As lawmakers sort through the fiscal cliff, WFMY News 2 is asking questions about how this situation will affect you.
There are two things going on. Both cost us money. If Congress doesn't cut a deal, we will all pay an average of $2,000 more in taxes. Then, consider the two-percent payroll tax cut which expires at midnight. No matter what happens with the fiscal cliff, congress is not expected to keep the payroll tax cut in place.
"There will be some form of a tax increase. I guess we'll know when the dust settles later this month about how it's all going to come out," Kevin Robinson of Robinson Tax & Accounting Services said.
So, what can you do? Robinson says, do the math now to figure out how much a two-percent pay cut will cost you.
"You may want to have fewer exemptions - more taxes taken out - in 2013 so you don't wind up owing again at the end of 2013," Robinson said. "The IRS has been warning Congress for quite some time - you need to get your act together and fix this. So, it could delay filing and refunds for 2012, too."
You could notice a smaller paycheck as early as this week. Others may not see a change until the middle of January. It all depends on your employer's payroll procedures.
However, experts tell WFMY News 2 that making snap decisions is not a good idea.
"The key thing here is to know that you need to be living within your means...The better you can position yourself to live within the income that is coming in, the easier it will be to face what's coming down the line," Michael LoNano of LoNano Financial Advisors, Inc. said. "We don't think you should do anything rash based on this. If you have money under management, let your professionals make those judgment calls. But, doing extreme things, like moving all your money to cash because of this event, we think, would be a mistake because the market could quickly react based on some kind of a deal coming out." (Securities offered through Securities America, Inc., Member FINRA/SIPC; Advisory Services offered though LoNano Financial Advisors, Inc. Securities America, Inc. and LoNano Financial Advisors, Inc. are unaffiliated.)
WFMY News 2