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Fiscal Cliff: What Does It Means For My 2013 Paychecks?

The financial deadline looms in Washington, with no deal yet made. Check this primer, and share your questions and thoughts.

With Christmas 2012 over, one reality check is that the looming "fiscal cliff" deadline is just a few days away. On December 31, tax cuts dating to the George W. Bush presidential term are scheduled to expire, and President Obama and congressional leaders have not reached a compromise.

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Do you think President Obama and Congress will reach a "fiscal cliff" deal? How would a tax increase affect your spending? Share your thoughts in the comments below.

Apparently, though, there will be no immediate change in withholding tables, while the situation is unresolved.

According to John Tuzynski, the IRS’ chief of employment tax policy, employers should continue to use 2012 withholding tables and personal exemption amounts until further notice.

And CNBC.com reported that employers are planning to withhold income taxes at the 2012 rates, at least for the first one or two paychecks of the year, said Michael O'Toole of the American Payroll Association.

However, a caveat: If employers don't withhold enough taxes in January, they will have to withhold more later in the year to make up the difference. Otherwise, taxpayers could get hit with big tax bills, and possibly penalties, when they file their 2013 returns.

Check in with some local financial planners for advice:

Edward Jones - Financial Advisor: Tracy L Burt

  • 1255 N. Ankeny Blvd., Ankeny

Iowa Financial Partners

  • 2501 S.E. Tones Dr., Ankeny

One Source Tax & Accounting

  • 210 N.E. Delaware Ave., Ankeny

Or any of these other financial planners or accountants found in the Patch directory.

If no compromise is reached by the president and Congress, the hit will be noticeable in many workers' paychecks.

A taxpayer making between $50,000 and $75,000 would get an average tax increase of $2,400, according to the Tax Policy Center, a Washington research group. If the worker is paid biweekly, that's about $92 a paycheck.

About 75 percent of taxpayers got tax refunds in 2012, averaging $2,707, according to the IRS. And many people rely on tax refunds to pay bills or make major purchases.

"The reality is, the vast majority of Americans do live paycheck to paycheck and that tax refund is their most significant payday of the year," said Bob Meighan, vice president of TurboTax, an online tax preparation service.

Kurt B. December 30, 2012 at 01:21 PM
There are plenty of lessons to learn from this fiasco. Among them are : - the tax code definitely needs fixing. It takes somewhat of an expert to wade through the maze of questions on a typical return. The older you are, the more difficult it becomes ( not due to age, but due to ones complex financial situation ) - it is clear Mr Obama is not much of a negotiator. He wants it his way , period. And , Reid whimpering like a little puppy saying that the Republicans haven't done anything in their camp is a disgrace to this country. - if we do nothing to control the ridiculous gov't spending, we are headed for something more serious than a cliff. A bottomless volcano comes to mind. - if we truly have almost 50% of the population paying no fed income taxes, this spells disaster right there. Sure, they pay some taxes ( sales tax, property tax, etc. ) but the portion that runs the government is called Fed income tax . If that is zero from 1/2 of the population, that is a huge disaster. - just think of our debt this way : when our national debt reaches $20 trillion, the interest alone on this , at a nominal 5% rate, is $1 trillion a year. If we can't pay the interest on our debt, the only option is to give possessions to our debtors ( like maybe Hawaii or Alaska ). Don't think that will happen ? - just wait and see. - the bottom line is : this country is in a financial mess and we will not get out of it playing the kinds of games that Washington has exhibited on this.

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