Tidbits from the Law – January 2012

…Congress extended the temporary payroll tax cut that was done in 2011, which reduced the 6.2 percent social security tax to 4.2 percent of wages. This extension runs from January 1, 2012 through February 29, 2012.

…Here are some predictions on tax issues, especially those tax laws that are set to expire in 2012:

A) The payroll tax cut will probably be extended to all of 2012, despite the disagreements between the House and the Senate;

B) The Bush income tax cuts will probably be extended for another year to 2013 by a lame duck postelection session. It is highly unlikely that Congress will tackle the politically charged issues in this tax cuts during an election year.

C) Although the estate tax exemption of $5.0 million is set to expire at the end of this year, which will lower the exemption to $1.0 million, Congress will most probably extend the larger exemption amount, as well as the portability of exemptions between spouses for another year.

D) Congress will probably revive the break for direct IRA payouts to charity in 2012, which will allow people who are 70-1/2 or older to donate up to $100,000 a year from their IRA’s directly to charity.

…The Federal Estate Tax exemption for 2012 rises to $5,120,000, thanks to inflation. The maximum rate will stay at 35%. The annual gift tax exclusion remains at $13,000 per person.

…Recently, a court in Florida ruled that a widow could collect damages against Bank of America and a debt collection agency, who harassed the widow to collect money owed by her deceased husband. The bank handed over the past due accounts of the deceased to a collection agency to try to collect the debts, despite the fact that the decedent had no assets and the family, including the widow, were not responsible for the debt. The collection agency that specialized in death-debt collection, zeroed in on family members, particularly the widow, who they thought might agree to pay some of what the dead person owed even though they have no legal obligation to do so. If in doubt, check with your attorney.