Accounting News

Tuesday, October 30, 2012
AICPA Focuses on the Fiscal Cliff

fiscal cliff
We have been talking about the fiscal cliff for several months now. As a brief reminder -- the fiscal cliff refers to the large number of tax code that is scheduled to expire at the end of this year. It includes tax cuts from the Bush administration and also tax cuts from the Obama administration. This is coupled with spending cuts that are scheduled to go into effect on the first of next year.

Many economists believe that if they are not altered it will lead the US economy back into recession. Some people concerned about the national debt see it as the only way to reign in out of control spending. In the end it is a political hot potato that no individual or party has shown the leadership to fix. Everyone is now resigned to waiting for the lame duck congress to address after the election.

Beyond the issues with an economy in recession; this has a very real impact to the average tax filer. Whether tax rates are increasing dramatically will impact their tax planning decisions. A good accountant or financial planner will work with you on two different plans. One will be if the tax cuts are extended past this year. The second is if congress fails to act and tax rates are allowed to go back to their pre-Bush levels. If there is a plan in place than the changes can be made quickly to reduce the tax liability. As the boy scouts always say, "be prepared."

We are not alone in feeling anxious about what might happen, if anything. The AICPA has set up a website devoted to the topic. They have information on what cuts are going to expire and a tool to help CPAs navigate the possible changes.

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