The Fiscal Cliff and
American Taxpayer Relief
Act of 2012
• Name and company
About the PICPA
• PICPA – Pennsylvania Institute of Certified
Public Accountants
• The PICPA is a professional association of
more than 20,000 members working
together to improve the profession and
serve the public interest.
What Is the Fiscal Cliff?
• “Fiscal cliff” is a phrase coined by Federal
Reserve Chairman Ben Bernanke.
• The term summarized the possible impact of
large tax increases and spending cuts facing
the U.S. at the end of 2012.
The American Taxpayer Relief
Act of 2012
• Signed into law Jan. 2, 2013
• Addresses the tax issues of the fiscal cliff
Expiring Tax Breaks
A series of tax breaks were scheduled to expire,
including:
• American Opportunity tax credit
• “Payroll Tax Holiday”
• Alternative Minimum Tax patch
• And more
Expiring Tax Breaks
• Some were extended through 2013
• Some were extended for five years
• Some were permanently extended
Expiring Tax Breaks
As a result of the Act:
• American Opportunity tax credit
– The American Opportunity college tuition
tax credit was extended through 2017.
Expiring Tax Breaks
As a result of the Act:
• “Payroll Tax Holiday”
– The 2 percent cut in Social Security tax
was not extended. All wage earners will
see a rise in their withholding beginning
Jan. 1, 2013.
Expiring Tax Breaks
As a result of the Act:
• AMT patch
– A permanent Alternative Minimum Tax
patch was passed, including indexing for
future adjustments.
More Tax Information
As a result of the Act:
• Individual income tax rates stay the same, with
an added tax bracket of 39.6 percent for highincome earners ($400,000 or $450,000-joint).
• Estate tax rate has gone up from 35 percent to
40 percent for estates over an inflation-indexed
$5 million ($10 million for couples).
More Tax Information
As a result of the Act:
• Personal Exemptions and Itemized Deductions –
Previous limitations reinstated for 2013. Phaseout
increased to $250,000 ($300,000 - joint).
• Capital Gains and Dividends – Provisions were
extended. Qualified dividends to be taxed at long-term
capital gains tax rate; new rate of 20 percent applies
to taxpayers in the 39.6 percent tax bracket.
Spending Cuts
The large spending cuts set to begin in 2013
were postponed for two months.
• Defense/government contracts - Delayed
• Other budget cuts – Delayed
• Medicare payments – Extended for 1 year
• Unemployment Compensation – Extended
through 2013
Take Action
• Tax planning is a year-round undertaking.
• Consider how potential tax increases and/or
spending cuts may effect you.
• Let the members of Congress know your
position on these important issues.
Take Action
• The American Institute of Certified Public
Accountants has more resources:
– Total Tax Calculator
www.totaltaxinsights.org
– What’s at Stake
www.aicpa.org/WhatsAtStake
Planning Resources
Visit www.ineedacpa.org
• Ask a CPA
• CPA Locator