Monday, December 24, 2012

Keeping up with the Ohlemacher

There are good ways to use numbers to explain things. Tables*, charts and online calculators** are all well known. Changes in tax law need them.

Then there's the AP way : Throw a bunch of numbers in at random points in a narrative to make it confusing, like Stephen Ohlemacher did this weekend.

The basic story is fairly interesting : Since the IRS has been told repeatedly : Don't worry, things will change, they haven't sent out new withholding tables.

Social Security payroll taxes are set to increase on Jan. 1, so workers should immediately feel the squeeze of a 2 percent cut in their take-home pay. But as talks drag on over how to address other year-end tax increases, the Internal Revenue Service has delayed releasing income tax withholding tables for 2013.
As a result, employers are planning to withhold income taxes at the 2012 rates, at least for the first one or two paychecks of the year, said Michael O'Toole of the American Payroll Association.

Clear enough, yes? A side point that this means the Fiscal Cliff is an even gentler slope than you probably realized, and this would be a useful squib. Alas, however, it's a Big Story, which means 17 more paragraphs of increasing pointlessness.

The tax increases could be steep. If Congress fails to act, workers at every income level face significant tax increases next year as part of the year-end "fiscal cliff."
A taxpayer making between $50,000 and $75,000 would get an average tax increase of $2,400, according to the Tax Policy Center, a Washington research group. If the worker is paid every two weeks, that's about $92 a paycheck, on average.
Someone making between $75,000 and $100,000 would get a tax increase averaging nearly $3,700. If the worker is paid every two weeks, that's about $142 a paycheck.

Feeling stupider? It's working.

There's one fun bit along the way:

In addition, dozens of other tax breaks for businesses and individuals that are routinely renewed each year already expired at the end of 2011. Congress was expected to renew many of them by January, so taxpayers could still claim them on their 2012 tax returns.

Read it over a couple times, and it just gets crazier. This one we can't blame on Ohlemacher : He's clearly stated the actual situation. The year is likely to end, and tax law will be retroactively changed. The biggest provision is the annual AMT patch. Since it isn't indexed to inflation, there is $92,000,000,000 at stake for 2012.

*Forbes laid out the tables nicely last month
Scenario 1: Tax cuts under the extension of the Bush-era tax cuts for all
RateSingle FilersMarried Joint FilersHead of Household Filers
10%$0 to $8,950$0 to $17,900$0 to $12,750
15%$8,950 to $36,250$17,900 to $72,500$12,750 to $48,600
25%$36,250 to $87,850$72,500 to $146,400$48,600 to $125,450
28%$87,850 to $183,250$146,400 to $223,050$125,450 to $203,150
33%$183,250 to $398,350$223,050 to $398,350$203,150 to $398,350
35%$398,350 and up$398,350 and up$398,350 and up
Scenario 2: Tax brackets under the expiration of the Bush-era tax cuts for all
RateSingle FilersMarried Joint FilersHead of Household Filers
15%$0 to $36,250$0 to $60,550$0 to $48,600
28%$36,250 to $87,850$60,550 to $146,400$48,600 to $125,450
31%$87,850 to $183,250$146,400 to $223,050$125,450 to $203,150
36%$183,250 to $398,350$223,050 to $398,350$203,150 to $398,350
39.60%$398,350and up
Which means a tax increase basically of $450+ 3% of your excess over the top of the 15% bracket, a bit more if you make over $200,000 taxable. There are also various credits, the AMT, the possible reversion of dividends to ordinary, the increase o fhte capital gain rate to 20%. the expansion of the Medicare tax.... Well, there's a lot of details.

**Bankrate has a simple calculator

Merry Christmas.

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