Most residents will find their wallets a little bit lighter following passage of the American Taxpayer Relief Act, which averted the so-called fiscal cliff.
The final agreement reached by lawmakers earlier in January didn't extend a temporary 2 percent reduction in Social Security payroll taxes.
President Barack Obama and Congress previously reduced the portion paid by workers for Social Security to 4.2 percent from 6.2 percent for 2011 and 2012. This could save an individual or family $500 up to more than $2,000 a year, depending upon their income.
It's a change workers may immediately notice in their take-home pay.
Employers have continued to pay their 6.2 percent portion. Social Security is financed through the combined 12.4 percent tax on wages up to $113,700 a year, with employers paying half and workers paying the other half.
Wilson Certified Public Accountant Scott Bridgers said the Social Security measure was originally intended as a two-year reduction.
And that's exactly how it turned out.
"It went back to what it was," Bridgers said. "It's returning to what it was in 2010. It's not a new tax increase."
But some folks might view it that way once they see a difference in their paycheck.
Bridgers, who frequently prepares tax returns for residents, noted a few clients have called him over the change to see if they can do anything to combat it.
"There is nothing you can do to offset it," Bridgers said.
Compared to what would have happened had the country fallen off the "fiscal cliff," Bridgers believes the trade-off is clearly worth it.
"It was suppose to really go up for everyone, except for those in the 15-percent tax bracket," Bridgers said. "It was going to be dramatically different."
During final fiscal cliff negotiations, neither Obama nor Republicans reportedly made a big push to extend the 2-percent reduction.
The reduction was viewed by the government as a tax holiday, part of a stimulus package.
The George W. Bush administration sent checks to residents as a stimulus plan. Bridgers said officials found it didn't spur enough new spending.
The tax holiday was seen as an alternative.
Overall, the American Taxpayer Relief Act neutralizes middle-class tax increases and spending cuts taking effect with the new year. The legislation raises tax rates on incomes over $400,000 for individuals and $450,000 for couples.
It preserved certain Bush-era tax cuts.
The bill passed on a bipartisan 257-167 vote in the House. The Senate passed the bill by a margin of 89-8. Obama signed it on Jan. 2.
In the end, those considered the top 1 percent of wage earners ended up with the biggest burden under the deal.
email@example.com -- 265-7813
(c)2013 The Wilson Daily Times (Wilson, N.C.)
Visit The Wilson Daily Times (Wilson, N.C.) at www.wilsontimes.com
Distributed by MCT Information Services
Most Popular Stories
- Cape Cod Building Mussel Industry
- Hollywood Eager to Grasp Hispanic Market
- Frightfully Fun Films Return for Halloween
- Sears Denies Store Closings, Layoffs Report
- Microsoft Beats Income Expectations
- Would Soccer Be Richer Without Small Clubs?
- Cloud Lifts Microsoft's Quarterly Results
- Pfizer Approves $11 Billion Buyback Plan
- IS Funded by Black Market Oil Sales, Racketeering
- Weekly Jobless Claims Rise but Remain Low