AMHERST, N.Y. - Financial experts recommend some of you act quickly to protect your money from the "fiscal cliff."
On January 1st, taxes are set to rise for everyone, and the government is required to make drastic cuts to military spending. The combination of the two has many economists predicting we'll sink into another recession unless the President and Congress find a less painful way around it. That is why everyone is referring to the January deadline as the "fiscal cliff."
Although the government is drowning in debt, the President and Republicans in Congress can't agree on how to get us out of it. Taxpayers are stuck in the middle. For example, without a deal on taxes and spending, on January 1st, a married couple earning a combined $50,000 a year will pay an additional $2,200 in payroll taxes.
"If you pay taxes, you will pay more in 2013. Period," said Financial Adviser Joe Curatolo of Georgetown Capital Group.
Even with a deal, Curatolo says some taxes will almost certainly climb anyway. They likely includes some payroll taxes and taxes on gains from investments.
The first thing you can do to protect some of your money in the market or an investment?
"Let's say you know you're going to re-do your kitchen or put on a new roof in the spring, and it's going to cost you $10,000-$30,000 and you're going to sell some investments and may have a gain on them, or pull the money out of an IRA," Curatolo said. "you may want to take a look at it, and talk to your accountant, and do it now in December so you'll do it in a lower tax year than next year."
These taxes also affect those of you with a 401-k or traditional retirement account. If you plan on converting it to a Roth-IRA, consider doing it before January, when the tax penalties are expected to climb.
"Talk to your accountant now," Curatolo warned. "Don't wait until Christmas week because they're going to be very busy, and determine whether you should do any year-end tax strategies."
For some of you, the savings could be hundreds or even thousands of dollars.
The biggest shock, according to Curatolo, may come in early 2014 as you prepare your taxes for 2013. Many of you could end up owing money instead of receiving a refund from the government. So talk to your accountant early next year about your withholding.