Making Sense of the Fiscal Cliff

fiscal cliffAfter months of debate about the looming fiscal cliff, Congress has finally struck a deal. But, what exactly does that mean for business owners?

The deal does affect business owners in a variety of ways. Here are a few of the key tax implications worth considering as we move forward into 2013.

  • The first change that has received lots of media attention is the tax increase for those making over $400,000 ($450,000 for couples). For business owners who have a total income over this dollar amount, the tax rate will jump from 35 percent to 39.6 percent.
  • The so-called “tax holiday” on social security which cut the percentage workers paid to 4.2 percent has now gone back to the higher rate of 6.2 percent. If you have employees on your payroll, you will need to check with your payroll provider or accountant to make sure that this change is reflected on employees’ checks.
  • The rate on estate taxes is now rising from 35 percent to 40 percent – keeping in mind that the first $5 million in a person’s estate is tax-free.

For many small business owners who are making less than $400,000, the fiscal cliff may not have a substantial impact on taxes for the next year. However, it’s worth discussing with your financial planner or accountant to make sure that you will not experience any unexpected surprises when it’s time to file taxes.

Comments
One Response to “Making Sense of the Fiscal Cliff”
  1. fred sheats says:

    Without spending cuts, any tax increases will only slow growth. People remained scared of the future, because they know that the US remains on an unstainable financial path. Tough times call for tough decisions.

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