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#1771469 - 01/02/13 03:19 PM
Re: Fiscal Cliff Deal-Backup Withholding Rate
lucyc
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I doubt if anyone has seen the actual bill at this point to see if it was addressed.
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#1771476 - 01/02/13 03:29 PM
Re: Fiscal Cliff Deal-Backup Withholding Rate
lucyc
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as per media the bill is 157 pages and even congress has not read it. If it is only 157 pages there is a good chance that it has not been addressed.
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#1771483 - 01/02/13 03:42 PM
Re: Fiscal Cliff Deal-Backup Withholding Rate
lucyc
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As you have noted, the rate was scheduled to go back to 31% for 2013. I recommend setting it at 31% unless and until the IRS issues advice to the contrary.
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#1771511 - 01/02/13 04:10 PM
Re: Fiscal Cliff Deal-Backup Withholding Rate
lucyc
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The following is an excerpt from the deal:
"HIGH-INCOME TAXPAYERS.— (1) INCOME TAX RATES.— (A) TREATMENT OF 25-, 28-, AND 33-PERCENT RATE BRACKETS.—Paragraph (2) of section 1(i) is amended to read as follows: (2) 25-, 28-, AND 33-PERCENT RATE BRACKETS.—The tables under subsections (a), (b), (c), (d), and (e) shall be applied— (A) by substituting ‘25%’ for ‘28%’ each place it appears (before the application of subparagraph (B)), (B) by substituting ‘28%’ for ‘31%’ each place it appears, and (C) by substituting ‘33%’ for ‘36%’ each place it appears.’’.
The excerpt refers to subsections a,b,c,d and e. What ACT includes the subsections they are referring to? I checked 26 USC 1 and I didn't find any threshold of 25%. Since the excerpt from the deal states "substituting 25% for 28%" I don't think this is the ACT the deal is referring to.
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#1771517 - 01/02/13 04:15 PM
Re: Fiscal Cliff Deal-Backup Withholding Rate
lucyc
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Those are tax brackets and do not deal with backup withholding. I would follow John's advice and wait for further guidance from the IRS.
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#1771526 - 01/02/13 04:22 PM
Re: Fiscal Cliff Deal-Backup Withholding Rate
lucyc
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#1771528 - 01/02/13 04:24 PM
Re: Fiscal Cliff Deal-Backup Withholding Rate
lucyc
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I asked the IRS about this last week and got this response. IRC 3406 Backup withholding directs a payor to " deduct and withhold from such (reportable) payment a tax equal to the product of the fourth lowest rate of tax applicable under section 1(c)". At this time congress has not made a decision about the 2013 backup withholding rate. Please check www.irs.gov for any future changes.
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#1771537 - 01/02/13 04:35 PM
Re: Fiscal Cliff Deal-Backup Withholding Rate
lucyc
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Leave it to the IRS to make their instructions convoluted and cryptic.
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#1771541 - 01/02/13 04:38 PM
Re: Fiscal Cliff Deal-Backup Withholding Rate
lucyc
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This appears to be all on the website. The rates are as follows: 31% for payments made through August 6, 2001; 30.5% for payments made after August 6 through December 31, 2001; 30% for payments made in 2002; and 28% for payments made in 2003 through December 31, 2012. For payments made after December 31, 2012, the rate increases to 31%. http://www.irs.gov/pub/irs-pdf/p1335.pdf
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#1771549 - 01/02/13 04:43 PM
Re: Fiscal Cliff Deal-Backup Withholding Rate
lucyc
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And that's what I would go with unless the IRS updates the information pursuant to the "deal" legislation.
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#1771559 - 01/02/13 04:57 PM
Re: Fiscal Cliff Deal-Backup Withholding Rate
lucyc
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KY
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I disagree. That is old "pre-deal" information.
I think we should keep the rate at 28% because the 'deal' only changed the highest tax bracket.
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#1771575 - 01/02/13 05:19 PM
Re: Fiscal Cliff Deal-Backup Withholding Rate
lucyc
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For what it may be worth, the IRS document cited above, Publication 1335, was posted to the IRS website on August 23, 2012. Here is the source directory... http://www.irs.gov/pub/irs-pdf/
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#1771582 - 01/02/13 05:31 PM
Re: Fiscal Cliff Deal-Backup Withholding Rate
lucyc
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I am with John on this (It is noted that as an auditor I have no say) but the publication (or any other that I can find) does not say anything about the cliff.
If we see something that is in the signed deal (or posted on the website) then we can change.
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#1771591 - 01/02/13 05:48 PM
Re: Fiscal Cliff Deal-Backup Withholding Rate
lucyc
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I have gone with the 31% until told otherwise by the IRS. I tried to get through to the IRS today but was disconnected after being on hold an hour.
I can always change it back if something definitive comes out.
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#1771696 - 01/02/13 08:43 PM
Re: Fiscal Cliff Deal-Backup Withholding Rate
edAudit
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I *think* this is a searchable version: linky dink
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#1771704 - 01/02/13 08:49 PM
Re: Fiscal Cliff Deal-Backup Withholding Rate
lucyc
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Amazing, that countless economists, tax professionals and others will have read all of this before many of the members of congress who voted on the bill.
After scanning it quickly, I think it's very possible that the backup withholding rate, which is tied to the individual tax percentage rates, will be 28% when the dust settles.
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#1771719 - 01/02/13 09:02 PM
Re: Fiscal Cliff Deal-Backup Withholding Rate
lucyc
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I spoke to a representative with the IRS, she advised me to change the rate to 31% based on what was stated in Publication 1335.
She stated that what was on hold was the changes to the federal income tax withholding tables.
What I'm really confused about now is all I heard was that these changes were only going to affect a small percetage of Americans which contradicts with the excerpt from the bill that I referred to in my earlier post. The excerpt is a follows:
"HIGH-INCOME TAXPAYERS.— (1) INCOME TAX RATES.— (A) TREATMENT OF 25-, 28-, AND 33-PERCENT RATE BRACKETS.—Paragraph (2) of section 1(i) is amended to read as follows: (2) 25-, 28-, AND 33-PERCENT RATE BRACKETS.—The tables under subsections (a), (b), (c), (d), and (e) shall be applied— (A) by substituting ‘25%’ for ‘28%’ each place it appears (before the application of subparagraph (B)), (B) by substituting ‘28%’ for ‘31%’ each place it appears, and (C) by substituting ‘33%’ for ‘36%’ each place it appears.’’.
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#1771721 - 01/02/13 09:03 PM
Re: Fiscal Cliff Deal-Backup Withholding Rate
lucyc
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I read the Senate received the 150+ pages just 3 minutes before they passed it, another one of the infamous "we must pass it to know what's in it". This makes the sausage factory product pristine looking.
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#1771730 - 01/02/13 09:13 PM
Re: Fiscal Cliff Deal-Backup Withholding Rate
lucyc
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That's what I thought at first too, lvc. I was going off of Pub 1335, since the Congressional bill didn't explicitly state the backup withholding rates. However, like John pointed out, those withholding rates are based on the 4th tier of individual tax rates. Since those DID change, I think the final result will be that withholding rates will change to match.
I feel for the IRS reps, to be honest. They are likely being inundated with calls on something that barely squeeked by less than 48 hours ago!
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#1771732 - 01/02/13 09:17 PM
Re: Fiscal Cliff Deal-Backup Withholding Rate
lucyc
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Big Sky Country
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Helpful KPMG link about backup withholding rates: Here
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#1771735 - 01/02/13 09:19 PM
Re: Fiscal Cliff Deal-Backup Withholding Rate
lucyc
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Cape Cod
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And on which they undoubtedly received no advance information.
The small percentage of Americans affected are those with incomes over $400,000 a year ($450K for joint filers). The reason all those withholding tables are being amended is because the law in effect on 1/1/13 at a minute after midnight raised all those rates because the so-called "Bush-era" cuts had all expired. Your taxes and mine would be a lot higher if the "deal" wasn't cut. So it looks like the "deal" changed them all back to whatever they were in 2012, except for the folks at the top of the income heap.
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#1771774 - 01/02/13 10:05 PM
Re: Fiscal Cliff Deal-Backup Withholding Rate
lucyc
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So it looks like the "deal" changed them all back to whatever they were in 2012, except for the folks at the top of the income heap.
John the Social Security witholding taxes rates were raised (cuts were no longer extended) for all of us working stiffs 2%.
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#1771815 - 01/03/13 01:18 AM
Re: Fiscal Cliff Deal-Backup Withholding Rate
lucyc
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Yup.
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#1771835 - 01/03/13 01:12 PM
Re: Fiscal Cliff Deal-Backup Withholding Rate
lucyc
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I'm going to keep it at 31% until the IRS publishes a final notice to the contrary.
Unless I'm totally missing something, which is highly possible, what are the income thresholds for the following changes? It doesn't seem to me that these changes are only effecting the consumers that make over $400k.
"HIGH-INCOME TAXPAYERS.— (1) INCOME TAX RATES.— (A) TREATMENT OF 25-, 28-, AND 33-PERCENT RATE BRACKETS.—Paragraph (2) of section 1(i) is amended to read as follows: (2) 25-, 28-, AND 33-PERCENT RATE BRACKETS.—The tables under subsections (a), (b), (c), (d), and (e) shall be applied— (A) by substituting ‘25%’ for ‘28%’ each place it appears (before the application of subparagraph (B)), (B) by substituting ‘28%’ for ‘31%’ each place it appears, and (C) by substituting ‘33%’ for ‘36%’ each place it appears.’’.
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#1772177 - 01/03/13 07:31 PM
Re: Fiscal Cliff Deal-Backup Withholding Rate
lucyc
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FYI, the IRS just posted the following regarding changes to the income tax withholding tables: http://www.irs.gov/uac/Newsroom/IRS-Provides-Updated-Withholding-Guidance-for-2013Unfortunately these changes do not coincide with the excerpt from the Fiscal Cliff deal that I provided in my earlier post. For example, per the fiscal cliff 28% was to be substituted with 31% however I see no reference to 31% in the withholding tables. So basically I still have the same core issue/questions 1. Should I change the backup withholding rate to 31% based on Publication 1335 or leave it a 28% since the fourth income bracket per the 2013 withholding rate tables is still 28? 2. How does what is stated regarding the substitutions listed in the Fiscal cliff deal come into play? Is is possible that the 2013 Withholding rates on the IRS website are incorrect?
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#1772179 - 01/03/13 07:34 PM
Re: Fiscal Cliff Deal-Backup Withholding Rate
lucyc
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Maybe I'm just totally missing something...but lvc, it seems you are interpreting this backwards. It says (above) to subsitute 28% for 31%...not 31% for 28%. Is that, perhaps, what is throwing you off? (no pun intended!  )
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#1772186 - 01/03/13 07:42 PM
Re: Fiscal Cliff Deal-Backup Withholding Rate
lucyc
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Those are payroll withholding tables and have nothing to do with backup withholding.
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#1772197 - 01/03/13 07:57 PM
Re: Fiscal Cliff Deal-Backup Withholding Rate
lucyc
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from the website it has not been updated since the rate expired in 2011 (if they did not post for last year, what makes us think we will have a quick answer) Backup Withholding Program ("B" and " C" Programs) Overview 1.There are two separate Backup Withholding (BWH) programs that require payers to withhold at the backup withholding rate from recipients’ (payees’) payment of Form 1099 income. 2.The backup withholding rate is 28% for payments made after December 31, 2002. This new rate expires December 31, 2010. http://www.irs.gov/irm/part5/irm_05-019-003r.html
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#1772204 - 01/03/13 08:04 PM
Re: Fiscal Cliff Deal-Backup Withholding Rate
lucyc
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Please forgive my ignorance...but if I'm not mistaken, they had already updated the tables to the old rates that should have gone back into effect had the 'deal' not been signed. All they are doing is putting it back where it was for the last couple or so years. SO, it's not changing from 28 to 31...it's changint the 31 back to 28.
As far as actual backup withholding (as opposed to payroll)...I don't think that's really known yet.
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#1772212 - 01/03/13 08:10 PM
Re: Fiscal Cliff Deal-Backup Withholding Rate
lucyc
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I would hope that everyone has something better to do then argue all day on this subject that probably impacts .000001% of all accounts. I would just wait for IRS clarification.
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#1772214 - 01/03/13 08:13 PM
Re: Fiscal Cliff Deal-Backup Withholding Rate
lucyc
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As far as actual backup withholding (as opposed to payroll)...I don't think that's really known yet.
That is correct, they did not even post the amounts for 2011 in their overview yet alone 2012 or 2013.
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#1772452 - 01/04/13 03:00 PM
Re: Fiscal Cliff Deal-Backup Withholding Rate
lucyc
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Amen to Randy. There are a lot more important fish to fry right now, although I appreciate that setting the backup withholding rate is probably an annual start-of-year checklist item for many operations folks.
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#1778113 - 01/18/13 08:06 PM
Re: Fiscal Cliff Deal-Backup Withholding Rate
lucyc
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How many of you have gone ahead and changed your backup withholding rate to 31%?
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#1778321 - 01/21/13 09:56 AM
Re: Fiscal Cliff Deal-Backup Withholding Rate
NeverEndingSupport
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The most efficient and effective "compliance" technique is to refuse to maintain interest bearing accounts for people who are subject to backup withholding.
This wasn't a cost efficient method for collecting taxes when we were paying 5% interest. Today, it's simply ridiculous; e.g. 31% of .50%?
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#1790572 - 03/01/13 04:42 PM
Re: Fiscal Cliff Deal-Backup Withholding Rate
lucyc
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KY
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Instructions for 2013 Forms 1099-INT and 1099-OID posted to the IRS web-site yesterday. http://www.irs.gov/pub/irs-pdf/i1099int.pdfBox 4. Federal Income Tax Withheld Enter backup withholding. For example, if a recipient does not furnish its TIN to you in the manner required, you must backup withhold at a 28% rate on payments required to be reported in box 1 (which may be reduced by the amount reported in box 2), box 3, and box 8 on this form. The other related publications (505, 1281, 1335) have not yet been updated with the current rate which did not change from last year.
Last edited by StevenD; 03/01/13 04:46 PM.
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