What a 'fiscal cliff' could mean to your pockets

If politicians in Washington don't come to some sort of an agreement, we could be headed off the edge of a 'fiscal cliff,' where more will be coming out of your check.

We keep hearing 'fiscal cliff,' but what it essentially means is that the Budget Control Act of 2011 is going in effect unless a compromise is met on Capitol Hill. If a mutual agreement isn't found, you'll be helping with the nation's budget deficit.

A hike in taxes is the last thing Americans want to hear, but we're less than a month away from that happening in a number of areas.

"We're getting a lot of calls about it, and we're actually doing a lot of tax-planning for yearend right now," said tax manager Angela Frazier with EGP PLLC.

Frazier believes this increase is going to catch some Americans by surprise when they notice it missing from their checks.

To give you an example, a household with an average income of $80,000 is looking at paying more than $2,000 extra in taxes for 2013.

Your income's not the only thing that could take an unfortunate hit in January, as long-term investments are set for a four-percent increase on any gains. The money from that hike is going towards Medicare.

"An additional tax on interest and dividend income, capital gains, certain types of annuities and rents," Frazier added.

"For those people that are married, filing jointly, modified adjusted income is more than $250,000 a year, then you could see an additional 3.8% tax on your investment income," she said.

Frazier believes people may notice something else missing from their first paycheck of 2013, which comes from a fund workers have been taking home for the past year.

"You're going to see an additional two-percent tax withholding for FICA that they haven't had this year."

Arkansas Governor Mike Beebe is one of several governors set to meet with President Obama to discuss the gap in negotiations for a new tax strategy.

As far as estate taxes are concerned, just more than $5 million was exempt from taxes. That amount will be lowered to $1 million, which will be taxed at a 55% rate. This rate is up from 35% under the Bush tax cuts.