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New Year Tax Cut Updates

  Sanjiv Gupta CPA  Published 
New Year Tax Cut Updates

It is now common knowledge that the New Year will signal an increase in taxes. This is not very good news, especially at the start of a new year. However, with the expiration of the term of most of the tax breaks that had been legislated, there is not much choice for the common folk. The chances of another extension being provided are all the same minimal, especially considering that the estimated loss of these breaks is about $192 billion. The effects of such a loss are expected to be felt way into the year 2017.  The resultant net effect of these changes in the tax threshold is meant to cover at least 90% of the citizenry. These changes are expected to cut through the social fabric, from the very rich people to the very poor people. Even then, this does not mean that the population in general and the government are ready for the result of such tax changes. While the government may be happy that more and more people will be covered with the tax threshold, the result may not be smooth sailing for everyone who is affected. As such, the total effect is an increase of about $2000 in the tax bill of individuals.

Now that the elections are complete, it is expected that the congress will finally get down to business and deliberate on the tax bills. The problem with this kind of deliberations is that the congress will be forced to balance delicately between the spending cuts that they seek and the tax increases that they want to effect. As such, while the legislators will be busy trying to reverse or change the scheduled tax increases, various accounting professionals are expecting to get busy with the process of re-arranging the tax benefits of their clients so as to minimize the effect of tax on the bottom line. It is therefore expected that a lot of lobbying will happen before a blueprint for tax in the New Year is let out to the public. On the other hand, the public can only hope that the result of this intense lobbying is a relief nonetheless.

It is the expectation of many people that some particular types of taxes are bound to make a come back in the process. Some of these include payroll tax, which was cut at the time to help inspire growth. This kind of tax is set to affect virtually everyone who falls within the tax bracket. The president has been on record as pushing for some of the tax cuts as well as some of the scheduled tax increases. With a government in debt even more than it was before, his reasoning cannot be faulted one bit. At the end of the expiry period, the average rise in taxes that individuals and businesses pay is bound to affect the bottom line of most institutions. Businesses, individuals and the government have to work together so as to fend off any negative impact that such a situation may bring.