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Fiscal Cliff: What It Means For My 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.

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.

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Iron Mike December 29, 2012 at 02:36 PM
To all the Democrats who dutifully voted for Obama a 2nd time – even AFTER he'd raised our Federal Debt $5 Trillion in 4 years,... ...well, I hope you can hang onto your jobs,... ...I hope you'll be comfortable with less take-home pay,... ...I hope you feel he'll be spending your tax $$ on worthy stuff, - like flying around the country on Air Force One still giving campaign speeches,... … really, I do hope the best for you. BUT, don't say you weren't warned. Of course, when we warned you – you called us 'racists', - and you kept blaming everything on Bush. Gee, look at the bad economy Obama JUST inherited – from himself! Who's fault will it be if it gets worse? Is there ~ any ~ chance that he wants it to get worse?

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