• Home
  • About You
  • About Us
    • Our Services
    • Our People
  • Our Clients
  • Jobs
  • Resources
  • Blog
  • Contact
Accountability Services
Tel: 206.522.0110

Seattle Passes an Income Tax on 'High Earners'

7/24/2017

 
​Our phones have been ringing off the hook!  YES -- Seattle’s newly enacted Income Tax on high earners was signed into law this week by the mayor and, depending on taxpayer income, will add to some Seattle residents’ tax burdens.
 
A broad overview of the basics is that the City of Seattle has authorized a 2.25% tax on the total income of single residents that exceeds $250,000 or $500,000 of those filing married filing jointly (certain trusts are also liable for the tax). The language of the ordinance defines total income as “the amount reported as income before any adjustments, deductions, or credits on a resident taxpayer’s United States individual income tax return for the tax year”. If you have a copy of your 1040 tax return https://www.irs.gov/pub/irs-pdf/f1040.pdf, you’ll find this amount on line 22 of the 1040, and includes wages, interest, dividends, alimony, net business and rental income, capital gains/losses, taxable IRA distributions, pensions, Social Security benefits, and any other income deemed taxable by the IRS – before any exemptions or deductions.
 
The first year taxable year begins on January 1, 2018 and income is to be reported by the taxpayer by April 15th of the following year (2019). At this time, there is no provision for payment of the tax through deductions from wages, and a six month extension will be allowed, by filing a copy of the IRS extension (form 4868) with the City.
 
A court challenge to this new tax has already been filed, and is welcomed by the proponents of the tax – mainly because supporters believe a new ruling on the taxability of gross income could set a new precedent in Washington and eventually lead to a state-wide income tax (which many believe to be a more fair and equitable taxation standard than reliance on sales and property taxes).
 
State GOP leaders have even encouraged civil disobedience and recommending non-payment of the tax. Failure to file and pay the tax could lead to the following interest and penalties:
  • Willful failure to file penalty - $1,000
  • Late, incomplete, or incorrect filing - $250
  • 4% Interest - based on the underpayment rate under the Internal Revenue Code
  • Failure to pay penalty – In addition to interest - 1% per month up to 25% of unpaid tax
 
The ordinance has cited several factors leading to the tax: Washington State’s regressive tax system; increased demand for city services – housing, education, and transit; homelessness; the loss of Federal proposals to cut funding directly to city and indirectly through the state; and the City’s goal of zero net greenhouse gas emissions by 2050, stating additional resources are needed for this initiative.
 
The ordinance has also provided that all receipts from the tax shall be restricted in use and shall be used only for the following purposes:
  1. Lowering the property tax burden and the impact of other regressive taxes, including the business and occupation tax rate;
  2. Addressing the homelessness crisis;
  3. Providing affordable housing, education, and transit;
  4. Replacing federal funding potentially lost through federal budget cuts, including funding for mental health and public health services, or responding to changes in federal policy;
  5. Creating green jobs and meeting carbon reduction goals; and
  6. Administering and implementing the tax levied by this Chapter 5.65.
 
Stay tuned.  We will update this post as more information becomes available!

Comments are closed.

    Accountability Services

    Welcome to The Bottom Line, an online newsletter from Accountability Services. As clients, friends and colleagues, we are excited to share with you financial updates, tips, company news, and opportunities in each issue of The Bottom Line. 

    Archives

    October 2019
    April 2019
    March 2019
    February 2019
    January 2019
    December 2018
    November 2018
    October 2018
    September 2018
    August 2018
    July 2018
    May 2018
    January 2018
    December 2017
    November 2017
    October 2017
    July 2017
    June 2017
    January 2017
    December 2016
    November 2016
    October 2016
    July 2016
    June 2016
    May 2016
    March 2016
    January 2016
    December 2015
    November 2015
    October 2015
    September 2015
    August 2015
    July 2015
    June 2015
    May 2015
    April 2015
    March 2015
    February 2015
    January 2015
    December 2014
    November 2014
    October 2014
    September 2014
    August 2014
    July 2014
    June 2014
    May 2014
    August 2013
    July 2013
    June 2013
    May 2013
    April 2013
    March 2013
    February 2013
    January 2013
    December 2012
    November 2012
    October 2012
    September 2012
    August 2012
    July 2012
    September 2011
    March 2011
    September 2010
    August 2010
    December 2009
    September 2009
    May 2009
    February 2009
    January 2009
    September 2008
    May 2008
    March 2008

    RSS Feed

© 2000-2019 Accountability Services PLLC  Privacy Policy
Website by Pretty Smart Design