Does anyone know what changed in our taxes for 2011? Despite the bill passed in the lame duck congress, my federal income tax went up $14 per pay check (paid 24 times per year). I do see the payroll tax cut that obama mentioned (dropping from 6.2% to 4.2%) but why did income tax go up? someone mentioned tax tables, but i'm not sure if that's the same as tax brackets, or even if they changed. it was my impression that federal income tax would stay the same, yet mine has gone up about $350 for the year.
Tax tables show how much tax you owe based on income and marital status. Tax brackets are the income levels at which tax rates change. Thus the tables are calculated from the brackets. As for why you owe more tax than last year, I am not a tax lawyer so I don't know. However, tax laws are so complicated that nobody but a tax lawyer can even hope to figure them out, and most tax lawyers can't even do that. If your taxes are complicated, two different accountants are likely to come up with two different figures for what you owe. I'll go further: Since most laws are written by lobbyists anyway, and tax bills are likely to be hundreds, if not thousands of pages thick, no legislator ever actually reads them before voting on them. Please note that this is not a partisan issue: Both parties operate the same way. The government needs money to operate, and whichever party is in power, the same lobbyists are writing the laws. The short answer is your taxes went up because the government needs more money. And the only ways to get that money are taxes or borrowing. But as for what specific changes in the tax law raised your taxes (assuming your income remained the same) probably even your legislators don't know the answer. A really good tax accountant might.
The Making Work Pay tax credit expired. From the IRS site : How will the Making Work Pay tax credit affect you? Most wage earners will benefit from larger paychecks in 2009 and 2010 as a result of the changes made to the federal income tax withholding tables to implement the Making Work Pay tax credit. However, some people may find that the changes built into the withholding tables result in less tax being withheld than they prefer. More here: The Making Work Pay Tax Credit So, in your situation, the making work pay reduction in your withholding was larger than the SS decrease this year, so you are getting more withheld this year. The big print givith and the small print taketh away!
You income tax withholding went up. Don't confuse this with your actual 2011 taxes. I haven't had time to check -- are the correct 2011 withholding tables even available yet? Did you employer get them in time for this pay cycle? Congress changed the law so late that the IRS is scrambling to get the right information out. For example, the correct Schedule A this year's filing season won't be available until the end of the month.
thank you all for your response. i think Mark's explanation is what fits my situation best. fuzzy - yes my first check this month was already reflecting the new law. mark - actually, my check is more overall. the payroll deduction was about 43 per pay, and the income tax increase was 14, so i'm 29 bucks ahead. i just wondered why the federal went up.
After some thought, I have another question. Why not just keep the making work pay credit in place instead of cutting into the amount of money coming into social security? To me, it doesn't make sense to take money out of a fund that's already in trouble.
Because draining the fund and stealing the money has been the plan by a certain political party for a long time, that is a lot of money that corporate and Wall Street people want their hands on.
Nothing about the tax law makes sense. Very little of the law in general makes any sense. When legislators vote on tax or budget laws, they have no idea what the bill they are voting on actually says, because they are so thick nobody could actually read them all. They are cobbled together by lobbyists, riders and amendments stuck in, and then big teams of lawyers try to figure out what they actually mean.
The Social Security fund isn't really in trouble, and in any case, the shortfall created in SS revenues will be reimbursed by the general fund. As to why this path was chosen, who knows. On the Dems side, I can see two reasons for changing it up. One, it moves the tax cut away from the stimulus, which has a negative connotation for some people. Two, it makes a change that people will notice. If the credit was continued, people wouldn't see a change in their paychecks and might think that the Administration isn't doing anything. My guess is that the GOP agreed to this move so that when the temporary cut expires, they can argue it should be made permanent, just like they did with the Bush tax cuts. Making the cut permanent would have an effect on the Fund (or a long-term impact on the deficit), which would bolster GOP rhetoric regarding changes to SS and deficits. An expiration of the temporary cut will almost certainly be spun as a tax increase in the 2012 election season.
My own thought is that it is because the feds will have a higher $ amount in the general fund. This was is easier than borrowing from SS and facing the backlash of "raiding the lock box". In any case, it's more typical bait and switch government.
Plus extending it will allow the GOP to raid the fund further down the road by cutting into it further until people scream for changes to save it, thus creating an in-road for Wall Street stockbrokers to steal whats left.
It has nothing to do with Law, Tables or Brackets and everything to do with Democrat's taking over Congress and the Executive. Anytime that happens taxes go up, it's a fact of nature.
There is nothing in the 'fund' left to steal, except a bunch of IOUs from the Treasury. Congress borrows and spends the excess faster than it comes in, and has been doing so for decades, through numerous changes in party control.
