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Two congressional committees, the House Ways and Means Committee and the Senate Finance Committee, recently held a join hearing to review capital gains taxes and their potential reforms.

At the moment, capital gains are taxed at a maximum of 15 percent. This is in contrast to 35 percent, the top rate at which ordinary income is taxed.

Reforming the U.S. tax system must include a thorough examination of capital gains’ rates to encourage growth, create jobs and reinvigorate the economy, according to Senate Finance Committee chairman Max Baucus, D-Mont. He believes the reform process should examine the capital gains rate in comparison with corporate income and dividends and individual wage income. He also says that many high-income individuals end up with a lower effective tax rate than middle class families because of the current capital gains tax rate.

Baucus queries whether it’s possible to lower wage income tax rates without increasing the capital gains rate. He also commented on the complexity of the tax code dealing with capital gains taxes.

Some at the hearing testified that capital gains tax rates were preferential and should not be continued. Others argued that increasing capital gains rates could discourage angel investing and other financial strategies that encourage the creation new businesses and jobs. Attendees also discussed the complexity of the capital gains issue and the difference between reform focused on generating revenue and reform geared toward boosting the economy.

For more information on how changes in capital gains tax rates may affect your business, contact a Beaton Accounting tax representative at 631-921-6894.

Have a question or certain topic you’d like to see addressed in our next blog post? Just leave a comment or e-mail us at [email protected].

You can still adjust your 2012 tax withholding to avoid large tax refunds or tax bills when you file your returns next year. Though some people look forward to a big refund check, wouldn’t it be better if you could keep more of your money in your pocket? Adjust your tax withholding soon to bring the amount of taxes you pay closer to what you actually owe.

Most companies withhold taxes from each employee’s paycheck. The other common scenario is that people, especially the self-employed, pay taxes on a quarterly basis through estimated tax payments.

But each year millions of Americans have far more taxes withheld from their pay than is actually required. This can create stress during refund time for people who need their refunds to make major purchases or pay debts. If possible, taxpayers should avoid relying on a tax refund to make a major financial choice, especially if it is time sensitive.

Here are some additional tips to help make the taxes you pay during the year closer to what you will owe when you file your tax return.

If you are a regular employee…

When you start a new job, you will complete a W-4, Employee’s Withholding Allowance Certificate. This form is used to calculate the amount of federal income tax that will be withheld from your paychecks. Make sure you complete this form as accurately as possible.

Changing your W-4 to reflect certain life events can also help make what you pay for taxes closer to what you owe. Examples of life events that may affect your taxes include purchasing a home, obtaining or losing a job, getting married or having a child. Make sure you keep your W-4 up-to-date.

Usually, you can submit a new W-4 whenever you’d like to increase the number of withholding allowances. But if a life event causes you to decrease your withholding allowances or change your marital status from married to single, you are required to provide a new W-4 within 10 days of that life event.

If you are self-employed…

If you are self-employed and think you will owe $1,000 or more in taxes for the year, you normally must make estimated tax payments to cover your income tax, Social Security and Medicare taxes. The worksheet in Form 1040-ES, Estimated Taxes for Individuals, will help you determine if you are required to pay estimated tax on a quarterly basis. Making estimated payments will help you avoid paying a large lump sum at tax time.

If you’d like to speak with a Beaton Accounting tax representative for professional advice on your taxes, call us today for a FREE consultation: 631-921-6894.

Have a question or certain topic you’d like to see addressed in our next blog post? Just leave a comment, or email us at [email protected]

At this point you should have received your W2, 1099 and any other applicable tax documents. With all of these in hand, you are ready to complete your taxes. If you know how to prepare your own taxes then you’re ahead of the game. But if you happen to be like the 80% of Americans who use either a paid tax preparer or purchase tax software to submit their taxes, you prefer someone else to crunch the numbers for you and there’s nothing wrong with that.

But if you are someone who prefers to have a live human helping you with your taxes, you need to be sure that choose wisely. Here are 5 tips to help you pick a trustworthy tax preparer:

After a lot of debate and some last minute shenanigans, the American Taxpayer Relief Act (or “ATRA” for short) was signed into law by President Obama on January 2, 2013. This new law makes the changes made by the Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act that was enacted in December 2010 permanent with regard to federal estate taxes, gift taxes and generation skipping transfer taxes, with one notable exception. Below is a brief summary of what this relief plan provides with regard to these types of federal taxes for 2013.

Easy come, easy go. As an American, the last 2 years brought us 2% of our paychecks back that we didn’t have in 2010 thanks to the “Payroll Tax Holiday” that gave us all a break of 2% on Social Security payroll taxes.

However, one expiring provision that was not given new life during the fiscal cliff deal – which extended the income tax rates for 99% of Americans – was this 2% reduction to an employee’s share of Social Security payroll taxes. For 2011 and 2012, employees paid only 4.2% of their wages towards Social Security. Beginning January 1, 2013, that burden has reverted back to 6.2%. As a result, if you earn a salary, you may have noticed that your first paycheck in 2013 was 2% lighter than your last check in 2012, assuming equal pay.