs, and suppresses wages because it is a tax on capital and on entrepreneurship.”
For more information on estate tax visit www.Heritage.org
The child tax credit was to drop from $1,000 to $500 per child, but it has been delayed until 2013.
Earned income tax credit (EITC) from the economic stimulus act gave a 45% increase to the EITC for families with three or more children, as well as higher income limits for those qualifying for the credit.
The EITC will expire in 20113.
Since the Obama administration allowed the Bush tax cuts to expire, College Saving Plans (529 plans) can no longer be utilized to pay for computers of broadband internet access.
Though there is some good news for college students.
The college tuition tax credit, from the stimulus act of 2009, then the American Recovery and Reinvestment Act, is renewed and will expire in 2013.
The Student Loan Interest Deduction has been extended for two more years.
These credits should give college students a bit of a breather.
In 2011, any business doing more than $600 in business with a vendor or any other contractor will be required to submit a 1099 form.
A problem with this new law, aside a massive amount of new paperwork, is that the cost of doing the paperwork will be passed to consumers.
For example, if a small business buys an $800 laptop from Costco or Walmart that business would be required to submit a 1099 form.
The cost of doing business has gone up drastically and the consumer will feel its effects.
What many feel as a ridiculous new tax is the tanning tax; a 10% excise tax simply for getting a tax.
The new Healthcare law passed in 2010 imposes a new criterion that Health Savings Accounts (HSAs) will be taxed.
A new, annual tax on pharmaceutical manufacturers will increase the cost of brand name drugs.
This means that that it will become more cost-effective than ever to purchase off-brand medication.
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