A few more updates to the tax law changes.

As the election is drawing close very few tax law changes have been passed. Most of what has happened is no action has been taken and laws will expire at the end of 2012. In IRS speak that means for tax years beginning after December 31, 2012. Social security withholding from everyone's paycheck will increase back to the 6.2% from the present 4.2%. The reduction was started in 2011 as a part of the economic plan. For businesses depreciation rates are changing. Businesses could deduct the cost of equipment purchased in 2011 as Bonus depreciation at 100%. In 2012 that amount was reduced to 50%. Beginning in 2013 it disappears. Section 179 to write off more of the cost of equipment is also being reduced. In 2010 and 2011 a business could write off up to $500,000 of equipment purchased. In 2012 that amount was reduced to $139,000. Starting in January that amount is reduced again to $25,000. These changes greatly reduce the incentive for a business to purchase new equipment. While it may not seem like a big deal the sale of that new dozer from Cat impacts thier employees, the employees of the parts suppliers and ripples out throught the economy. Voluntary Classification Settlement Program lets business owners confess their misclassification of workers as 1099 independent contractors and reclassify them as W2 employees. By doing this the employer receives audit protection going back in connection to the reclassified workers. The employer pays only 10% of the normal employer tax liability for the past year and is not liable for any penalties or interest. If an employer has been using the 1099 folks that should have been W2 now is the time to come clean and get rid of all the potential back liability. Maybe some help on the way after the election but not until after the new year when all the new folks get sworn in.