MANKATO — The end of the year is Marie Dranttel’s time to plan for her clients, but the St. Peter CPA said that’s been a bear of a job with the “fiscal cliff” debate unsettled in Washington.
“It’s hard to plan for the future when you don’t know what the rules will be. It’s just going to be a mess,” said Dranttel of the uncertainty surrounding automatic spending cuts and tax increases that kick in Tuesday if Congress fails to pass legislation.
The automatic changes will trigger tax increases and spending cuts that would slash the federal deficit by $503 billion next year. The Social Security tax, known as FICA, will jump 2 percent, more people will have to pay the more costly Alternative Minimum Tax and the capital gains tax will jump to 20 percent, among other impacts.
“It’s going to hit everyone, even the kid bagging at Hy-Vee who is going to see a 2 percent increase in FICA. That’s a lot of money to a 17-year-old bagging groceries,” Dranttel said.
She’s been working with much larger figures for many of her business clients, particularly farmers. Rather than the traditional strategy of shifting some income into the next tax year, she’s been moving the maximum amount of farmers’ income into this year’s taxes. That will get them a lower tax payment than they’d see in 2013, but it also pulls more cash out of their pocket now.
“They’re paying some significant amount for taxes this year.”
And she’s been advising farmers who’ve been considering selling high-priced farm land to do it before capital gains taxes jump.
“I just had a land sale where the difference between selling this year and next was almost $90,000 (less in taxes),” she said.