Q: What does the current debate in Washington on extending the Bush-era tax cuts mean for my year-end payroll withholding tax calculations?
A. Reports are coming out hourly about this, so it’s important to pay attention to the news. The biggest effect seems to be that if Congress does not pass a bill by the end of this week, there could be a delay in the timing of distributing W-2s for tax purposes for next spring. President Obama worked out a plan with Congressional Republicans to extend the tax cuts for all tax brackets for two years. The compromise means the Republicans are supporting a 13-month extension of unemployment insurance. If this compromise is not passed before the end of the year, the average taxpayer’s paycheck would shrink $1,400 – $3,000/year. As you know, this is a significant amount that could otherwise be used for healthcare deductibles, purchasing new products or software for your business, or even just paying your telephone bills. — CW