SALT LAKE CITY — The so-called "fiscal cliff" has been making news since the end of November's election. So what is it, and what does it mean for your family?
Back when the Bush tax cuts took effect, the only way the Bush administration could get them through Congress was to promise that those tax cuts would expire. December 31, 2012 is the deadline. If lawmakers can't come to an agreement before then, it means higher taxes for you in 2013 and a good chance the U.S. economy will drop into another recession.
If Congress does nothing, the average family will pay another $1,600 in taxes in 2013.
"Income, payroll, and capital gains, estate taxes actually could all increase," said Utah retirement coach Sean Lee.
For weeks there's been a stalemate in Washington, with Democrats demanding tax increases for those making over $250,000 a year. Republicans are fighting back, saying the disaster can be averted by closing loopholes. The result? A standoff on Capitol Hill with no end in sight.
House Speaker John Boehner, R-Ohio, said earlier this week, "We're nowhere. Period. We're nowhere."
Treasury Secretary Timothy Geithner said, "There's just no reason why 98 percent of Americans should see their taxes go up because some members of Congress on the Republican side want to block tax increases for 2 percent of the wealthiest Americans."
If Congress can't come up with a solution, it's the so-called fiscal cliff. On Jan. 1, for example, defense spending and other government spending would be slashed as part of so-called sequestration.
Less spending leads to less demand for product and fewer employees needed.
David Hess, president of defense contractor Pratt & Whitney, said, "Were sequestrian to go into effect, the unemployment rate could rise to 9.1 percent."
So, regardless of what Congress does, is there anything you can do to prepare?
Sean Lee said, "If your company offers 401 (k) (take advantage of it), or look at using more tax deferred strategies, IRAs. Families could also invest in municipal bond strategies, which will have a lower tax implementation than their counterpart, than stocks would."
Lee also suggests re-evaluating finances to make sure you're prepared for any possible scenario.
There are 27 days left until the U.S. goes over the edge of the so-called fiscal cliff. But there is hope on the horizon. Some lawmakers are starting to speak out saying it's time to put politics aside.