Tax news for the new year.

[carol b]

According to recent reports those of us who itemize will have to wait until april to file our taxes. This is due to the upgrades that the IRS are doing to their system.

In other recent news there are some changes that may take effect that will make you wonder.

Firstly there will be a two percent decrease in the Social Security tax. The employer with-holding portion however will remain the same.

Next the percentage of tax you will pay.

Individual Tax Rates Remain the Same: The passage of the 2010 Tax Relief Act retains the current tax rates through 2012. Without action, the 10% tax bracket would have been eliminated and the upper tax brackets would have increased 3 - 3.6%. In 2013, these higher tax rates (15%, 28%, 31%, 36% and 39.6%) will go into effect unless Congress acts.

Dividend and Capital Gains Tax Rates Remain the Same: Qualified capital gains and ordinary dividends will continue to be taxed at a maximum rate of 15%, with a 0% rate on capital gains for those in the 10 and 15% incom e tax brackets. Without the Tax Relief Act of 2010, the capital gains 0% rate would have risen to 10% and the 15% maximum rate would have risen to 20%. Dividends would have been taxed at ordinary income tax rates rather than the preferred 15% rate.

What it means: You now have a level of certainty for the next couple of years as to what the tax rates will be. In addition, a number of clients looking to adjust their portfolios due to the pending increase in the dividend and capital gains tax rates now have two more years to plan.

Check the IRS website for further information or talk to your tax preparer.