Taxpayers are waiting on pins and needles for the important decisions regarding income tax cuts or increases to be made by Congress. Will Bush’s tax cuts be extended or should taxpayers expect a surprise come tax time? Congress reconvenes on November 15th and hopefully we can get some answers quickly. Every year we wait for a patch to be issued that will apply inflation rates to the tax laws regarding Alternative Minimum Tax (AMT).
…Congress hasn’t addressed the 2010 Alternative Minimum Tax. If lawmakers don’t act, 32 million taxpayers will owe AMT this year versus 5 million last year, with many subject to underpayment penalties as well.
It seems that there is more possibility of change occurring in the tax system then in previous years and this leaves the taxpayers of America uneasy when it comes to the tax planning process.
Additional tax issues that loom pending Congressional action are that of tax rate increases in general and tax increases on capital gains and dividend income.
The Bush tax rates enacted in 2001 and 2003 expire at the end of this year, raising taxes across the board, but especially for millions of low and moderate-income taxpayers… If the Bush cuts aren’t extended, the top rate on long-term gains will rise to 20% from 15% and dividends will revert to being taxed as ordinary income, with a top rate of 39.6%.
There is no way to determine the outcome this year so the best advice that can be given at this time is to keep your tax withholdings in line with the percentages you paid last year and hope for the best.
Source: Wall Street Journal