Fiscal cliff brings changes to 2012 returns
At the start of the new year, taxpayers typically begin to gather their documents to begin the painstaking process of filing their tax returns. However, lawmakers approved a comprehensive set of tax provisions, some with long-lasting effects, that have added several changes to the 2012 tax season.
In what officials and media outlets have donned the "fiscal cliff," several Bush-era tax cuts passed in 2001 and 2003 were set to expire Jan. 1. After much discussion, Congress extended a majority of these cuts through 2017 except the Social Secuirty payroll tax "holiday," which lowered the 6.2 percent level to 4.2 percent for 2010–11. This payroll tax has already been reflected on nearly every employee's paycheck, and it means that a single indivdual with an income of $50,000 will receive about $1,000 less each year.
As a compromise measure, Congress also passed the American Taxpayer Relief Act, which the president signed into law Jan. 2. The act re-established the lower rate for middle and low income taxpayers, while allowing the higher rate for upper income citizens to expire with the new year. The act also placed caps on deductions and credits for individuals in the upper income brackets.
The income tax rates, or tax brackets, remained constant as outlined during the Bush administration, but a top tax rate of 39.6 percent was added to encompass single individuals who make more than $400,000 per year, married couples filing seperately who make more than $225,000, married couples filing jointly who make more than $450,000 per year and heads of households who make more than $425,000.
New tax laws will affect everyone filing for 2012 and those filing for 2013. Many of the tax laws are set to bring changes to the 2012 tax forms.
Barry Fowler of Fowler Tax Solutions in Cy-Fair said the IRS will need to work quickly to adjust the necessary forms and release them to tax preparation firms, various software companies and taxpayers. The IRS announced last month that it did not begin processing tax returns until late January, which could delay federal refunds by several weeks compared to previous years.
