HAPPY NEW YEAR!

{I hear that the Senate has passed a bill.  But it ain't over till it's over.  And I do not hear the fat lady warming up yet.  The House still has to accept, reject, or revise the bill}

Well we have done it – American has fallen over the “fiscal cliff”.

Actually that is not quite true.  As Rex Nutting explained in his commentary “Stop Calling It A Fiscal Cliff” at MARKETWATCH.COM -

“The fiscal cliff is a misleading metaphor. The laws will change on that day, it’s true, but the impact will be spread out over many, many months. In fact, the effects are already being felt, particularly in financial markets. Businesses, investors, workers and consumers have begun to prepare for the changes, and that’s caused the economy to slow a bit already.

It’s not a Niagara Falls, with billions of gallons going over a cliff. It’s more like a bathtub slowly filling up. And, on Jan. 1, it’s going to spill over the edge. Eventually, it will flood the house, but that’ll take time.

It’s not an explosion; it’s water torture.”

What has happened, from a tax point of view, is this – the idiots in Washington have done nothing to extend the tax law that expired on December 31, 2011, and December 31, 2012.

So what is new for taxes for 2013?

(1)  The contribution limits for tax-deferred pension accounts are -

·      IRA = $5,000

·      IRA Catch-Up Contributions at age 50 and older = $1,000

·      SIMPLE Plan = $12,000

·      SIMPLE Catch-Up Contributions at age 50 and older = $2,500

·      401(k), 403(b), Profit Sharing Plans = $17,500

·      Catch-Up Contributions for these plans at age 50 and older= $5,500

(2)  The Standard Mileage Allowance rates are –

 • 56.5 cents per mile for business 

 • 24 cents per mile for medical or moving

 • 14 cents per mile in in service of charitable organizations  

(3)  The following provisions of Obamacare take affect –

·      The employee’s share of the Medicare tax increases by 0.9% - to 2.35% - for taxable wages over $200,000 for single filers, $250,000 for joint filers, and $125,000 for married couples filing separately. The self-employment tax is similarly increased on these levels of income.

·      A new 3.8% “surtax” on “net investment income” is added on the Form 1040 for taxpayers with “modified” AGI (MAGI) over $200,000 for singles, $250,000 for joint filers, and $125,000 for married couples filing separately. 

·      If you are under age 65 you will only receive a tax benefit for your itemized medical expenses if the total of your allowable expenses exceeds 10% of your Adjusted Gross Income (AGI). 

·      Employee contributions to an employer-provided medical expense FSA are limited to $2,500 per year.

What else?  To be honest – God only knows, and he ain’t talking!

If the idiots in Washington continue to do nothing we will be taxed like its 1999, or actually 2000.  The so-called “Bush” tax cuts and the various BO tax benefits expired on December 31, 2012.  Therefore, as of January 1, 2013, the Tax Code pretty much goes back to the way it was on December 31, 2000, unless there is some kind of tax extension or tax reform legislation passed.

Actually, at this point we really do not know how we are being taxed for 2012 either.  The popular “extenders”, including the AMT patch, expired on December 31, 2011.

So, based on the Tax Code as of this writing, American taxpayers will need to dig deep in their pockets to pay their 2012 and 2013 federal income tax bills!

My only hope is that the idiots in Washington at least act on the dreaded AMT and the other “extenders” before the end of January so I can begin the “season” knowing how to properly prepare 2012 tax returns.

Regardless of your political “persuasion” – the Republicans, the Democrats, and BO are all equally guilty of acting like idiots during this nonsense.   

TTFN