taxes

How expiring Bush tax cuts will affect you

A temporary tax increase?
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A temporary tax increase?

Although Congress decided not to act on the Bush tax cuts before the Nov. 2 midterm elections, conventional wisdom holds that the House and Senate will take some action later this year to keep at least some of the lower tax rates in place.

But if legislators don't make any changes in early November, all taxpayers could end up paying higher taxes for at least a while in 2011.

The IRS says it must finalize next year's payroll withholding tables in November so that employers will have sufficient time to incorporate the information into paycheck withholding systems. And those withholding tables will be based on law at the time the IRS guidance is issued.

So even if Congress eventually retains most or all of the current lower tax rates, if lawmakers dawdle in doing so, some early 2011 paychecks could be smaller since the payroll withholding will be based on the higher 2011 tax rates.

Taxpayers might have to adjust their withholding or wait until they file their 2011 returns in 2012 to get back any paycheck overpayments.


 

 

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