When the clock strikes midnight on December 31, 2012, many Americans will celebrate the arrival of a new year with streamers, confetti and a round of “Auld Lang Syne.” But when they wake up the next morning, January 1, 2013, they may not be as excited to learn that their federal taxes have increased.

As things stand now, many Americans are facing a tax increase beginning in 2013. This pending tax increase has been referred to as “the 2013 fiscal cliff” and “Taxmageddon” by some pundits, who are concerned that it could threaten the fragile economic recovery.

On January 1, 2013, the lower income, investment and estate tax rates that were passed as part of the Economic Growth and Tax Relief Reconciliation Act of 2001 (EGTRRA) are scheduled to expire. According to David Lerner Associates Branch Manager John Koene, these lower rates were originally scheduled to expire at the end of 2010. “However, they were temporarily extended by the Tax Relief Act of 2010 until December 31, 2012.”