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Fiscal Cliff: What It Means For Your 2013 Paycheck

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 Dec. 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.

There is panic in Washington as threats of another recession and a jump in unemployment looms.

Of course, that means tax bills would increase for many middle- and upper-class taxpayers. And that means paycheck withholding for many workers would change, leaving them with less take-home pay in the new year.

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.

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.

College Planner January 02, 2013 at 04:04 AM
I am thoroughly disgusted with our congress...a 17% approval rating...yet the ignorant masses keep voting these thieves in. Well America...when the pain gets bad enough, you can look in the mirror at the problem...and tip your hat...if you still have one.
Shripathi Kamath January 02, 2013 at 05:31 AM
Ah, blaming the ignorant masses which is the moral thing to do since you belong to a different group -- one with common sense that emphasizes personal responsibility by blaming ignorant masses. I hope you let your Congressman (John Campbell, is it?) that he is a thief.
fact checker January 02, 2013 at 05:46 AM
They????
met00 January 02, 2013 at 05:53 AM
Dan, education IS my business. Heck, I have an awarded patent on Computer Adaptive Diagnostics for Education that I co-authored. When it comes to what do we need to do to fix education, it's not just my passion, I AM actually one of the experts in the field. :-) The current method of education says; if you are 7 years + 0 days to 7 years +364 days old you can be put in a class with other students in that groups and all of you can be taught the exact same information by the exact same method and learn at the exact same rates. Now there are so many different holes in that methodology that ensure that it fails, but it does provide an easy way for a system to provide a minimal education to a specific group of students. The premise is that under this system they teach to the 7yr+180day level and those above that level will get it and be bored and those at that level will get it and those under that level will get it somewhat. The problem is that education is generally a building block process in what you learn next is based on what you already know, and if there are holes that are not closed, you can't build on that base. The solution is JIT (Just In Time) education where the student undergoes diagnostics that quickly define where the "holes" are so they can be closed and the student will have the proper foundation for the next educational step. Not vouchers or charter schools, but individualized instruction teaching what needs to be taught when the students ready.
JustUs January 02, 2013 at 07:07 AM
The ones who design the educational curriculum and their bosses. Why wouldn't they teach financial literacy in a society that is predicated upon financial literacy. Connect the dots. It makes no sense. If it makes no sense and doesn't pass the stink test - it's an intentionally broken system.

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