The tax experts at Tax Help MD are setting the record straight for the many Americans who may be wondering what jumping off the Fiscal Cliff means, and how it affects their taxes in 2013. The professional tax negotiators at Tax Help MD are advising tax payers to take control of their taxes and make the necessary changes, even if they don’t know when the ‘Fiscal Cliff‘ turned into ‘Sequestration’.
Colloquially called the ‘Fiscal Cliff Deal’ H.R. 8, or the American Taxpayer Relief Act means a lot of things, but most importantly, it means changes for marginal tax rates.
According to Dean Michael, the Chief Executive Officer at Tax Help MD, “If you are affected, you may wish to adjust your tax allowances so that you won’t be penalized when tax time comes around again or so you won’t be getting too big of a refund. While you may think that a big refund sounds nice, it is actually a bad thing when you realize you are giving an interest-free loan to the government.”
According to Forbes, the IRS has released the tax tables for 2013 tax year along with a number of inflation adjustments for tax-items such as standard deductions. The marginal tax rates include some changes for certain filers and have been adjusted for inflation.
Bush-era tax policies for all families with taxable income below $450,000 and single filers with taxable income below $400,000 were kept in place, which means that if tax payers fall under these categories, their marginal tax rates will remain the same as they have been. However the tax rate will increase for filers that are earning higher than these rates.
The ‘Fiscal Cliff Deal’ included several increases in tax rates. The “payroll tax cut holiday” ended, meaning payroll taxes will revert to 6.2% after being 4.2% for the past two years. Tax on Capital gains and dividends will remain at 15% for those that fall under the $450,000/$400,000 threshold, but for those that don’t the rate is now permanently set to 20%.
One new tax was added: the Medicare Tax of 3.8% of modified adjusted gross income will also be charged on anyone earning over the $200,000/$250,000 threshold.
“This information is useful because it can help you prepare for your tax expenses now, before you find a larger-than-expected bill from the Internal Revenue Service next April,” advised Dean Michael.
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