US President Barack Obama says he is “modestly optimistic” that a deal to avoid the “fiscal cliff” is possible, after a last-ditch White House meeting.
Mr Obama said Senate leaders were working to craft a bill that could win approval in both chambers of Congress.
But if a compromise was not reached, the president said he would ask for a quick vote on preventing tax rises.
Congress has only four days to reach an agreement before across-the-board tax rises and spending cuts take effect.
Analysts say sliding over the so-called “cliff” could tip the US into recession and set back the global economic recovery.
If Senate majority leader Harry Reid and minority leader Mitch McConnell do not work out a deal, Mr Obama is seeking a vote to prevent tax rises on incomes up to $ 250,000 (£150,000) and ensure unemployment insurance is continued.
He described that as the “bare minimum” Congress should get done before 1 January.
“The hour for immediate action is here, it is now,” Mr Obama said.
Earlier on Friday, Mr Obama met Mr Reid, Mr McConnell, House Speaker John Boehner and House minority leader Nancy Pelosi at the White House for just over an hour.
Mr McConnell and Mr Reid said they were entering talks shortly after the meeting, and gave relatively upbeat assessments on their task.
Mr McConnell said he was “hopeful and optimistic” that he could present a comprise to his caucus by Sunday, just over 24 hours before the deadline.
His Democratic counterpart said he would “do everything I can” to make the deal happened.
But Mr Reid cautioned that “whatever we come up with is going to be imperfect”.
The renewed effort towards a Senate deal that could pass both chambers comes after much of the focus in negotiations rested on House Speaker John Boehner.
An alternative plan proposed by Mr Boehner – which would have seen taxes rise only on those earning over $ 1m – failed in the House of Representatives late last week.
Mr Boehner has called the lower chamber into session on Sunday. A staff member in the house speaker’s office told Reuters that the House would consider Senate legislation.
“The Speaker told the president that if the Senate amends the House-passed legislation and sends back a plan, the House will consider it – either by accepting or amending,” the unnamed aide said.
Mr Obama’s plans to increase taxes on the wealthiest Americans have remained a point of division between the two parties since he won re-election in November.
Many Republicans oppose new taxes as a matter of principle, and are demanding cuts to what they see as deficit-inflating public spending, putting at risk healthcare and welfare benefit schemes popular with Democrats.
During the news conference on Friday, Mr Obama said any last minute action on tax rises would form the groundwork for further negotiations in the new year.
“The American people are watching what we do here,” he said. “Obviously their patience is already thin.”
Cuts and benefits
The term fiscal cliff refers to the combination of almost $ 600bn (£370bn) of tax rises and spending cuts due to come into force on 1 January if Congress does not pass new legislation.
Sweeping tax cuts passed during the presidency of George W Bush will expire, eventually affecting people of all income levels, and many businesses.
Other tax cuts and benefits set to expire include:
• A 2010 payroll tax cut, the expiration of which would prompt immediate wage-packet cuts
• Benefits for the long-term unemployed
• Compensation for doctors treating patients on federal healthcare programmes
• Inheritance taxes are also likely to be affected if no deal is reached.
In addition, spending cuts mandated by a law passed to break a previous fiscal impasse in Congress will come into force, affecting both military and domestic budgets.
The cuts are expected to affect federal government departments and the defence sector, as well as hitting unemployment insurance and veterans’ support.