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What should we expect from 'Taxmageddon'?
Even with the election now behind us, great uncertainty remains about what taxes will look like in 2013 and how looming tax changes will affect companies and their employees. With "Taxmageddon" quickly approaching higher taxes are inevitable in 2013. Taxand USA explores potential tax changes and what multinationals can do to prepare.
One major change set to occur at the end of 2012 is the sunset of the Bush tax cuts and the President Obama extension. Unless some form of tax cut extension is negotiated, most tax brackets will see a sizable rate increase. President Obama has proposed a tax increase only for Americans earning more than $200,000 ($250,000 for married/joint filers). However, the ultimate outcome depends on if and how Congress compromises.
Also, the tax holiday for the employee portion of Social Security is scheduled to expire after 31 December 2012. Unless the tax break is extended, the employee portion of Social Security will revert back to 6.2% from 4.2% (subject to wage base limit). Capital gains and dividend tax rates are also scheduled to increase. The phase out of personal exemptions and itemised deductions for higher-income taxpayers is also planned for restatement.
With the hopes of increasing awareness about health care coverage costs, employers that sponsor health plans must now report the aggregate cost of "applicable employer-sponsored coverage" in a new box on the Form W-2. This reporting is informational only and does not affect whether health benefits are taxable.
Tax and payroll departments need to be prepared for a whirlwind of a year-end. With numerous tax increases on the horizon and the potential for last-minute changes, companies must plan for numerous possible outcomes. However, in the midst of planning for change, year-end compliance like Form W-2 reporting and Section 409A corrections cannot be neglected either.