A Two Percent Employee Payroll Tax Cut — The legislation includes an employee-side payroll tax cut for over 155 million workers, providing tax relief of about $112 billion in 2011 paychecks.
Extension of Unemployment Benefits
Extention of emergency unemployment benefits at their current level for 13 months, preventing an estimated 7 million workers from losing their benefits over the next year as they search for jobs.
The Child Tax Credit — The $3,000 refundability threshold established in the Recovery Act for the Child Tax Credit will be extended, ensuring an ongoing tax cut to 10.5 million lower-income families with 18 million children.
The Earned Income Tax Credit — The legislation continues a Recovery Act expansion of the Earned Income Tax Credit worth, on average, $600 for families with 3 or more children, and reduces the "marriage penalty" faced by working married families. Together, these enhancements to the EITC will help 6.5 million working families with 15 million children.
The American Opportunity Tax Credit — The new American Opportunity Tax Credit — a partially refundable tax credit worth up to $2,500 per student per year that helps more than 8 million students and their families afford the cost of college — is continued.
100 Percent Expensing — The legislation temporarily allow businesses to expense 100 percent of certain investments in 2011, potentially generating more than $50 billion in additional investment in 2011, which will fuel job creation.
1603
Renewable Energy Grants — The agreement extends the 1603 program, which provides payments in lieu of renewable energy tax credits and is helping to support tens of thousands of jobs in the wind and solar industries.
One of the most popular retirement choices, the Regular IRA.
Most workers will see their take-home pay rise during 2011 because the Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010 provides a two percentage point payroll tax cut for employees, reducing their Social Security tax withholding rate from 6.2 percent to 4.2 percent of wages paid. This reduced Social Security withholding will have no effect on the employee’s future Social Security benefits.
Employers should start using the new withholding tables and reducing the amount of Social Security tax withheld as soon as possible in 2011 but not later than Jan. 31, 2011. Notice 1036 contains the percentage method income tax withholding tables, the lower Social Security withholding rate, and related information that most employers need to implement these changes.
Note: Congress has extended the social security employee rate of 4.2% through February 29, 2012. During next year's session, Congress may extend this reduction through December 31, 2012.
You may be able to take the first-time homebuyer credit if you purchased a home as your primary residence in 2010. There are specific benefits that certain members of the military and certain other federal employees have, such as an additional year to buy a home in the United States, if they otherwise qualify for the credit.
This credit reduces your tax bill or increases your refund depending on the tax you owe. The IRS will refund the credit, even if you owe no tax or the credit is more than the tax owed.
For qualifying purchases in 2010, you have the option of claiming the credit on either your 2010 or 2009 return. Fill out Form 5405, First-Time Homebuyer Credit and Repayment of the Credit (see the instructions for help with the form), and a properly executed copy of a settlement statement used to complete the purchase.
- Purchasers of conventional homes should include a copy of Form HUD-1, Settlement Statement, or other settlement statement, showing all parties' names, property address, sales price and date of purchase.
- Purchasers of mobile homes who are unable to get a settlement statement should include a copy of the executed retail sales contract showing all parties' names, property address, purchase price and date of purchase.
- Purchasers of newly constructed homes where a settlement statement is not available should include a copy of the certificate of occupancy showing the owner’s name, property address and date of the certificate
On March 10th, 2011 The House of Representatives passed the Small Business Paperwork Mandate Elimination Act of 2011 (HR 4) by a 314–112 vote. The bill would repeal the expanded Form 1099 information reporting requirements mandated by last year’s health care legislation. It would also repeal the new 1099 reporting requirements imposed on taxpayers who receive rental income.
Section 9006 of last year’s Patient Protection and Affordable Care Act expanded the 1099 reporting requirements to include all payments from businesses aggregating $600 or more in a calendar year to a single payee, including corporations (other than a payee that is a tax-exempt corporation), and to include payments made for property, starting with payments in 2012. The Small Business Jobs Act enacted a requirement that individuals who receive rental income must issue Forms 1099 to service providers for payments of $600 or more made during 2011 and for payments made for property and to corporations beginning in 2012. Both of these provisions would be repealed by the bill.
Fiscal Commission Proposal before Senate Budget Committee
The President's Commission on Fiscal Responsibility and Reform has developed a plan to reduce the deficit. The proposed plan involves a number of spending reductions and tax increases.
There are six proposed guidelines for moving toward deficit reduction. These include the following:
1. Encourage Economic Recovery – Reduce spending gradually. By 2013, spending would be reduced to approximately 2008 levels.
2. Protect Truly Disadvantaged – The plan would continue federal unemployment benefits, food stamps, Social Security payments for disabled and other relief programs.
3. National Security – There would still be a strong national defense. However, as Chairman of the Joint Chiefs of Staff Admiral Mullen has stated, the greatest national security threat to America is the accumulating debt.
4. Investments – There need to be continued national investments in infrastructure, research and education.
5. Tax Code – Both the personal and corporate tax codes should be reformed. The reformed tax codes would have lower tax rates and a broader tax base with limited deductions.
6. Shared Sacrifice – All of the areas of federal spending would be subject to review and potential reductions.
The plan includes six deficit reduction strategies. These include the following:
1. Discretionary Spending Caps – The goal would be to reduce spending on discretionary items by $200 billion in 2015.
2. Tax Reform – In exchange for greatly reduced deductions, personal rates would be lowered to 8%, 14% and 23%. Similarly, corporate tax rates would be lowered to a range of 23% to 29% by limiting deductions.
3. Healthcare – There would be changes in co-payments and deductibles for Medicare. Medicaid qualifications would be adjusted. There would be medical malpractice reforms.
4. Mandatory Spending – Many changes would occur in both military and civilian retirement plans, in farm subsidies and in the indexing methods for government programs.
5. Social Security – There would be an effort to make Social Security solvent for 75 years by increasing the wage base and adjusting the retirement age for younger workers.
6. Budget Process – There would be several fiscal reforms that may include automatic adjustments in budgets if the government does not reach deficit targets.
