Update 3 January 2011: Since the Congress finally did act to extend the Bush era tax cuts late in December 2010 and the IRS acted quickly to release the withholding changes to U.S. businesses, this tool's results are no longer accurate. Please see our tool Your Paycheck in 2011 for the numbers that will matter to you where 2011's tax withholding calculations are concerned!
When the 111th United States Congress abandoned its responsibilities for doing even basic things that legislatures are supposed to do, such as passing a budget for the federal government, in favor of going into recess to campaign ahead of the November 2010 elections, it also left another major bit of undone business that will affect all working Americans: it took no action to resolve the matter of the 2003 income tax rate cuts that are set to expire at the end of 2010.
That matters because without taking any action, those tax rates will revert to their much higher 2003 level for all taxpayers. In fact, because the IRS must publish the withholding rates that will apply for the next year in November, to give businesses enough time to revise their payroll accounting systems to take any and all tax changes into account, it is nearly all but guaranteed that higher tax withholding affecting all working Americans will go into effect next year, at least through the month of January.
We wondered what the potential impact of that might be on a working American's paycheck, so we adapted our paycheck withholding tool by incorporating the withholding tax rates that would apply under 2003's original rules, updating the income thresholds to account for inflation.
That tool is below - just enter the indicated data for all the typical items that might affect the amount of federal income taxes that will be withheld from your paycheck and we'll work out how much federal income taxes will be withheld from your paycheck beginning in January 2011, as well as the percentage change from the amount that would be withheld from a paycheck you would receive in 2010.
The amount of federal income tax withholding from your paycheck that is estimated in this tool should be in the right ballpark for what you'll actually see in your paychecks in January 2011. In fact, given the very low rate of inflation in the past year, which will result in 2011's Social Security benefits being frozen at 2010 levels for 2011, it's possible that the 2010 withholding figure will be very close to what your withholding would be in 2011 should the current income tax rates be extended.
Welcome to the blogosphere's toolchest! Here, unlike other blogs dedicated to analyzing current events, we create easy-to-use, simple tools to do the math related to them so you can get in on the action too! If you would like to learn more about these tools, or if you would like to contribute ideas to develop for this blog, please e-mail us at:
ironman at politicalcalculations
Thanks in advance!
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