How Will the Election Impact Your Taxes
As Americans stomp to the polls rather loudly today in an effort to have their voices heard, the Bush-era tax cuts are about to expire, and with a lame-duck session of Congress it’s impossible to predict what flippant actions will take place. If Republicans gain control of the House, they do not take control until January, leaving the current Representatives in the House open to President Obama’s idea of removing income tax breaks for people earning more than $200K.
The President has said that he wants to change the top two tax brackets upward, from 35% to 39.6%, and from 33% to 35%. These changes are less likely to take place if the Republicans gain control of the House, at least regarding income levels phased in at $200K, but there may be a compromise where the new tax rates will phase in at a much higher income, i.e. $500K+.
Congress will typically enact a patch that would prevent Americans from falling prey to this increase, but it also prohibits quite a few of the deductions and credits normally afforded.
The AMT will be the big address this year, because it will be immediately affected because it applies to returns filed for the tax year 2010. If AMT is not dealt with by the end of 2010, tax filings for anyone falling into this category will be put on hold, probably through the filing of extensions.
Granted, most of the expiring provisions (about 70) relate to businesses, there are a number of individual provisions that would immediately affect 2010 returns.
The IRS is currently considering issuing supplemental instructions regarding how to report items that are not reflected on the current forms. Tax preparers will be found pulling their hair out, if tax software developers fail to keep up fast enough with the last minute changes.
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