Archive for January 2011

Accountants Are Like Doctors – You Need To See A Specialist!

If you had a heart condition, would you go to your primary care doctor or a cardiologist?

Easy question, huh?

They why when it comes to taxes, do most people say “I’ve got an accountant who handles that.

What does your accountant do?

Are they a specialist? Or just a “primary care giver“?

For most people their accountant is a CPA. Want a surprise?

While a CPA is the highest designation you can receive in accounting, it may not be the best certification for tax issues.

First off, the CPA exam covers all aspects of accounting, taxes are only a small part of this exam. In addition, a CPA is never required to take another tax course for the rest of their lives. In fact, their Continuing Professional Education(CPE) requirements to maintain their CPA status can be on any accounting subject.

Secondly, if an accountant is learning about bookkeeping, records and auditing, how much time can they really spend on taxes?

This is much like a doctor: A cardiologist ONLY studies hearts.

A tax professional ONLY studies taxes.

With this in mind, the top professional designation for a tax preparer is the Enrolled Agent(EA). First off, the exam for enrolled agents is ONLY on taxes and it is 3 parts:

1) Personal
2) Business
3) Ethics.

Secondly, an Enrolled Agent is required to take 72 hours of continuing education every 3 years to maintain their license and they can ONLY take tax related courses approved by the IRS.

Third, the other way to become an Enrolled Agent is to work for the IRS for 5 years, so as an EA, you have the knowledge of an IRS veteran.

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Another accounting phenomenon is the bookkeeper with an associates’ degree who gets a Paid-Preparer Tax Identification Number(PTIN) and presents themselves as a “full service accountant“. Until 2010 anyone could get one simply by filing a form with the IRS. Thankfully, they have cracked down on this and now require any PTIN holders to either be enrolled(EA, CPA or several other licensed financial professionals such as Tax Attorneys or Actuaries) or pass a competency exam prior to receiving or renewing their PTIN.

This might be the type of accountant that is mentioned in the best-selling book “The Millionaire Fastlane: Crack The Code To Wealth and Live Rich For A Lifetime” by MJ Demarco. On page 286 he mentions:

Don’t be an idiot like me. Still green, I remember my first accountant, found right out of the Yellow Pages – not from referral, but blind hope. It didn’t take long to see that she wasn’t concerned with tax planning. No questions about my business or my concerns, just zeal to complete the forms and get it done. Additionally, most of her clients were Slowlaners who dabbled with W-2s and 401ks rather than corporations. Great pick, MJ. I needed someone with a Fastlane business mindset and I committed to finding one. After interviewing and investigating a half-dozen accountants, I found one whose clients were primarily business owners.

Based on our experiences, we’re guessing the first accountant was most likely either:

a) the book-keeper posing as a tax professional, who only knows how to balance books, thus the inability to properly interview a client.

OR

b) a CPA who does taxes 3 months out of the year to earn extra money and is more concerned with records and auditing than caring about the most important aspects of working with a tax client- INTERVIEWING and CONSULTING.

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Case study:

A doctor finds his tax professional through referrals of fellow doctors. He hires someone whose clients are primarily doctors.

His tax professional advises him to file “Married Filing Separately” while his wife files “Single” so he can avoid burdening his wife with taxes on her salary (her salary is significantly lower than his).

Sadly, this particular doctor gets taken to the cleaners. Not only does the “professional” firm charge him a pretty penny (around $5k), but they make the rookie mistakes mentioned above.

Result: An audit.

The correct solution to this is to file “Married Filing Joint” and file for “Innocent Spouse” protection.

Unfortunately, this doctor did not get the proper level of service until it was too late. Needless to say the doctor did find a competent and trust-worthy service provider who cleaned up the other one’s mess and did it for a fraction of the cost.

The moral to the story:

A tax professional can save you. Big time!

Some personal info:

As a Tax Patriot, I am currently licensed with a PTIN and in the process of studying for the Enrolled Agent exam. In the mean-time I am working under the guidance of my father, our founder and lead Tax Patriot, a CPA/Enrolled Agent with over 30 years of experience.

Our lead Tax Patriot has seen everyone from minimum wage employees to multi-millionaire business owners. Our specialty, or niche, is taxes. We have helped people from all walks of life. But we just focus on taxes.

This approach is different from many accountants, who work with specific “niches” or occupations/endeavors. Their philosophy is to provide the best service by being a one-stop shop for all accounting needs, but specializing in a certain demographic.

It is a viable approach.

But which is the better for getting your taxes done: Being a jack of all trades for one specific occupation or niche?

Or focusing just on taxes?

Contact us for a FREE consultation and find out for yourself.

Don’t Forget the Tab – Your Tips Are Taxable!

If you work as a waiter/waitress or in any type of service job where tips are a major part of your income, you WILL be taxed on them. Even if you receive them in cash, the IRS has a way of calculating your tips based on your hours worked. This is known as an “allocated” tip.

There are some exceptions, but here’s some tips from the IRS themselves:

1) Tips are subject to federal, Social Security and Medicare taxes. This includes “non-cash” tips such as tickets or prizes which have a cash value.

2) Tips received both in cash and from credit card transactions, whether they are direct or through a “tip-jar” where you split the total tips with fellow servers.

3) If you receive more than $20 in any one month, you should report these tips to your employer for tax purposes. This way you can have your taxes withheld and either get a refund or lessen your balance due at the end of the year.

4) You should keep a log of your tips. The IRS provides Publication 1244, Employee’s Daily Record of Tips and Report to Employer for you to keep this log.

Keep in mind that there is no way for the IRS to know exactly how much you received in tips, however, an easy way to trigger an audit is to not report ANY tip income. Is it worth the money, time and hassle of an audit to save a few dollars on your taxes?

If you work a service job and depend on tips to make a living, please contact us and we will steer you in the right direction so that you will not have to pay more taxes than you should.

Business Deductions – Worth The Cost?

I spoke recently with a friend who is a professional affiliate marketer. We got to the subject of taxes and mentioned a certain CPA that our Tax Patriots greatly admire and see as a authority on tax information. The irony was that the information he mentioned was the Section 179 depreciation which was one of the “bonus depreciation” provisions available in 2009 where a small business could deduct the full cost of most depreciable purchases such as heavy machinery or furniture.

Thanks to the passage of the “Tax Relief Act of 2010” in December these provisions remain. The irony is that this does not affect him as an affiliate marketer unless of course he had an office with expensive furniture or a server room since practically all of the furniture and computer equipment of a standard home office can be written off as “Office Expenses” on either a Schedule C or K-1.

The relevance of this discussion goes to show that businesses are very concerned with deductions, some to the point that they will justify an unnecessary expense by stating “oh, it’s a tax write-off.” Well if you make enough of these purchases you’ll have another issue to deal with- BANKRUPTCY.

I know this is over-dramatic, but the reality is that some businesses care more about deductions than profits. An example would be if you were on the fence about purchasing new computers because there’s a great sale going on where you can pickup ten  $1000 laptop computers for $500/ea, however, you won’t need them until you expand next year. You buy it, knowing that you can deduct this expense, but tax time comes and you realize that the $5000 you spent on laptops have put your company in the red and you will have to close up shop.

Again, this is a theoretical example, but it goes to show that deductions need to be weighed against revenue forecasts. If you see a need for the item in question in the next year or so, the deal is too good to pass up and your revenue forecasts show that you’ll be able to cover the cost of the equipment then go for it! Otherwise, hold off.

Another example would be a subscription service where you are billed monthly, whether it is web hosting or a merchant account. Both of which are rather minuscule, however, can add up and put a business on a shoe-string budget in jeopardy. A better example would be leasing an office. In today’s economy, it’s a buyer’s market and office space can be had for next to nothing. When your business has no revenue, “next to nothing” is still something. In addition, there are great alternatives such as “virtual offices” where you rent a shared office at a much lower monthly rate than typical office spaces until you can justify the cost of a traditional store-front or office space.

Bottom line is check your own bottom line before making purchases. Talk to a JFTS Tax Patriot who can help advise on the expected tax savings of business purchases. This way you can weigh costs and tax savings against your revenue projections so that the next purchase you make is out of necessity, not impulse and certainly not because “it’s deductible”.

Maximum Child Benefits – Why You Should Not Put A Price Tag On Your Children!

A common question we get at JFTS is “How much is each child worth?”. We receive this from either current or expecting parents. What an awful question!

We know that parents do not mean “How much can I SELL my child for,” they mean “How much of a tax refund can I get for each child?”

First off, this is a loaded question. The theoretical “value” of each child depends on many factors ranging from your filing status to your income to how many children you have. The biggest child tax credits are: the Earned Income Tax Credit, Child and Dependent Care Credit, Child Tax Credit and Adoption Credit.

Depending on your earned income and tax burden, these credits can be huge, to the tune of clients we have worked with who earned $15k/yr, had little to no tax with-held and still received a $5k+ refund. Some of these clients yell “JACKPOT!” as they are unlike most refunds where a client receives a check for the amount of taxes they overpaid the previous year, these clients are literally getting money back without paying in.

The question here is – “What is the cost of a child?” Recent studies have shown that raising a child from birth to age 18 in the US can cost anywhere from $200k-250k. This breaks down to a anywhere from $16,667/yr to $20,833/yr. Even if you are one of our “JACKPOT” cases, this cost far outweighs the tax benefits.

With this article we are not discouraging having children. It is only an eye-opener that having a child for the purposes of tax benefits is an awful “financial plan” and should be avoided. Have a child because you want to love and care for that child, not for a yearly paycheck, especially when the costs to raise that child properly far outweigh that paycheck.

Refund Anticipation Loans aka Legalized Loan Sharking

With tax season in full swing now we have been seeing plenty of ads claiming “don’t wait, get your refund now.”

Sounds great doesn’t it? I mean your refund is YOUR money, you paid it to the government, you should get it as soon as possible! Well the average turn around time from the IRS is about 7-10 business days when you do direct deposit and that’s not too bad considering they have been holding in the excess taxes you paid for the entire year.

The problem here is the companies that offer “Refund Anticipation Loans” also known as RAL’s.

In all the ads they sound like wholesome, goody-good companies that just want to get you your money faster, as in, on the spot instead of 7-10 days. However, they are no better than the shady “payday loan” or “car title loan” companies.

It is the same premise of “we’ll loan you money because you cannot wait another week, but in exchange we’ll charge you an unheard of interest rate, sometimes as much as 30%, for the privilege of getting your money today” that you see in the above mentioned companies. The reality though is it is not only the “fly-by-nights”, but that there are legitimate, nationwide tax businesses that are getting in on the action and actually depend on revenue from these high interest loans.

These “loan sharks” prey on the impulsive and irresponsible. Even worse is they never really let you know up front how much it costs to get your money now instead of waiting a few days or even a week. It is all buried in the fine print behind the smiling faces on the ads or the picture of the guy holding up hundreds of dollars he just got simply for getting his taxes done.

The worst aspect of all of these companies is that they are so intent on getting you in and out that most do not let you know up front that there is an added fee for this service. If they do, they usually mention it in passing after telling you how much your refund is going to be and instead ask questions like “what are you going to do with all that money?” In the end you don’t realize that you just paid $300 or more simply to get your money today instead of 7-10 days from now.

Our job as a professional tax service is to inform consumers of the risks of flashy guarantees that are nothing more than good ol’ “bait and switch” tactics. We mentioned a few in a previous article titled: Buyer Beware! Watch Out For All The “Free” and “Guarantees” In Tax Ads.

The difference here is that those ads are easier to see through as most people know that nothing is truly free(there’s always a catch) and that the only guarantees in life are “death and taxes”. For the RALs, the tax service, some of which are simply pay day or title loan offices posing as tax services, depends on a client that is just too excited or impatient to get their refund today that they overlook how much they are getting taken advantage of by taking out the RAL.

Before you make the mistake of going to one of those “loan sharks”, contact us for a FREE consultation and you can decide for yourself if we are the honest and direct tax service that you need.

Buyer Beware! Watch Out For All The “Free” and “Guarantees” In Tax Ads

As a growing tax business we realize that creative marketing is essential to the growth of our business. This tax season with a fully fledged marketing effort we are noticing more and more the ads of our competitors and frankly a lot of them make us sick!

First off, you see a lot of the “free” return offers. Sounds great, doesn’t it? It’s not!

And it’s not really anything special. You can go to IRS.gov and get the same “free” basic Federal tax return done for free. The difference here is that it is the old “bait and switch” where you are baited on the “free” product only to find out that there is an added cost.

The additional costs in these so-called “free” products add up quickly. For example the retail software products and nationwide tax chains charge extra to do State returns. These are included in your price quote from JFTS. If you qualify for the Earned Income Tax Credit, which is what most early-season filers depend on to get a large refund, there is an extra cost. Again, this is included in your JFTS quote. Next thing you know “free” return has ballooned into a $400+ bill for just a basic return with a few additional credits claimed, like the couple in this video.

Where our marketing differs, is our free consultation is a product with value. To consult with a tax professional, especially a CPA, usually costs upwards of $150/hr. At JFTS we don’t believe in charging for advice, so we offer free consultations as a way to build trust with our potential clients so YOU can decide whether our services are right for you.

Now that we’ve discussed price, on to the other aspect of marketing that bothers us “no audit guarantees.” You see this in both the software products and nationwide companies, however, what’s the value in the guarantee when it only guarantees you from mistakes that THEY make? For software it protects you from calculations made by the software and not errors made when you input your data. These errors, despite all the “roadmaps” and “guidance” functions are easy to make, even for trained professionals. This is why our Tax Patriots are given extensive training every year on the professional grade software we use as it changes year by year. How many at-home tax preparers are provided training on how to use their software? NONE. Even worse, is most at-home preparers think that browsing the instruction manual or doing a quick Google search will yield the results they need, only to find out when they get audited that they did something wrong.

With the store-fronts, the audit guarantees are just as useless. At JFTS we make no such guarantees, we only guarantee that we will do our best to get your taxes done right the FIRST time and if you are audited then you have the information and guidance you need to protect yourself. The reality is that there are “red flag” audits where the IRS will choose a given subject, such as last year’s “red flag”, The First Time Homebuyer Credit. Then there are “selective” audits where the IRS will just choose random returns. For the selective audits it is usually a “marekt research” or “training” audit. With a “market research” audit they take a big business in a new industry and try to make an example of them. For a “training” audit, this is where auditors in training are given a list of returns and audit whoever they want so that they can get practice and experience.

The biggest protection against an audit is having a full consultation with a tax professional. With the store-front model they are given a standard interview format and in the heart of the tax season it is very easy to cut corners. The next thing you know you are being audited on an item that your preparer never interviewed you on, whether it was a credit/deduction due-diligence question or not asking the right questions to find out about all of your taxable income. Again, this is why the initial consultation from a JFTS Tax Patriot is essential and a “one-size fits one” approach is the ultimate value add in our services.

Bottom line: Don’t fall for “free” return preparation or “no-audit” guarantee offers!

Here at JFTS all we promise is to give you a professional level of service at a fair price and don’t believe in the false promises of “free” preparation or “no-audit” guarantees.

Your Deductions – What’s Missing?

After reading an article titled “10 Most Overlooked Tax Deductions” from Investopedia I felt it was my duty as a professional to make sense of this.

Despite all the tax services and software claiming maximum refunds and the most comprehensive review there are still many deductions that are overlooked. Even worse, there are improper deductions taken as a result of either preparer inexperience or user input error that lead to the worst possible scenario- an audit!

Keep in mind for the 2010 Tax Return practically all of these deductions are only available if you file a Schedule A for Itemized Deductions instead of taking the Standard Deduction for your chosen filing status. In addition, most of these deductions have thresholds, which means that they need to meet a certain percent of your Adjusted Gross Income(AGI) before they can be deductible.

So on to the 10 most overlooked deductions, which are:

1. Selling Your Home

While the profit from your home sale can be taxable, the expenses incurred can be deductible from real-estate brokers’ fees to closing costs. In addition, any real estate taxes paid during the year of sale are deductible on that year’s tax return.

2. New Car Sales Tax

For a new vehicle purchased up until Jan 1st 2010 there is still a possibility of deducting the sales tax in addition to any state or local taxes paid if the sales tax was paid any time in 2010.

If the vehicle was purchased after Jan 1st 2010 you might be able to deduct the sales tax in lieu of state and local taxes paid. Check with one of our Tax Patriots to make sure which deduction is more beneficial for you.

3. Car Registration Fees(based on the value of the vehicle)

In our home state of Arizona the annual registration of a vehicle is dependent on the price of the vehicle. The portion of this fee that is based on the price is what the IRS calls “Personal Property Tax” and can be deducted on Schedule A.

4. Non-Cash Charitable Contributions

We donate a lot to the local Goodwill. These donations can be deductible, but only if we have an appraisal of the items donated if the value is over $500. In addition to the value of items being donated, the actual appraisal fees can be deductible.

5. Miles Driven For Charity/Volunteer Events

The value of your time is not deductible. Any cash spent for volunteering purposes as well as transportation costs, however, can be deductible. Mileage, parking and tolls might be deductible as well as any public transportation costs incurred.

6. Laundry/Dry-Cleaning Costs for Business Trips

Most business travelers only keep receipts for the major items like air travel and hotel stays, however, staying dressed and pressed for your business meetings can also be a deductible expense. So keep those dry cleaning receipts, but remember, these are only for expenses that your employer does not cover or reimburse.

7. Shipping/Baggage Costs for Business Purposes

On top of laundry, if there are any documents you have to ship or if you have to pay those dreaded baggage fees, don’t worry, they can be deductible.

8. Business Phone/Internet Use During Business Trips

If you don’t have a smart phone or you are traveling abroad and need to pay extra to use a phone or internet connection these expenses can be deductible. If you hate paying $2/min for a local call and $5/min for long-distance, keep those receipts for tax time to get a break on your taxes.

9. Medical Insurance Premiums

Most employees have premiums taken out of their check before taxes are calculated. If this is not the case or you just pay your own then you might have a deduction. Medical expenses are the highest threshold at 7.5% of your AGI so you need to have a pretty sizable expense before you can deduct, but chances are with the cost of health insurance that you will benefit come tax time.

10. Medical Mileage/Transportation Costs

Not only are your surgeries, doctor visits and prescription costs potential deductions, but so too is your transportation for medical purposes. Keep a mileage log or receipts for any public transportation or air travel necessary for medical services performed within the US so you can write it off at tax time.

Bottom line, after looking at these items I know as a professional and most readers probably know that “if it seems deductible, chances are it is worth keeping the receipt”. Just keep in mind that there are thresholds and limits, thus it is essential to talk to a Tax Patriot to figure out how much of your 2010 expenses are deductible and how you can plan for tax year 2011 to get the best tax advantage for your common expenses.

Top 10 Tax Tips 2011 – All you need to be prepared!

Tax season 2011 is here and we are all awaiting those important documents in our mailbox any day now. Meanwhile, here are the Top 10 Tax Tips directly from the IRS to ensure a smooth and easy experience in getting your taxes done:

1.     Get Your Records Ready

Gather up all your records to support filing your taxes: receipts for expenses, donations, rentals, businesses, canceled checks and all other necessary paperwork you have to support deductions you could claim on your return.

2.     Watch for Your Income DocumentsBe on the lookout in the mailbox for your expected W-2s and 1099s(1099-MISC for contract labor and 1099-G for unemployment income). In addition, if you had any investments such as stocks, mutual funds or even an interest bearing savings account, look out for your 1099-DIV and 1099-INT. You need those in order to file your return.

3.     Schedule Your AppointmentContact one of our Tax Patriots and make an appointment ahead of time to avoid rushing and the crowds.

4.     Try E-FilingEvery return done by us is transmitted using the safe, secure, and fast new IRS E-File method which saves you the hassle and time and gets you your refund weeks faster than mailing it in. If you owe taxes, there are many payment options available to you. If you are getting a refund with E-File and Direct Deposit, you can get your refund in as little as 10 days.

5.     Consider All Your OptionsYou can try to prepare and file your own return. With all of today’s fast pace changes, going to a tax preparer is always a safer choice. Have one of our Tax Patriots analyze your situation and suggest the best outcome for you as well as help you plan ahead for the future.

6.     Go for Direct DepositDirect Deposit is a much faster and more secure way to get your money straight into your bank account. No paper checks, no standing in line, faster turn-around and rest easy! In addition, if you are strapped for cash you can elect to have your preparation fees debited from your refund.

7.     Visit the IRS Website OftenThe official IRS website is always the best resource for all the latest information and all the necessary tools to help you make this process easier. You can find anything you need there: forms, publications, instructions, frequently asked questions and lots of free advice.

8.     Read Up on Pub 17Publication 17 is the IRS comprehensive guide to help the taxpayers prepare well to file their returns.

9.     Always Double, Triple CheckReview all your information and return several times before filing it in the IRS system. Don’t rush into sending in incomplete information as that will only lengthen the process and delay your refund. Double-check everything until you’re confident enough to send it in. Most common errors are in Social Security Numbers and wrong math. Check those again.

10. Don’t PanicRemain calm throughout the preparation and filing process.  If you have any problems or questions you can always contact one of our Tax Patriots or the IRS directly or toll-free at 800-829-1040.

States With No Income Tax – What’s the Catch?

On our Services page you can see that we service “All States(where required)” and not “all 50 States” or even “all 50 States plus the District of Columbia and all US Territories”. This is because not all states have an income tax.

The seven states that do not have an income tax are: Alaska, Florida, Nevada, South Dakota, Texas, Washington and Wyoming.

Not having an income tax would make these sound like perfect places to live and do business, however, there is a catch.

First off, Alaska, South Dakota and Wyoming are among the 5 least populous states. All three are very large in area which means the low population density means there are many areas that are uninhabitable.

Up next is Washington, a somewhat populous state with a great metropolitan area in Seattle as well as the affluent town of Redding, home of Microsoft.

After Washington is a group of Florida and Texas, both of which are great retirement destinations with warm climates(aside from the wonderful snow storms in Texas now).

The final income tax free state is Nevada, home of Las Vegas, the gambling capital of the US, a major reason why Nevada’s state treasury can afford to operate without an income tax.

So let us look at the states individually and see the pros and cons of living without an income tax. Is it worth it? What other costs make up for the lack of an income tax?

Alaska

Some of the positives of living in Alaska aside from the gorgeous Summers are the monetary incentives. Did you know that residents of Alaska are actually given a monetary incentive to live in the “Last Frontier” known as the “Alaska Permanent Fund”?

This fund is only available to full year residents of Alaska and is an encouragement for citizens to brave the brutal Winters and live and work here. Despite this fund Alaska has some of the highest costs of living from the necessities(a gallon of milk can cost over $10, almost 5x the national average) to the indulgences(the liquor tax is about $13/gallon).

As you can see the lack of income tax is made up for in desolate Winters, high sales taxes and high excise taxes.

Florida

Known for its beaches and Disney World, Florida is a great destination for families, partiers and most of all, retirees.

The recent Recession though, has hit Florida hard, especially in the job market. With double-digit unemployment as well as some of the worst hit housing markets for foreclosures and a steep drop in housing prices Florida’s economy took a beating.

This doesn’t even factor in the worst part about Florida, the annual hurricane season, which doesn’t bother locals who are accustomed to this natural disaster as much as those who emigrate here.

Finally, the “catch” to no income tax is the relatively high sales tax, gas tax and liquor tax. All of which more than make up for the lack of a state income tax.

Nevada

Despite the gambling tax making up some of the gap in income tax revenue lost, Nevada, home of “Sin City”, is not without sin.

Much like Florida it has the same issues of a depressed housing market, high unemployment and high sales taxes. The plus side is that there is a high median income for those who are employed.

Bottom line, if you’re not an entertainer, gaming mogul or a dealer, Nevada might not be right for you, despite the lack of a state income tax.

South Dakota

Grouped with Alaska when it comes to population, it differs in the fact that South Dakota is among the lowest in unemployment rates and boasts a high median income.

However, in South Dakota’s largest city, Sioux Falls, the issue of under-employment comes to mind. Yes there is low unemployment, however, with the highest density of restaurants per capita, a lot of employees are working for minimum wage and barely meeting basic costs of living.

This is in stark contrast to the salaries and bonuses of executives at some of the financial giants such as Citigroup and Wells Fargo who are based here due to the business incentives for holding operations in South Dakota.

Texas

Everything’s bigger in Texas! From the steaks to the ranches to the Cadillacs it is all big. Without an income tax and better yet, a great climate for most of the year as well as cheap property it sounds like a great place to live.

There is a catch. From high sales taxes to high property taxes, the Lone Star State more than makes up for its lack of income tax. In addition, despite deregulation over 15 years ago, the energy costs are still sky-high.

Washington

With beautiful scenery of the Pacific Northwest Washington is a great place to live. Add to it business giants like Amazon and Microsoft and it is a great place to work. The Seattle area has plenty do, however, as is the case with this entire article, there is a catch.

Aside from the high unemployment and sales tax, there are other taxes that are higher than normal such as property taxes. Looking at the bottom line, WA might not be the best financial decision, unless you have the wealth of Bill Gates or Jeff Bezos, the billionaire founders of Microsoft and Amazon, respectively.

Wyoming

Saving the best for last, the least-populated state, Wyoming.

Aside from having many wide-open, desolate spaces, WY is starting to feel the pain of the depressed economy with rising unemployment.

In addition, it boasts the second highest tax burden per capita at $2,973.87, behind Hawaii at $3,050.03. This shows that the lack of income taxes is more than made up for in other taxes.

The verdict: No state income tax comes with a catch. In addition, one must not forget that there is still a Federal income tax to pay that is the same no matter where you live. Consider the big picture when relocating and if you do live in a no income tax state it is worth your while to consult with a tax professional such as one of our Tax Patriots to make sure you are getting the best deal on your taxes.

Sources:

Yahoo! Finance – 7 States With No Income Tax

Statemaster.com – Total Tax Burden Per Capita