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United States - Tax Cuts Extended: Implications for Individual Taxpayers

Tax Cuts Extended

Background

The United States Congress has approved and President Obama has signed legislation (The Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010) that extends prior tax cuts approved under President Bush for an additional two years, through 2012. The scheduled increase in the top rate of income tax to 39.6% will not go ahead with the result that the top rate of tax for 2011 and 2012 will remain at 35%. Alternative Minimum Tax relief has been extended in relation to 2010 and 2011. In addition the employee share of the OASDI portion of social security taxes has been cut by 2% for the 2011 year only.

With the extension in the tax cuts, tax planning that has been in place for the last several years can remain in place for the next two years. This applies to individual taxpayers, as well as their employers. Hypothetical tax liabilities for assignees should remain consistent through 2012, allowing for ongoing budgeting and planning for international assignment programs. While this does provide some relief for the near-term, taxpayers and companies must continue to look to 2013 and the potential tax landscape that may exist at that time.

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