2012 tax rates: It always pays to plan ahead — Business Management Daily: Free Reports on Human Resources, Employment Law, Office Management, Office Communication, Office Technology and Small Business Tax Business Management Daily

2012 tax rates: It always pays to plan ahead

by on
in Office Management,Payroll Management

Employees can take a lot of the guesswork out of their 2012 income tax liability by ensuring that their W-4s are accurate. Those who need to file new forms due to changes in their personal finances now have the inflation-adjusted figures on which to base those decisions. Low-income employees may qualify for the earned income tax credit. (Rev. Proc. 2011-52, IRB 2011-45)

Standard deductions and phaseout amounts

The 2012 standard deduction amounts are:

  • Singles: $5,950
  • Marrieds filing jointly: $11,900
  • Marrieds filing separately: $5,950
  • Heads of households: $8,700
  • Dependents: the greater of $950 or the sum of $300 and their earned income, up to the standard deduction amount
  • Extra standard deduction for aged or blind: $1,450 (singles) or $1,150 per eligible spouse (marrieds filing jointly).

The tax news for high earners is very good. The extension of the 2001 tax law in December 2010 means that the overall limitation on itemized deductions and the phaseout of personal exemptions again don’t apply for this year. However, unless the 2001 tax law is extended once more, these limitations will be automatically reinstated next year.

Earned income tax credit

Depending on family size and wages, low-income employees may qualify for the earned income tax credit. The credit is phased out at certain income levels.

•    One child: The maximum credit is 34% of $9,320, or $3,169. For income exceeding $17,090 (singles and heads of households) or $22,300 (marrieds filing jointly), the credit begins to be reduced. The credit is completely phased out when wages exceed $36,920 for singles/heads of households and $42,130 for marrieds filing jointly.

•    Two children: The maximum credit is 40% of $13,090, or $5,236. For income exceeding $17,090 (singles/heads of households) or $22,300 (marrieds filing jointly), the credit begins to be reduced. The credit is completely phased out when wages exceed $41,952 for singles/heads of households and $47,162 for marrieds filing jointly.

•    Three or more children: The maximum credit is 45% of $13,090, or $5,891. For income exceeding $17,090 (singles/heads of households) or $22,300 (marrieds filing jointly), the credit begins to be reduced. The credit is completely phased out when wages exceed $45,060 for singles/heads of households and $50,270 for marrieds filing jointly.

•    No children: The maximum credit is 7.65% of $6,210, or $457. For income exceeding $7,700 (singles/heads of households) or $12,980 (marrieds filing jointly), the credit begins to be reduced. The credit is completely phased out when wages exceed $13,980 for singles/heads of households and $19,190 for marrieds filing jointly.

Leave a Comment