Posts Tagged Medicare
Taxes for the Rich Set to Go Even Higher
Posted on June 13, 2011 | Tax Studies.
One of the major campaign promises that President Obama offered to U.S. citizens was that he would ensure equitable taxation for all so that those who earned more would pay the lion’s share of taxes. The President criticized the Bush Administration for offering tax holidays to the rich, who he felt, did not need any tax advantages (because they were financially comfortable). True to their word, the Obama Administration and the Democrats in Congress has gone a long way in ensuring that the rich will be removed of tax cuts and will bear the largest share of taxes. They have come up with several bills and proposals to have the rich taxed more:
The Three Percent Surtax Proposal
One of the more recent tax moves targeted at the rich is the 3% surtax proposal by Democratic Senate members. If passed, the surtax will be loaded onto high income earners. The Senators are seeking to introduce a bill to have a surtax charge on individuals who earn an income of $1,000,000.00 and above. The proposed tax is part of the attempts to narrow a widening tax deficit in the government.
Democrats Seeking Removal of Bush Tax Cuts
There have been talks from the Democratic politicians in the past two years to have tax cuts removed for high income earners. The Obama Administration has been keen to have the tax cuts removed, but they have compromised their stand owing to various negotiations with the Republicans. However, the removal of the Bush Tax cuts for the rich now seems to be a matter of time. The proposal is to remove the tax cuts for any taxpayer who earns more than $250,000.00 a year. Removal of the Bush tax cuts will raise the effective tax rate for the top income tax bracket by about 6.5%.
0.9% Surtax on Medicare
In 2010, Congress passed a bill to make changes on the Medicare Law. These changes were an attempt to solve the Medicare situation, whereby more retiring citizens are seeking to get free Medicare from the program. As part of the Medicare Law, Congress introduced a 0.9% Medicare Surtax for income earners in the top tax brackets. The Medicare Surtax is to be levied on all taxpayers who earn more than $200,000.00 a year and for couples who file taxes jointly who earned more than $250,000.00 annually.
Proposal to Remove Tax Ceiling on Social Security
In May 2010, President Obama mentioned that the government was seeking to make a proposal to remove the ceiling on Social Security taxes. Presently, Social Security taxes are applied to a maximum of $106,800.00 a year and any amounts above this maximum are not levied for Social Security. If the change is made to have no cap on Social Security payments, tax experts project that the move will effectively raise the taxation on the top income earners by about 10%.
Given that the top income earners are currently taxed at a top rate of 35%, with the addition of these new taxes and the aforementioned proposed tax changes, some tax analysts say that this may result in the top income earners paying an effective tax rate of over 60%.
Taxes That Apply to Household Employees
Posted on May 12, 2011 | Tax Studies.
Employees who work in your household may qualify as household workers. If they qualify as household employees, you will be required to apply various taxation processes. The IRS provides qualifications for what determines household employees and also provides the guidelines on how to withhold various taxes from the workers’ wages. These details are explained below:
Who Qualifies as a Household Employee?
Not all people who work for you qualify as household employees. The IRS provides a guideline to check whether a worker qualifies as a household employee or as an independent contractor. According to the IRS, a household employee is any household worker for whom you control the amount of work that he or she does and how the work is done. You also provide the tools necessary for the work. The worker is an employee irrespective of the number of hours that he or she works for you or the payment structure. In most cases babysitters, cleaning people, drivers, caretakers, domestic workers, housekeepers, health aides, nannies, yard workers, maids, and private nurses will qualify as household employees. However, the dividing rule is whether you give these workers specific instructions as to what to do and how to do it.
Who Does Not Qualify as a Household Employee?
If on the other hand, the worker defines the scope of work to be done, then they will be self-employed and you will not need to take any tax action. This applies to such people as gardeners who work on multiple lawns and who come with their own tools, plumbers, home repairs help, painters, and car mechanics. If you obtain your worker from an agency for whatever household services (including those who would otherwise qualify as household employees) and the agency determines the scope and procedure of the work, then such a worker does not qualify as a household employee. If you take your children to a childcare facility or to the house of the babysitter, then they also will not qualify as your employees.
Social Security and Medicare Withholding
For those who qualify as your employees, you will need to withhold Social Security and Medicare taxes from the wages to pay them. You will withhold these taxes if the wage amount is above $1,700.00 for 2009 and 2010, and $1,600.00 for 2008. You can choose to take up the tax burden and pay for the Social Security and Medicare taxes from your pocket. If you do so, such payments need to be included as part of their earned income for taxation purposes. However, these taxes that you shoulder on behalf of the worker do not need to be reported or deducted off any Federal unemployment wages or any Social Security and Medicare wages received. You should also not withhold any taxes if the workers working for your household are your parents, your spouse, your children, any worker below 18 years of age, or any worker who is a student. To submit the Social Security and Medicare taxes, you will need to fill out both Form W-2, “Wage and Tax Statement Form” and the Form W-3, “Transmittal of Wage and Tax Statement Form.” You will need to provide the workers’ Social Security numbers and your Employer Identification Number (EIN). If you do not have an EIN, you can apply for one from the IRS website.
Besides Social Security and Medicare tax withholding, you may also be expected to pay Federal Unemployment Taxes based on various qualifications. You are, however, not expected to withhold Federal Income Taxes unless the worker explicitly requests you to withhold them.