Don’t look to your tax planner for help in preparing a 2010 tax strategy, at least not until Congress quits the political games and resolves the issue on tax cuts.

At the end of 2010, tax cuts enacted during the Bush years (2001 and 2003) are scheduled to expire, which will increase federal income tax rates for some Americans. Also at stake are taxes on dividends and capital gains, as well as tax credits and deductions.

Most Democrats and Republicans agree the middle class should not have to face tax hikes. But what about high-earners, families with income above $250,000 and singles above $200,000? Therein lies the battle.

The Obama administration favors allowing the Bush tax cuts to expire for wealthier Americans. Treasury Secretary Timothy Geithner this week argued the Administration plan would raise billions for the government with minimal impact on the economy.

“The top 2% are the least likely to spend those tax cuts, certainly not in comparison to the 98% of Americans who make less than $250,000 per-year,” said Geithner.

Republicans, though, are firmly opposed to the Administration plan. “We don’t believe anybody should face a tax hike, particularly in a recession,” said Don Stewart, press secretary for Republican Senate Minority Leader Mitch McConnell.

“It’s clear they want to hold hostage tax cuts for the middle class for their desire for more tax cuts for the wealthy,” countered Jim Manley, spokesman for Democratic Senate Leader Harry Reid.

As the tax rate deadline ticks, professional tax planners are growing impatient.

“They’re dysfunctional,” complained Evan Snapper, financial advisor with Anchin Block & Anchin. “It’s terrible. It’s a political game that’s hurting the country.”

Usually accountants advise clients to defer income and investment gains until the following year — why owe taxes now when you can put them off?

But the possibility of higher tax rates in 2011 calls that logic into question.

“It’s tax planning turned on its head,” said Doug Flynn, a certified financial planner at Flynn Zito Capital Management.

Because of the uncertainty, planners can’t yet advise clients whether to sell real estate, stocks and bonds or to convert traditional Individual Retirement Accounts into Roth IRAs, which requires payment of taxes on investment gains.

“It’s putting us almost in a standstill. We’re trying to get our ammunition ready, but we’re not certain what ammunition to load,” said Steven Bandini, a certified public accountant at Zapken & Loeb.

And for entrepreneurs who have to worry about both business and personal income taxes, it’s added an extra layer of uncertainty on top of the sluggish economy.

New York business owner Ellen Donath says she’s won’t even consider hiring additional staff, until the issue is resolved because she’s unsure of whether more of her company’s revenue will have to go for taxes.

“You don’t have a clue of what you can do,” said Donath, who runs Donath Communications, an advertising, marketing and design firm. “When you know what the rules of the game are, then you can play the game.”

source: money.cnn.com

John McCain believes that taxes should be simple, low and fair. His plan calls for cutting taxes on the middle class, being pro-growth, pro-innovation and senior friendly. His plan also includes eliminating wasteful spending, reforming Washington, address social security, lowering unemployment, removing trade barriers and reforming health care. Here are high level actions he proposing to take if he is elected president of the United States:

Elimination of Alternative Minimum Tax (AMT)
25 million middle class families are effected by the AMT Tax. According to John’s proposal, the permanent elimination of this tax will save a middle class family with children, who would have to pay AMT Tax, an average of $2,700.

His plan also calls for cutting the corporate tax rate from 35% to 25%. In recent years, U.S trade partners have lowered their rates, which in effect, have made America less competitive. He also proposes keeping tax rate low to provide better opportunities for U.S. entrepreneurs.  In the same light, John believes that low taxes on dividends and capital gains will promote savings and stir investment into innovative, high-value uses.  His plan also includes allowing first-year deduction of expenses on equipment and technology. This action will dramatically benefit America’s heartland, especially in cities like Cleveland and Detroit.

His pro-innovation tax cut proposition is to ban Internet and Cell phone taxes. It also calls for simplifying the tax code by establishing a Permanent Tax Credit equal to 10% of wages spend on research and development (R&D). This Permanent Tax Credit provide incentive for innovation while providing confidence in making R&D investment decisions.

The McCain tax plan calls for lowering Medicare premiums for the elderly by taking actions to reform the Medicare system. His plan addresses the need to reduce health care costs and control increases in premiums while preserving high-quality care.

John acknowledges that the spending in Washington has gone beyond being irresponsible; he cites than 20% of government programs are receiving failing grades. His ideas on this subject are to stop Pork-Barrel spending and waste by invoking the line-item veto of such bills. He also would address the wasteful spending in defense and non-defense programs.

Mr. McCain believes in lowering barriers to trade, so that American workers can take advantage of globalization. With 95% of the world’s customers outside the United States, we need to level the playing field by engaging in multilateral, regional and bilateral efforts to reduce trade barriers.

It is critical to keep American workers competitive by educating our youth and rewarding schools that demonstrate excellence.

Unemployment insurance is also an area that John proposes to modernize by providing retraining, relocating and assisting workers who have lost a job. He also believes in strengthening our community colleges and technical training institutes.

Finally, John is committed to comprehensive health care reform by addressing the rising costs that threaten families’ budgets, business competitiveness, and government programs.