The Fiscal Cliff Explained
“Fiscal cliff” is the popular shorthand term used to describe the conundrum that the U.S. government will face at the end of 2012, when the terms of the Budget Control Act of 2011 are scheduled to go into effect.
Among the changes that were set to take place at midnight on December 31, 2012 were the end of last year’s temporary payroll tax cuts (resulting in a 2% tax increase for workers), the end of certain tax breaks for businesses, shifts in the alternative minimum tax that would take a larger bite, a rollback of the "Bush tax cuts" from 2001-2003, and the beginning of taxes related to President Obama’s health care law. At the same time, the spending cuts agreed upon as part of the debt ceiling deal of 2011 - a total of $1.2 trillion over ten years - were scheduled to go into effect. According to Barron's, over 1,000 government programs - including the defense budget and Medicare are in line for "deep, automatic cuts." Of the two, the tax increases were seen as the larger burden for the economy.
The Fiscal Cliff Deal
Three hours before the midnight deadline on January 1, the Senate agreed to a deal to avert the fiscal cliff. The Senate version passed two hours after the deadline, and the House of Representatives approved the deal 21 hours later. The government technically went "over the cliff," since the final details weren't hashed out until after the beginning of the New Year, but the changes incorporated in the deal were backdated to January 1.
If you filed your taxes and you are expecting a refund, chances are you'll be waiting a few weeks longer for that money, and it all has to do with the fiscal cliff dilemma that took place in Washington recently.
At H&R Block, tax payers are hoping for the best, and tax preparers are staying busy!
"They're coming in to get their taxes filed so they can get their money back as soon as they can," said Stacey Stocker with H&R Block.
The Internal Revenue Service could delay those refund checks this year because of recent changes to the nation's tax laws.
"A lot of them are later this year because of the fiscal cliff. Congress passed those tax bills the first week in January," said Stocker.
The IRS had to reprogram its computers causing the delays, and some people are not happy.
"It would be frustrating, when you file you are expecting that money quickly. So that means more debt and bills delayed," said Toni Wyant of Grand Island.
Other tax payers say the money is already spoken for in advance, so any delays could be stressful.
"I have some medical bills that need to be paid that the tax refund will go to. Also property taxes, this is a way I can put a chunk of money to pay more taxes later. Isn't it funny I use a tax refund to pay taxes," said Jill Liske-Clark of Grand Island.
Accountants at h&r block say some of their customers live paycheck to paycheck, so any refund is a relief.
"There are a number of people out there that are relying on it to take care of things. Make sure they have the kids taken care of, if there is some things that they need. Maybe even fixing up a car they need for transportation back and fourth to work right now," said Stocker.