It's easy to get caught up in the current morass of political and regulatory tax conversations. As you've heard, every pundit is guessing what will happen in Washington, D.C. after the current elections. Although the changes are significant and the rejection of Initiative 1098 sent a strong "no income tax" statement at the state level, none of this impacts the necessity of mindful planning to reduce one of your biggest expenses -- taxes -- every year and in the future.
Berntson Porter views tax planning as fundamental and that it is not separate and exclusive of your financial and personal planning. We look at planning first and foremost from your viewpoint -- what you want for your business and your family, and then we apply solid tax ideas uniquely applied to your situation. We explore the Federal, State and local tax impacts of various scenarios, as well as the effect on your estate planning. We analyze which scenario makes the best economic sense, and then work with you to implement the strategy successfully.
Since the Nov 2nd elections, some of the issues regarding the future of state and local taxes are clearer and others are less clear. It is clear Washington State will not be having a state income tax for individuals in the near future. Businesses in Washington, however, are still impacted significantly by state Business & Occupations (B&O) taxes, sales taxes and other associated fees. The need for revenue at the state and local level has resulted in the passing of laws expanding public sector reach into private sector proceeds...and not just in our state. It is more important than ever for businesses across the country to coordinate efforts to legislatively right-size both Washington State business taxes and out-of-state sales taxes.
What's to be said about Federal taxes? It's clear there are overtures from the President to extend the Bush tax cuts for certain income levels and perhaps to extend them for a two year period for the rest. This separation, or "decoupling," will become a hot political issue over the next few months. Whether the issue gets resolved before the end of the year or gets resolved at all is a looming question. Regardless, tax planning is an opportunity to determine timing of your income, character of your income (i.e. capital gains, ordinary income or tax free earnings), and to plan for different scenarios regarding potential changes in the law. By looking at the opportunities, you maximize your advantage regardless of what happens in 2011.
"It was the worst of times, it was the best of times" wrote Charles Dickens in a Tale of Two Cities. Regardless of your view, it is always the time to undertake planning and reduce the reach and extent of your tax exposure.
For more information, please contact your Berntson Porter CPA at 425-454-7990.