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At the year's end, a slew of tax changes

Americans' taxes will rise in a few weeks. Though the direction is clear, the exact amount is yet to be determined.

More than a dozen tax cuts are set to expire and a couple of new taxes are scheduled to land on Dec. 31. Combined, they would affect nearly 90 percent of taxpayers, with the typical household's tax bill rising by about $2,000 in 2013, according to the nonpartisan Tax Policy Center. One-percenters would see their taxes rise an average of $121,000.

On Tuesday, Congress will reopen discussions about how to deal with the combination of spending cuts and tax increases looming at year's end, and maybe even dip a toe into a broader tax overhaul.

"It would be bad for the economy and it would hit families that are already struggling to make ends meet," President Barack Obama said on Friday of the scheduled increases in taxes. "While there may be disagreement in Congress over whether or not to raise taxes on folks making over $250,000 a year, nobody — not Republicans, not Democrats — want taxes to go up for folks making under $250,000 a year."

While legislators are expected to try to reverse or temper many of the scheduled tax increases, at least a few appear to be a fait accompli. Accountants are expecting a flurry of frantic calls as clients rearrange their affairs to minimize the blow.

"I don't expect to have any respite from now till the end of the year," said Robert Willens, the president of his tax and accounting practice in New York.

At least two categories of tax increases are widely expected to materialize in some form.

A payroll tax cut given in the 2011 and 2012 calendar years — which was intended as a temporary stimulus — is set to expire, and so far both Democrats and Republicans seem ready to let that happen, although there could be some provision made to ease the pain for the lowest-earners.

The lapsing payroll tax cut affects everyone who works, or about three-quarters of all tax filers. A household in the middle quintile, roughly between $40,000 and $65,000, could expect its taxes to rise by an average of $672 next year, while a household in the top quintile, being paid more than $108,000, would pay an average of $1,950 more, according to the Tax Policy Center.

And with the re-election of Obama, the taxes imposed by his health care overhaul will also almost certainly remain.

At the year's end, a slew of tax changes 11/09/12 [Last modified: Friday, November 9, 2012 9:11pm]
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