Fiscal Cliff taxes for 2013 will affect small business!

By Jeffrey Brooks, CPA, CFP, MBA for JBrooks Wealth Advisors, PC, a Professional CPA and CFP Firm 602-292-2009 Please consult with your professional tax CPA regarding your specific circumstances!

The “Fiscal Cliff” will affect your income taxes and tax rates. The hope is that although there is a deadline before January 1, 2013 that congress will act by Christmas.

If the President and Congress do not act before January 1, 2013, $609 billion worth of tax increases and spending cuts will automatically occur and will push the economy over the “fiscal cliff” and into recession.
There are scheduled tax increases totaling about $500 billion and spending cuts of $109 billion starting Jan. 1st.
My business clients and top executive clients will be paying higher taxes. More proactive tax planning by CPAs will be even more important.

Democrats have one major demand: Ending low income-tax rates for families with net incomes above $250,000. Democrats would use the new revenue from the higher taxes on the rich – around $80 billion a year – to help replace the $109 billion in across-the-board spending cuts.
Republicans likely will seek to shift some of the scheduled spending cuts away from military programs and onto so-called entitlement programs, such as Medicare healthcare for the elderly.
If Republicans agree to raise income taxes on the wealthy – something they have resisted for years – they might try to raise the $250,000 income threshold or shoot for something below the 39.6 percent top tax rate Democrats want.
If Democrats agree to “entitlement” cuts, they may try to protect middle-income beneficiaries and push higher costs onto hospitals and other providers.
Other unknowns: Will Obama and congressional leaders achieve $109 billion in deficit reduction for 2013 to match the looming $109 billion in automatic spending cuts they want to kill? Will they settle for less, as many lawmakers have suggested, or even shoot for more? Also, if the 2013 automatic spending cuts are shoved aside, will Congress also cancel the remaining nine years worth of similar spending cuts that were part of the 2011 deficit-reduction law?
A tentative deal to avoid the Dec. 31 “fiscal cliff” would pave the way for Congress and the White House to agree to work during 2013 on comprehensive tax reform and long-term spending cuts, including major Medicare reforms.
Congressional committees would have at least several months to come up with legislation that would then be voted on by the full House and Senate.
The size of the so-called grand bargain deficit reductions could be in the range of $4 trillion over 10 years.
The backstop would force the triggering of automatic deficit reductions in the event Congress fails to act next year. If this sounds familiar that is because Congress resorted to a similar gimmick last year by creating the severe automatic spending cuts that Congress is now trying to undo. A “super committee” of lawmakers last November was supposed to have found a better alternative, but it failed.

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About Jeffrey Brooks

Jeffrey Brooks, CPA, CFP, MBA since 1976 has specialized in helping clients save significant taxes, help businesses increase their cash flow, revenues and profits while increasing their control and satisfaction. Jeff and his accounting firm sincerely cares about the happiness of his clients.

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Phone: 602-292-2009