It's tax season, but now is the time to prepare for changes in 2013
Ravell Call, Deseret News
SALT LAKE CITY — For thousand of Utahns, getting prepared for Tax Day will be a lot like last year.
But that will likely change dramatically by this time next year.
Provisions of the so-called "Bush tax cuts" are set to expire at the end of 2012, which would mean significant changes to the amount of money paid by taxpayers and the number of deductions available to them.
The Bush tax cuts refer to tax cuts passed during the presidency of George W. Bush in 2001 and 2003 and were set to expire at the end of 2010. Congress passed a two-year extension that was part of a larger tax and economic package signed by President Barack Obama.
However, those provisions are again set to expire at the end of this year, which could increase the amount of tax on numerous types of income for millions of Americans.
"In 2013, all tax rates are going up, with especially steep increases for tax rates on dividends, qualified dividends and capital gains," said Jim Hoch, tax manager for HEB Business Solutions — a downtown Salt Lake certified public accounting firm. Under the proposed changes, stock dividends or mutual fund dividends would be taxed at ordinary income tax rates rather than the much lower current rate, he said.
"So if you are at a 28 percent rate, you'll be taxed at 28 percent instead of the 15 percent it has been since the Bush tax cuts were enacted," he said. Similarly, income from capital gains — profit from the sale of stock, bonds or real estate — would be taxed at 20 percent compared to the current 15 percent.
Another important change set to expire is the 2 percent payroll tax cut, which lowered Social Security withholding from 6.2 percent to 4.2 percent. For someone earning $50,000 a year, the payroll tax cut meant taking home about $1,000 more a year.
"Most likely, this will be slowly phased back in," said Matt Lund, senior economist for the Utah Tax Commission."
In addition, there will be a reduction in the amount some high-income taxpayers will be allowed to take on available itemized deductions. For small-business owners, there would be a major change in the amount they could deduct for some aging equipment.
"You won't be able to take as much accelerated depreciation," Hoch explained. He said those changes and others could have a significant impact on many Utahns of all income levels.
"There will be no 10 percent tax bracket, (the rates) will start at 15 percent," he said. "The cuts reduced taxes for everyone. But the biggest savings came for the high-income individuals (and families)."
Hoch recommended that taxpayers claim as much of their income as possible in 2012 and take more deductions for next year. He also suggested that small-business owners consult their tax advisers to figure the best way to handle depreciation expenses.
According to the Utah Tax Commission, in 2009, there were slightly more than 1 million full-time resident taxpayers in Utah with an average adjusted gross income of $49,861. Nationally, the Internal Revenue Service reported more than 140 million taxpayers with an average AGI of $54,459.
While some Utahns dread tax season, taxpayers such as William Smith — a college professor in Salt Lake City — have found computer programs that help them prepare their own tax returns in an efficient and organized manner.
"Turbo Tax makes it so darn easy," he said. "Sitting down and doing (your return) on the computer takes a little bit of time." Because he has become so accustomed to preparing his own returns, Smith said he looks forward to this time of year.
Regarding the impending expiration of the Bush tax cuts, he said he and his wife would meet with their financial planner to figure out what steps to take to best manage the changes and potential increase in tax burden.
Another do-it-yourself tax veteran said preparing her own taxes has never been too much to handle, except for this year.
"It has always been fairly quick and easy to get them done, and we have never owed," said Saratoga Springs resident Jenny Taylor. "For some reason the system that we went through this year — same as the one we used last year — had many unclear questions and was much longer and time-consuming."
In an effort to stay on top of the family tax situation, Taylor — who runs a home day care business — said they have already started planning for next year's possible changes.
"My husband is visiting with HR at his office … to see about withholdings and possible investments," she said.
Telephone assistance for individuals: Toll-free, 1-800-829-1040
Hours of operation: Monday–Friday, 7 a.m.–7 p.m
Telephone assistance for businesses: Toll-free, 1-800-829-4933
Hours of operation: Monday–Friday, 7 a.m.–7 p.m.
Salt Lake City
50 S. 200 East
801-799-6963, 801-297-2200 or toll free: 800-662-4335
324 25th Street
173 E. 100 North
210 N. 1950 West
Email: email@example.com, Twitter: JasenLee1
- 20 ways to make yourself more likable at work
- Google selling wireless plans to get more...
- Lehi supplement firm launches research lab
- The few, the proudly employed, the coding...
- University Place construction timeline released
- Nebraska looking at ways to lure out-of-state...
- Taylor Cotterell: Time for a job change?...
- FCC approves 'net neutrality' rules for...