Financial Planning For The Fiscal Cliff

HUNTSVILLE, Ala. (WHNT) – Congressional leaders are still scrambling to come to a compromise before automatic tax increases and spending cuts go into effect on January 1st.

But while Democrats and Republicans try to find middle ground, some taxpayers are getting anxious about the impending tax rate hikes.

“If a person has a smaller net paycheck they are going to feel like they can spend less. They’re going to have to cut back on expenditures be more frugal, and that’s the concern that’s not something the us economy needs right now,” said Don Nalley, a Certified Personal Accountant.

Nalley says clients have already expressed concern about the hikes to income, capital gains, dividends, and FICA, and estate taxes.

Nalley suggests those with investments sell their assets.

“You can always reinvest,” advises Nalley. “You can sell the stock, then reinvest at the same amount and you’ve paid capital gains at today’s rates as opposed to the higher rates next year.”

For those more concerned about take home pay, Nalley suggests looking at your past tax returns.

“A lot of times individuals who are working and don’t have a lot of assets get refunds in their tax returns. What I’d consider doing is looking at my tax return and if I did get a refund, adjust my withholding to overcome some of this increase in taxes.”

If the tax hikes do go into effect, Nalley says most taxpayers will just have to wait for their paychecks to see how big of a financial hit they were dealt.

House members will return to Capitol Hill on Sunday, and hope to begin voting on a plan that night.