NASCAR, rum, electric vehicles and algae all got special treatment in the latest tax legislation, though none of the measures got an up-or-down vote from Congress.
This post is by Kay Bell at Bankrate.com.
Yeah, right. If Congress did its job properly -- hey, quit laughing! -- that might one day happen.
But as long as it puts off making hard decisions, such as how to avert the fiscal cliff until the last minute, we're going to keep getting laws that include things we didn't really expect.
The American Taxpayer Relief Act of 2012, which finally made it into law last week, is chock-full of such surprising, uh, goodies.
The complexity of the code requires people to spend too much time on their tax returns, watchdog says, even though 90% use software or a tax preparer.
This post is by Stephen Ohlemacher of The Associated Press.
The nation's tax law is so thick and complicated that businesses and individuals spend more than 6 billion hours a year complying with filing requirements. That's the equivalent of 3 million people working full-time, year-round.
As a result, about 90% of filers will either pay a tax preparer or use a computer software service to help with their federal tax returns this spring, according to a report issued by an independent government watchdog on Wednesday.
"The existing tax code makes compliance difficult, requiring taxpayers to devote excessive time to preparing and filing their returns," says the report by Nina E. Olson, the National Taxpayer Advocate. "It obscures comprehension, leaving many taxpayers unaware how their taxes are computed and what rate of tax they pay. It facilitates tax avoidance by enabling sophisticated taxpayers to reduce their tax liabilities and provides criminals with opportunities to commit tax fraud."
The agreement restores a tuition tax deduction that expired in 2011 and retains until 2017 a tax credit that was scheduled to shrink. But financial aid could still face big cuts.
This post is by AnnaMaria Andriotis of MarketWatch.com.
In addition to extending the Bush-era tax cuts for all but the highest earners, the measure expands a college-related credit and several deductions that were scheduled to be scaled back or eliminated.
The changes come at a time when more families depend on education tax benefits to alleviate some of the burden of paying for college. Families received roughly $18.2 billion in such benefits for the 2011-12 academic year, compared with $7.3 billion in 2006-07 and $5.9 billion in 2001-02, according to the College Board. In many cases, the credit and deductions are available to families with relatively high incomes -- with phase-outs starting around $130,000 for married couples filing jointly. These families typically have a tougher time qualifying for free aid, like need-based grants and scholarships.
Taxpayers who use some schedules will have to wait until mid-February or March. So far, there is no reason to expect refunds to be delayed.
The Internal Revenue Service will begin accepting tax returns on Jan. 30, 2013, though taxpayers who use some forms will not be able to file until February or March.
The agency had planned to begin accepting returns Jan. 22, but it delayed that schedule to update computers and forms to account for most of the changes Congress made in the fiscal cliff legislation passed last week.
Taxpayers will have to wait until late February or early March if they want to claim a residential energy tax credit, report property depreciation or claim a general business credit. The full list of forms that will not be available until later is available on the IRS website.
The government doesn't care how much suffering was brought about by unemployment or alimony. You still owe taxes on that and other income you may not have considered.
This post is by Kay Bell at Bankrate.com.
You've always followed the sage advice of the late singer-songwriter Jim Croce: You don't tug on Superman's cape, you don't spit into the wind, and you don't try to pull a fast one on the Internal Revenue Service.
OK, maybe that last one wasn't one of Jim's lyrics, but the sentiment -- know the consequences before you act -- still applies.
Unfortunately, that's not always easy to do when it comes to Uncle Sam's tax collectors.
Seniors who make more than $400,000 a year will see tax increases, but most others will not. Plus, threatened cuts in Social Security and Medicare did not happen -- yet.
This post is by Philip Moeller of U.S. News & World Report.
Washington's effort to avoid the fiscal cliff did not involve a grand deal that President Barack Obama had sought, but the American Taxpayer Relief Act, as it's called, certainly did involve a grand compromise. And maybe we can breathe easy for a while. But the new Congress will soon be greeted with renewed brinksmanship and squabbles as it wrestles with raising the federal debt ceiling and making spending cuts that were absent from the fiscal cliff fix.
In the meantime, older Americans have been spared any meaningful hits, unless they make more than $400,000 a year ($450,000 for couples). In that case, they will see big tax increases and also reductions in allowable tax deductions.
But, for the rest of us, the law hurriedly and reluctantly passed includes eight key features of special interest.
This week's agreement settled a number of tax issues. But Congress still has to make hard decisions about spending cuts, the debt limit and the national debt.
This post is by Connie Cass of The Associated Press.
The "fiscal cliff" compromise on taxes leaves a big part of the nation's budget crisis still dangling.
Lawmakers bought a little time with a New Year's Day agreement to hold income tax rates steady for 99% of Americans, while allowing payroll taxes to go up. But they left themselves only two months to settle seemingly irreconcilable differences over how much the United States should borrow and spend and where painful budget cuts should land.
Here's a look at what's been resolved and what's left hanging:
Make less than $400,000? New limits on deductions could raise taxes for anyone making more than $250,000, twice the number affected by the new rates for top earners.
This post is by John D. McKinnon of The Wall Street Journal.
One of the biggest tax increases in the fiscal-cliff bill is also one of the least understood: a set of limits on tax deductions and other breaks that will hit far more households than the bill's rate increases for top earners.
The bill that cleared Congress Tuesday boosts the tax rate for single filers making more than $400,000 and married couples filing jointly making more than $450,000, or roughly the top 1% of filers.
But provisions that reduce the value of personal exemptions as well as most itemized deductions, including those for mortgage interest and state income-tax payments, will affect about twice as many people since they carry a lower income threshold — $250,000 for singles and $300,000 for married couples.
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