TEN TAX ISSUES WHICH COULD HAPPEN BY JAN 1, 2013

The reason that I have taken to time to list the 10 changes which could occur if certain decisions are NOT made in Washington, is because, I am willing to bet you that within the next four years, all or most of these changes will be implemented, one way or another.Here are 10 ways your money could be affected if there is no deal reached by the end of the year
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1. Your Income Tax Rates Will Go Up The expiration of the Bush-era tax cuts on Dec. 31 means nearly every American taxpayer will see their rates go up when the rates go back to their 2001 levels. President Obama’s plan to avert the cliff includes keeping the current rates for middle- and low-income earners, while allowing the rates to increase for the highest income levels from 35 to 39.6 percent. Republicans have pushed to keep the tax cuts for everyone.
2. Your 2012 Tax Bill Will Be Huge As many as 28 million Americans are about to be slammed with the alternative minimum tax because a "patch" to adjust the AMT for inflation will not go into effect unless Congress acts. For middle-class households with kids and earning around $75,000, the AMT will add $3,700 on average to the tax bill for 2012 alone.


3. Your Paycheck Will Be Smaller The first paycheck of the year is going to be smaller for up to 125 million Americans after the Social Security payroll tax holiday expires on Dec. 31, raising the rate from 4.2 to 6.2 percent.


4. Your Tax Refund Will Be Delayed The Internal Revenue Service has said that without a deal by Dec. 31, tax refunds could be delayed for as many as 100 million taxpayers as the government agency scrambles to revise tax forms to reflect the changes post-cliff.


5. Your Kids Will Cost You More Money Among the tax credits that expire on Dec. 31 are several that help lower- and middle-income families with kids, including the Child Tax Credit, Earned Income Tax Credit, Child and Dependent Care Credit, and the American Opportunity Credit. All four revert to lower levels on Jan. 1, which could cost families hundreds to thousands of dollars in lost tax credits, according to CNN Money.


6. You Cannot Collect Extended Unemployment As many 2 million unemployed Americans won’t be able to collect extended benefits after Jan. 1, when the federal government’s unemployment extension ends as part of automatic spending cuts.


7. Your Stocks Could Wobble The stock market tumbled on Thursday after Senate Majority Leader Harry Reid (D-Nev.) said it looked like the the country was going to go over the fiscal cliff. Uncertainty over taxes could create more market volatility, experts say, but there is a silver lining: The Fed has promised to keep interest rates low for the next year, and that could help stabilize the economy overall.


8. If You Use Medicare, It Will Be Harder To Find A Doctor One of the spending cuts that will be enacted on Jan. 1 is a 30 percent reduction in the rates Medicare pays doctors. According to physicians' groups, the pending change has already sent doctors fleeing some health care plans, Forbes reported.


9. Finding A New Job Will Be More Difficult Mandatory spending cuts slated to start on Jan. 1 will cut into government jobs and jobs dependent on federal contracts. One report from George Mason University estimated that the cuts could cost 2.14 million jobs, the Christian Science Monitor reported.


10. High Earners Will Pay New Taxes For Obamacare High-earning taxpayers will pay a new 3.8 percent tax hike on net investment income, including income from interest, dividends, capital gains, rental and royalty income. Much of that same income group is also subject to a new .9 percent increase in Medicare taxes. These tax hikes are part of the Affordable Care Act and go into effect on Jan. 1.

Increase Your Refund, Saver's Credit for 2012 Tax Return, Have Until April 15, 2013

Credit Helps Low- and Moderate-Income Workers Save for Retirement

WASHINGTON — Low- and moderate-income workers can take steps now to save for retirement and earn a special tax credit in 2012 and the years ahead, according to the Internal Revenue Service.
The saver’s credit helps offset part of the first $2,000 workers voluntarily contribute to IRAs and to 401(k) plans and similar workplace retirement programs. Also known as the retirement savings contributions credit, the saver’s credit is available in addition to any other tax savings that apply.

Eligible workers still have time to make qualifying retirement contributions and get the saver’s credit on their 2012 tax return. People have until April 15, 2013, to set up a new individual retirement arrangement or add money to an existing IRA and still get credit for 2012. However, elective deferrals (contributions) must be made by the end of the year to a 401(k) plan or similar workplace program, such as a 403(b) plan for employees of public schools and certain tax-exempt organizations, a governmental 457 plan for state or local government employees, and the Thrift Savings Plan for federal employees. Employees who are unable to set aside money for this year may want to schedule their 2013 contributions soon so their employer can begin withholding them in January.

The saver’s credit can be claimed by:

• Married couples filing jointly with incomes up to $57,500 in 2012 or $59,000 in 2013;
• Heads of Household with incomes up to $43,125 in 2012 or $44,250 in 2013; and
• Married individuals filing separately and singles with incomes up to $28,750 in 2012 or $29,500 in 2013.

Like other tax credits, the saver’s credit can increase a taxpayer’s refund or reduce the tax owed. Though the maximum saver’s credit is $1,000, $2,000 for married couples, the IRS cautioned that it is often much less and, due in part to the impact of other deductions and credits, may, in fact, be zero for some taxpayers.

A taxpayer’s credit amount is based on his or her filing status, adjusted gross income, tax liability and amount contributed to qualifying retirement programs. Form 8880 is used to claim the saver’s credit, and its instructions have details on figuring the credit correctly.

In tax-year 2010, the most recent year for which complete figures are available, saver’s credits totaling just over $1 billion were claimed on more than 6.1 million individual income tax returns. Saver’s credits claimed on these returns averaged $204 for joint filers, $165 for heads of household and $122 for single filers.

The saver’s credit supplements other tax benefits available to people who set money aside for retirement. For example, most workers may deduct their contributions to a traditional IRA. Though Roth IRA contributions are not deductible, qualifying withdrawals, usually after retirement, are tax-free. Normally, contributions to 401(k) and similar workplace plans are not taxed until withdrawn.
Other special rules that apply to the saver’s credit include the following:

• Eligible taxpayers must be at least 18 years of age.
• Anyone claimed as a dependent on someone else’s return cannot take the credit.
• A student cannot take the credit. A person enrolled as a full-time student during any part of 5 calendar months during the year is considered a student.

Certain retirement plan distributions reduce the contribution amount used to figure the credit. For 2012, this rule applies to distributions received after 2009 and before the due date, including extensions, of the 2012 return. Form 8880 and its instructions have details on making this computation.

Begun in 2002 as a temporary provision, the saver’s credit was made a permanent part of the tax code in legislation enacted in 2006. To help preserve the value of the credit, income limits are now adjusted annually to keep pace with inflation. More information about the credit is on IRS.gov.