Delaney and Delaney Legal Blog

Friday, February 17, 2012

Why the New Payroll Tax Cut Means Higher Taxes for Some

submitted by Brian J. Delaney, Esq.

It looks like Congress will be extending the payroll tax cut through the end of 2012.  Many people assume it is a good thing, but don’t understand how it affects their tax returns.  This payroll tax cut actually went into effect in January in 2011.  Will you see a bigger tax refund?  For most people, the answer is no.   In fact, some people will be paying more in tax this year as opposed to last year!  I prepare tax returns for many of my clients and I have quickly realized that a number of them will end up paying more than last year.  Why? Read on…

The reason why most people will not see a benefit is because the payroll tax cut was already paid during the year.  Do you remember it?  Probably not… Take a look at your paystub and look at the various deductions.  You will see either a deduction for “FICA” (Federal Insurance Contributions Act) or two separate deductions for “Medicare” and “Social Security.”    These are known as payroll taxes.  I still remember receiving my first pay check from Star Market when I was 16…I was so angry that this “FICA” organization was taking a big chunk out of my take home pay! 

Payroll taxes are paid equally between the employer and employee.  Typically, you will pay 6.2% of your wages in social security tax and 1.45% in Medicare tax, and your employer pays the same.  The employer portion is not shown on your paycheck or W-2.  If you’re self-employed, you have to pay the entire amount 15.3% yourself.

Prior to 2011, Congress had passed a number of stimulus-type tax breaks for individuals.  In 2009 and 2010, the “Making Work Pay Credit” gave workers a tax credit of up to $400 (individuals) and $800 (married couples).   The “Making Work Pay Credit” was an income tax credit.  The current payroll tax cut reduces an employee’s social security tax contribution from 6.2% to 4.2%.

How does the payroll tax cut work in real life?  Assume you make $52,000 and are paid bi-weekly for a total of 26 paychecks per year.  Normally, the social security portion of the payroll tax would be $124.00 (6.2% of $2,000.00).  With the payroll tax cut in place, the social security tax would be $84.00, for a savings of $40 per paycheck (or $1,040.00 per year).  Clearly, that’s a good a chunk of change.

OK, getting back to this year’s tax return…unless you are self-employed and need to report self-employment taxes on your Federal 1040, the payroll tax does not affect your tax return at all.  If you’re income is similar to last year’s, then you are actually paying more in income tax because the $400 tax credit from 2009 and 2010 is no longer in effect.  However, the payroll tax break you received during the year was likely higher.

So which taxpayers got shafted by the payroll tax cut? If you are a local or state government employee (such as a teacher, police officer, or fireman, etc) and you pay into the state pension system, then you do not pay social security tax.  Last year’s tax credit was available for anyone who had wages, but this tax break only applies if you pay social security tax.   If you didn’t pay social security tax, then you’re not getting the tax break.  Sorry!

If you have any questions regarding tax preparation, please do not hesitate to contact me at .

Wednesday, February 2, 2011

No One Likes Estate Planning

submitted by Brian J. Delaney, Esq.
I have represented many first-time home buyers.  These clients are typically very enthusiastic about purchasing their first home.  I have also helped many clients (as young as 18 years old and as old as 99 years old) with estate planning.  As you can imagine, these clients are polar opposites from my first-time home buyer clients.  I have never had a client say to me, “I’m so excited to sit down and talk about what happens to my property or my kids if I unexpectedly die or become incapacitated!”  It takes some clients months, if not years, to gather the courage to sit down and talk about estate planning. 
I fully understand the hesitancy to talk about the subject.  When I meet with a young couple, I make it a point to them that there is a strong likelihood they will live to see their children and grandchildren grow up.  Estate planning for young people is usually about planning for worst case scenarios.
Over the next several weeks, I will be posting blogs entries about various topics related to estate planning.  However, estate planning is an ugly term.  From now on, I will be referring to it as life planning.  Why life planning?  In addition to determining what happens to your assets when you die, you also need to execute documents such as a durable power of attorney and healthcare proxy in the event you are incapacitated.  If a parent dies, life must go on for his or her children.  Who will become guardian?  Who will manage the inherited property?  Your “estate planning” is really a roadmap for the rest of your children’s lives.
There are two ways to follow my upcoming blog entries on estate planning.  First, you can click here to sign up to receive blog updates by email or you can visit our Facebook page at  If you click “like” on our page, our blog entries will be included in your news feed.
If you have any topic you want us to discuss, please email me at

Thursday, January 27, 2011

IRS Announces Delay on Processing Returns until 2/14/11


submitted by Brian J. Delaney, Esq.

Due to last minute tax changes by Congress, the IRS has announced that some tax returns will not be processed until February 14.  If you itemize your deductions on Schedule A (mortgage interest, taxes paid, charitable contributions, etc), claim the higher education tuition and fees deduction, or claim the educator expense deduction, you will not be able to e-file until the 14th.  For our clients, we will finalize returns but hold off e-filing until we get the green light from the IRS.

All other returns can be filed immediately.

Check out the IRS website for more information here.

Thursday, January 20, 2011


submitted by Brian J. Delaney, Esq.

We are pleased to announce the launch of our new website,!  Between the detailed website content and frequent blog entries, we hope to keep our clients up to date on developments in real estate, estate planning, tax law, and elder law. 

We are also teaming up with a company called LegalVault to offer a secure online document storage system for our clients.  LegalVault offers some exciting features.  Clients are able to upload important legal documents to their account and can access the documents from any computer with internet access.  In addition, clients are provided with a wallet card containing an access code for healthcare providers to access their important healthcare documents such as a healthcare proxy, living will, or even a list of allergies and medications. 

 If there is any topic you want us to discuss in our blog, please do not hesitate to contact us.

The Law offices of Delaney and Delaney assist clients with Estate Planning, Asset Protection, Wealth Preservation, Wills, Trusts, Incapacity Planning, Planning for Children, Special Needs Planning, Estate Administration, Elder Law, Real Estate, in Waltham, Belmont, Watertown, Newtonville, Arlington, Lexington, Auburndale, Weston, Waban, Cambridge, Brighton, Somerville, Newton Highlands,Allston, Boston, Winchester, Wellesley Hills, Chestnut Hill, Medford, Brookline, Needham Heights, Woburn, Wayland, Wellesley, Burlington, Jamaica Plain, Charlestown,Malden, Everett, West Roxbury, Concord, Stoneham, Roslindale, Melrose, Chelsea, in Middlesex County, suffolk County, and Norfolk County, Massachusetts.

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