The Washington-imposed financial headache goes beyond higher taxes. Due
to the action on Capitol Hill certain industries could be hit particularly hard
by budget cuts and millions of taxpayers could be held up in filing their 2012
returns.
When ringing
in the New Year, it will be difficult not to think about the consequences of
Congress’ 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:
Tax Hikes
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. Capital gains would be taxed at 20 percent rather than 15
percent. Dividends would be taxed like regular income. And the estate tax would
expand to include more and more families.
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. And without an agreement to do
otherwise, the alternative minimum tax would expand to 28 million more
taxpayers.
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.
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. The other half
will affect other federal departments, possibly causing some federal workers to
be furloughed or laid off. 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. The IRS was too. 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.
For more
information about tax planning in Torrance, CA, please visit my estate planning
website.
Reference: Fox
News (December 25, 2012) “How Washington’s failure to reach a tax deal
could spoil your 2013”