Posted at: 01/02/2013 5:14 PM
Updated at: 01/02/2013 5:23 PM
By: Brianna Long
Paychecks Will Shrink Despite Fiscal Cliff Compromise
(ABC 6 NEWS) -- A deal has finally been reached. Lawmakers have put together a plan to avoid the so-called fiscal cliff. It was a combination of tax increases and spending cuts that many worried would put America back into a recession.
After waiting an extra day to vote on the fiscal cliff package, Tuesday night the House did gather enough votes to pass it.
As many households have been paying attention; so too have local accountants.
"From our standpoint, unfortunately, they waited 'till 2013 to do this. So it would have been very nice to know in December of 2012, so we could have properly done year-end planning, to know what the actual rules are going to be," said Mark Paczosa, a CPA at Smith Scafer and Associates in Rochester.
Most of the Bush-era tax cuts have been extended. However, the social security tax cut, was not.
"Say, for instance, you're making about $50,000. So $50,000, you're going to pay 2% additional payroll taxes. That's $1,000," said Paczosa.
So let's say you're making closer to $25,000, and get paid twice a month, you'll notice about $20 less per paycheck.
Another big part of the deal was unemployment. Benefits will be extended for roughly two million Americans out of work. The fiscal cliff was no doubt controversial. Both of Minnesota's senators voted in favor of it. Both of Iowa's did not.
"We have a spending problem, not a taxing problem. But nobody paid attention to the spending problem," said Iowa Senator Chuck Grassley.
That spending problem will need to be addressed in less than two months. That's when the nation will go over the debt ceiling; meaning a date is already set for another crucial, financial deal to be worked out.