Many Americans have been concerned about the “Fiscal Cliff” and I even wrote about how it was going to take a Christmas Miracle to save us from going overboard. However, one common misperception about the cliff is that it only applies to 2013 taxes.
However, according to the Tax Policy Center, approximately 28 million families would owe the IRS $86 billion more than they anticipated for this year.
Essentially, most Americans would face the “Alternative Minimum Tax,” which is imposed at a nearly flat rate on an adjusted amount of taxable income. The present AMT was enacted in 1982 and limits tax benefits from a variety of deductions.
The concern with having this retroactive for 2012 is that that taxpayers may not have set enough aside to pay their taxes or had enough withheld. This could cause greater challenges for an already struggling economy.
The President and lawmakers continue to work through the weekend to hopefully reach a deal that would save us from going off the cliff. Many experts are now speculating that we will go over the cliff and that Congress would potentially reach a deal in early 2013 and make it retroactive.
In the meantime, come on into Liberty Tax® and we would be happy to help you plan for your taxes.
It is nearing the end of the year, so you do have time to make some last minute donations to help your deductions. Feel free to donate any items you may have updated (get a receipt!) and of course financial donations to qualified charities would help you pay less on your tax bill.