Individual Tax Provisions Set to Expire
Posted 11-3-2010 | By Joan Morrow | Download Article
A number of tax provisions affecting individual taxpayers are set to expire at the end of 2010. While many believe Congress will vote to extend some of these provisions, no such vote has happened to date. Treasury officials typically release withholding tables by mid-November, and it is unlikely that Congress will make changes by that time.
Below is a list of individual provisions set to expire on December 31, 2010:
- Making Work Pay Credit - People saw decreases in the amount of federal income tax withheld from their individual paycheck when the credit was introduced as a part of the American Recovery and Reinvestment Act of 2009. Because the credit was only made available for the 2009 and 2010 tax years, the withholding tables will be adjusted back to pre-credit rates, meaning employees will see an increase in the amount of Federal income tax withheld from paychecks starting in 2011.
- Advanced Earned Income Credit - Lower income employees who took advantage of the advanced earned income credit also will see an increase in the amount of Federal income tax withheld. The ability to claim this credit prior to the filing of your tax return through lower withholding has been repealed for tax years beginning after December 31, 2010.
- Lower tax brackets - The 10% bracket would disappear. The lowest tax bracket would be 15%, and fewer joint filers and surviving spouses would qualify for this bracket. The top four tax brackets, which currently are 25%, 28%, 33% and 35%, would increase to 28%, 31%, 36% and 39.6%.
- Supplemental wage withholding - Federal income tax is currently withheld from supplemental wages, such as bonuses, commissions, or severance pay at a rate of 25% if the supplemental wages total less than $1 million in a calendar year; or at 35% if the total exceeds $1 million. These rates would rise to 28% and 39.6% respectively.
- Employer provided educational assistance - Currently, employers can reimburse up to $5,250 of an employee's educational expenses tax free if the reimbursement is made through a qualified plan. If the provision is allowed to expire, any reimbursements become taxable income subject to withholding.
Treasury officials decline to comment about how they'll handle the uncertain status of these provisions. We will keep you informed as details arise. Please contact Joan Morrow with any questions at jmorrow@hlbtr.com.