What does the Fiscal Cliff mean to You?

What does the Fiscal Cliff Mean to You?

More money to government, less money in your pocket!

There are literally hundreds of tax increases scheduled to take place prior to filing your 2012 income tax returns. Here is just a sampling of what you may look forward to…

·        Bye-Bye Bush-era Tax Rates.

If there is no resolution in Congress, individual income tax rates are scheduled to rise by at least 5%! 

 

•         Hello Alternative Minimum Tax!

 

The AMT patch disappears, causing more Americans than ever to be subject to the Alternative Minimum Tax (a flat tax at 28% which effectively eliminates the advantage of the 15% bracket)

 eeCPA’s calculations – Based upon our preliminary tax planning calculations for our client base, we have determined that AMT will add approximately $4,500 on to each client’s 2012 tax bills. However, we do anticipate that some sort of patch will be enacted by year-end (or retroactively), since the IRS came out to warn Congress that taxpayers would not be able to file their returns until late March, without the extension of a patch.

We will communicate new law changes, as soon as we receive definitive guidance!

 ·        Estate Tax: Bye-Bye $5 Million Exemption, Hello 55% tax rate!

Unfortunately, the $5 Million exemption is expected to revert back to $1 Million. Beginning next year (2013), those dying with worth more than $3 million in total assets will be taxed at rate of 55% (up from 35% through the end of this year), since legislation has not been enacted. We are working with several clients to make year-end gifts to reduce their potential estate tax burden.

·        Every US Wage Earner will pay 2% more in Social Security Tax beginning next week. The 2% reduction in effect for 2011 & 2012 is scheduled to expire on 12/31/12. We do not expect that this reduction will remain in effect