SMI Visitor's Blog       

Welcome to the SMI Visitor's Blog where you'll find selected excerpts from our Member's Blog, plus occasional posts created especially for our visitors.

For SMI Web Members, click here to go to the SMI Member Blog.

« Blog Home

It's beginning to look a lot like... a tax mess

Not to put a damper on your holiday cheer, but it's time to talk about — taxes. We're roughly one-month before the end of 2010, and the direction of key areas of tax policy for 2011 remains anyone's guess. Indeed, almost nothing has budged since Mark Biller wrote about the uncertain tax situation (subscribers' link) in our November issue, although President Obama and congressional leaders today pledged to resolve the impasse.

Barron's Washington editor Jim McTague says it is increasingly likely that things will get messy.

It's already fairly certain that 2010 tax refunds for millions of filers will be delayed by many weeks, because Congress is waiting so late in the year to patch the alternative minimum tax to prevent it from snagging 20 million to 27 million new taxpayers.

Circumstances might become more taxing if Congress doesn't reach a deal on the extension of the low Bush brackets — 35%, 33%, 28%, 25%, 15% and 10%. If the Bush brackets expire, withholding taxes in tax-year 2011 would shrink paychecks across the board, literally taking away milk money for families in the $40,000 range. The new brackets would be 39.6%, 36%, 31%, 28% and 15%....

There are only four weeks left on the 111th Congress' legislative calendar. On top of this, members of Congress who lost their seats or who are retiring or moving up in seniority are expected to be packed up and ready to move from their Capitol Hill offices the first week of December. Under such circumstances, how much serious work can they get done?...

Meanwhile, back in the real world, payroll departments are awaiting word from the Treasury on the exact amount of taxes they will be required to withhold from employee paychecks in 2011. The tables generally are released in mid-November, but they are being held this year because of the unresolved issue of the Bush tax cuts.

Over at the Wall Street Journal (under the same ownership as Barron's), reporter Laura Saunders lays out a few ideas for making decisions in the face of such a highly fluid situation. The WSJ piece is rather extensive, but it's worth reading if you're considering any investing move between now and the end of the year that could trigger a taxable event.

Of course, even if you are doing nothing that'll trigger a tax event over the next month, the unresolved tax issues before the lame-duck Congress could still affect you. Back to Jim McTague at Barron's:

My advice: Assume the worst, and take some profits and income in 2010. And plan for less take-home pay in the first part of 2011.

Powered by Movable Type  |   Subscribe  |   Email Updates