IRS Still Not Over ‘Fiscal Cliff’ Delays

Workers are paying high taxes this year thanks to the so-called Americans Taxpayer Relief Act of 2012, which was crafted to keep the United States from toppling over the “fiscal cliff.”

That dramatic end-of-the-year budget showdown also has caused significant delays in the Internal Revenue Service’s ability to process nearly two dozen federal tax forms, including the mortgage interest deduction form.

“The most major change was the increase in the Social Security tax for everyone that gets wages,” said Joy Child of a Westboro accounting firm, adding that the full 6.2 percent of Social Security is now being withheld from workers’ paychecks. “If they didn’t get a raise, their net pay went down.”

The IRS is recommending that taxpayers impacted by the delayed forms not file their tax returns until at least later this month.

Looking ahead, here’s what’s in store for the 2013 tax season:

  • The tax bracket for high-income households making more than $400,000 (single) or $450,000 (married filing jointly) is up to 39.6 percent, compared to 35 percent before.
  • High-income households in this new tax bracket are also subject to a capital gains rate of 20 percent, compared to 15 percent previously, as well as a new 3.8 percent Medicare surtax on investment income. That also applies to people making more than $250,000.
  • Personal exemption deduction and itemized deduction phase-out deals are back for single filers making $250,000, married joint-filing couples making $300,000, heads of households making $275,000 and married individuals who file separate returns making $150,000. The last time these were around was 2009.