Much has been debated about how long it will take for taxpayers to feel the affects of going over the Fiscal Cliff. Yes, income tax rates could go up or down or popular deductions and credits limited or eliminated all together. While these scenarios could take months or years to feel, the average worker is most likely going see less in their weekly paycheck as soon as the calendar flips to 2013.
The IRS has just delayed releasing the income tax withholding tables for 2013.
No matter what Congress does to address the year-end “fiscal cliff,” it’s already too late for employers to accurately withhold income taxes from January paychecks.
Social Security payroll taxes are set to increase on Jan. 1, so workers should immediately feel the squeeze of a 2 percent pay cut.
But as talks drag on over how to address other year-end tax increases, the Internal Revenue Service has delayed releasing income tax withholding tables for 2013.
As a result, the American Payroll Association says employers are planning to withhold income taxes at the 2012 rates, at least for the first one or two paychecks of the year.
So while employee’s tax with holding may remain the same at least for the first couple of week, that doesn’t mean they will stay the same after that. Bottom line is there are still a lot of moving pieces that must be settled on and deciphered before we can accurately predict what the consequences will be. However, paychecks will be less due to the Social Security Payroll tax increase almost immediately unless congress can do in 5 days what they couldn’t do in 2 years (don’t count on that Christmas Miracle). And the tax withholding charts will also tell us if we are taking even less home in our paychecks and/or less home in our income tax refunds. Stay tuned…