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Planning for Fiscal Cliff Gets New Push as New Year Approaches

Businesses have been increasing their awareness and fiscal cliff planning as December pushes along, fearing the backlash federal changes could have on payroll processing and other human resources systems. These resources must be updated as soon as alterations to tax rates, benefit payments and other systems are made, but until the deadline for negotiations passes, some are trapped in a state of paralysis as they remain uncertain how to exactly to target their preparations.

Taxes and payroll precautions
While some organizations have reduced full-time staff and cut future hiring plans, others are trying to think of innovative benefits compromises and more cost-efficient ways of handling regular payroll. With so many aspects of the fiscal cliff still undecided, companies need to make sure they are taking the most comprehensive approach possible.

When the Bush-era tax cuts expire in March, businesses will need to be ready to update their payroll software to reflect the new deductions. This will also impact the amount that must be taken out before taxes, which goes to programs like Medicaid and unemployment insurance. On top of that, new deductions will become mandatory, as new bills relating to healthcare and education will require more from each American's paycheck.

The basis of this, Fox News wrote, is that federal funding for key programs will be cut drastically as of next year. Fiscal cliff planning requires that companies ready their internal software to bear the brunt of these effects, and as the negotiation deadline approaches, more companies anticipate these strategies will actually come into play. Even federal agencies have been advised to come up with contingency plans in the event that an adverse outcome should be the result of political debates, the source stated, spurring executives to consider alternative futures regarding their own financial software and other tools.

Fiscal federal fears
Current options on the table would provide for additional federal relief, but both of these may still come down hard on corporate financial software. Human resources solutions will also need to be updated to reflect changes to healthcare benefits, as individual states will either opt into federal public insurance programs or come up with their own. Organizations that do not enroll their employees in these resources could face local and national compliance fines, accentuating the need to plan for how each of these outcomes will be handled internally.

CBS News wrote that no matter which side wins in the federal financial negotiations, companies must have fiscal cliff planning in place to ensure they are ready to meet these changes. Taxes are set to go up not matter what strategy the government chooses, as budgetary cuts will have to be weighed against some federal agencies regardless of the outcome. This in turn may trickle down to corporate and personal tax filers, who could experience additional reductions in income depending on which plan wins out.