When ringing in the New Year tonight, it will be difficult not to think about President and Congress ... and the consequences of their failure to negotiate a solution to the looming fiscal crisis.
A recent Fox News article provides an overview of "How Washington’s failure to reach a tax deal could spoil your 2013."
A few of the topics identified in the article include:
By now, everyone knows the Bush-era tax rates are slated to roll-back to pre-2001 rates. This means families making between $50,000 and $75,000 could see taxes jump roughly $2,400. OUCH! Capital gains would be taxed at 20 percent rather than 15 percent. OUCH! Dividends would be taxed like regular income. OUCH! And the estate tax would expand to include more and more families. [Note: Only good news for those of us who are estate planning attorneys, except we will be caught in these "tax jaws" too.]
In addition, a short-term Social Security payroll tax cut is also likely to expire, with the rate rising from 4.2 percent to 6.2 percent. OUCH! And without an agreement to do otherwise, the alternative minimum tax would expand to 28 million more taxpayers. NO!
So, without an agreement in the next few days, the New Year will bring with it the largest tax increase in American history – a $536 billion tax increase. UNBELIEVABLE.
But wait, there's more.
Spending Cuts, Threatened Jobs
Along with the steep tax hikes, 2013 will bring the first installment of $110 billion in government spending cuts. About half of the cuts will focus on defense spending, thereby threatening the thriving defense industry, let alone national security. The other half will affect other federal departments, possibly causing some federal workers to be furloughed or laid off. On the other hand, this likely is a good start. The Congressional Budget Office predicts the country could lose up to 3.4 million jobs.
IRS Filing Frustration
American taxpayers were not the only ones hopeful Congress would come to a fiscal agreement before the end of 2012. Our friends at the IRS were, as well. In fact, the IRS assumed that Congress would avert the alternative minimum tax provision so it failed to make necessary changes to its computer system. Now, if nothing is done, more than 100 million taxpayers will have to wait until mid-March to file their 2012 tax returns.
To see all the ways the failure of Washington to reach a compromise could impact you, read the full article here.
Reference: Fox News (December 25, 2012) "How Washington’s failure to reach a tax deal could spoil your 2013"