Tax Changes Being Talked About - You Need to Know This

There is a potential bill floating around that would make 401(k) contributions no longer deductible. Are you aware of that? I'll bet many people aren't. But the good news is that they were trying to sneak it through, but enough people heard about it and are now up in arms about it. We may have just dodged a bullet here.

But my point is that if people aren't aware of these types of bills they can be passed without your input to your senators and congresspeople. Staying aware, especially right now, is critical. And so is making your opinion known. I've never been one to step up to the plate on that, myself, so I'm talking to myself here as well! It's easy to send an e-mail or note. They are more "noticed" than a computer generated petition that many good organization provide for you. I'll post a place that you can go on the internet to get the names and e-mail addresses for your representatives at the end of this blog post.

So, onto the other issues coming at us. Doing away with the yearly cap on Social Security contributions, along with a possible 5% additional tax on earned income to fund Social Security. Now you would get $600 PER YEAR of additional Social Security at some point when you retire for that 5% - doesn't sound like a fair deal to me!

And there is also talk about making distributions from an S-Corp and LP subject to self-employment tax.

Now, I don't know about you, but I'd say the "middle class" is going to take the brunt of this. I know several small business owners that would get hammered with self-employment tax on distributions; they already pay taxes on paper earnings, not what they actually take in salary from their businesses. And they're already struggling just to keep the doors open in this economic quagmire.

And is $102,000 (the 2008 wage base on Social Security) really considered "high income" these days? Maybe in rural America, but in most metropolitan areas you can barely live on that as a single person, never mind a family. I just looked up on Wikipedia the number of millionaires (and this is based on individuals with a net worth of at least $1 million in all assets except their "primary residence") and there are over 10 million people in the world who fall into that category! About 3 million in the US - and over 38,000 multi-millionaires in the US (assets of over $30 million).

And that's not the end of what is on the table right now. Popularly called the "iTunes tax," there is already a sales tax on digital downloads required to be paid currently in 27 states and the District of Columbia. But there's been talk for a long time about a Streamlined Sales Tax; that seems to have stalled, but the “Internet Tax” has quietly come up again and Congress seems to have decided to bring it back to the table in order to resolve the issue so as to raise taxes quickly.

Here’s a link to a CNET article on the Internet Tax project:

http://news.cnet.com/8301-10784_3-9919420-7.html

If you want to have a voice in all of these issues, you need to act. Here are the links to how to write to your representatives (put it on your Toolbar so you see it and use it):

http://www.usa.gov/Contact/Elected.shtml