In about 17 days, if elected officials in Washington don’t act, we’ve learned that we will go over a fiscal cliff and Wednesday Rotary members learned from a certified public accountant what that will mean for them individually.
Tom Jennings, a Bartow Rotary member since 1972, who owns an accounting firm in Winter Haven, told people the term fiscal cliff would be more accurate if it was called a physical hill or slope and while on Jan. 1 we may still not know what will happen, there are “still some real consequences we will see from it.”
“The Congressional Budget Office says the ‘fiscal cliff’ would drive the U.S. economy back into recession next year and result in a jump in the jobless rate to 9.1 percent by the end of 2013. Economic output would drop by 0.5 percent in 2013 if Congress fails to act,” he said and Florida 30,000 jobs could be wiped out, consumer spending would be stifled and taxes for just about everyone would rise.
“There is some pressure on politicians to do it and do it right,” he said. “I’m not sure they will do it right.”
He said with the proposals that are out there – which include ending the Bush Era tax cuts, reduction in defense and domestic spending and the debt ceiling, “there is not one person in this room that won’t be affected.”
“Let me tell you how the fiscal will affect you. I have a modest income and I want went in and found this could cost me about $10,000 a year,” he said.
He added this includes changes that will come for those with investments and capital gains tax. While that may be something many don’t have, most people have 401K accounts that operate on the public markets and that could affect them.
Jennings cited an article from The Washington Post, copies of which laid on each table. He said people should follow what is in there in order to save money.
For individuals, tax rates may be lower this year than they’re likely to be in future years.
Save in taxes by realizing income in 2012 and delaying deductions until 2013, instead of following the more traditional practice of postponing income and accelerating deduction, the article said.
He said decide whether you want sell appreciated stock or those with losses before the end of year.
“Take a serious look at that,” he said. “Next year it could cost more in taxes.”
The article said to max out your retirement plan contributions. Set aside $5,000 in an IRA.
If you’re trying to increase your itemized deductions for 2012 but you’re short on money, pay with a credit card by the end of the year and deduct the expenses on your 2012 tax return.
Jennings offered his Rotary members a list of things to do before the end of the year to save some money.
Because capital gains and dividend rates may increase from 15 to 20 percent, consider selling security in which you had gains this year.
If you are considering acquiring business assets do so before 2013 as 2012 depreciation rates are higher than 2013.
Higher income taxpayers should consider accelerating income into 2012 to avoid higher income tax rates in 2013.
If you make year end charitable contributions, consider whether you should defer the contribution into 2013 based on your take on the resolution of the ‘fiscal cliff’ compromise.
To see more on the potential cost to you of the proposals he recommended people visit calculator.taxpolicycenter.org on the Internet.
DROP IN THE BUCKET: At Wednesday’s Rotary Club meeting boxes of toys were brought in from handsful of business collecting toys in the Toys for Tots Christmas drive. The drive, which is organized by the U.S. Marines, is headed by Rotarian Hazel Sellers, who plans to deliver the goodies to the drive in Auburndale. But because the deadline came on Friday, she emphasized that people shouldn’t stop giving if they want to contribute. The donations will be used next year if it’s too late for this year. Rotary usually collects several hundred toys in its participation in the drive every year, she said.