As people head back to work after the holidays, many are wondering what might happen to their paycheck. If the country heads over the fiscal cliff, taxes on take-home pay could go up.
“Any drop would be a big hit,” said taxpayer Rachel Gleason.
If Congress fails to make a deal payroll taxes are set to increase on January 1, which could mean a 2 percent cut to workers. It’s a reduction many families say they’re not prepared for.
“I mean it’s tight now, so it’s going to be a little bit tighter so we’re going to have to cut down on our monthly expenses and make sure that we don’t be as frivolous or anything like that,” said taxpayer Justin Carter.
For example, if you make $50,000 a year, you can expect to lose about $83 a month, or $1,000 a year.
“To prepare, you can only adjust your budget, you can’t change the tax law, it is what it is,” said Certified Public Accountant Mark Patrick.
Patrick recommends that families start crunching the numbers now, rather than play the game of wait-and-see.
“Most people need to stay in tune with their tax preparer, be aware of what’s going to happen. If you’re living paycheck to paycheck, plan on having less money in your first paycheck, maybe several pay checks into the new year, because any change that’s made will not be done immediately.”
Families with children could face another hit from another provision of the tax code is also slated to expire on Jan. 1: a doubling of the child tax credit from $500 to $1,000 per child per year.
“If one child, that’s a significant difference in your tax, on your tax return," Patrick said. "(If) you’ve got multiple children, it’s a significant number."