Businesses prepare for impending fiscal cliff - WOWK 13 Charleston, Huntington WV News, Weather, Sports

Businesses prepare for impending fiscal cliff

Posted: Updated:
  • Local NewsLocal NewsMore>>

  • Sistersville Woman Crowned Mrs. West Virginia, Will Compete for National Title

    Sistersville Woman Crowned Mrs. West Virginia, Will Compete for National Title

    Tuesday, July 15 2014 4:17 AM EDT2014-07-15 08:17:38 GMT
    A Sistersville mother, wife, and soon-to-be teacher, holds another very impressive title as she gets ready to take on the competition on a national stage.Mrs. West Virginia, Melissa Smith, will compete for the title of "Mrs.United States," in September. Smith travels throughout the state right now helping to push her platform. "Right now, I'm very focused on improving literacy education. I'm going to be an elementary school teacher and I have been traveling throughout West Virginia reading to...
    A Sistersville mother, wife, and soon-to-be teacher, holds another very impressive title as she gets ready to take on the competition on a national stage.Mrs. West Virginia, Melissa Smith, will compete for the title of "Mrs.United States," in September. Smith travels throughout the state right now helping to push her platform. "Right now, I'm very focused on improving literacy education. I'm going to be an elementary school teacher and I have been traveling throughout West Virginia reading to...
  • Federal judge in Martinsburg, West Virginia, sends 10 to prison for violating probation

    Federal judge in Martinsburg, West Virginia, sends 10 to prison for violating probation

    Sunday, July 6 2014 11:00 AM EDT2014-07-06 15:00:12 GMT
    Nine Martinsburg, West Virginia, residents and another from Keyser were sentenced to federal prison for breaking the law while they were on supervised release or probation.
    Nine Martinsburg, West Virginia, residents and another from Keyser were sentenced to federal prison for breaking the law while they were on supervised release or probation.
  • BusinessBusinessMore>>

  • Founder of Brazil's top building firm, Norberto Odebrecht, dies at 93

    Founder of Brazil's top building firm, Norberto Odebrecht, dies at 93

    Monday, July 21 2014 6:38 AM EDT2014-07-21 10:38:43 GMT
    The conglomerate that carries his name went on to lead ambitious projects such as paving a highway across the Andes mountains and through the Amazon rainforest into Peru, and linking Miami's Metrorail to the city's airport. It also formed a consortium with other firms and was awarded contracts for four of the 12 stadiums that hosted games for the World Cup that ended this month.
    The conglomerate that carries his name went on to lead ambitious projects such as paving a highway across the Andes mountains and through the Amazon rainforest into Peru, and linking Miami's Metrorail to the city's airport. It also formed a consortium with other firms and was awarded contracts for four of the 12 stadiums that hosted games for the World Cup that ended this month.
  • Multiple crews fight Glade Springs fire overnight

    Multiple crews fight Glade Springs fire overnight

    Monday, July 21 2014 6:22 AM EDT2014-07-21 10:22:55 GMT
    Fire at Glade SpringsFire at Glade Springs
    No injuries were reported, and there has been no word yet on the cause of the fire.
    No injuries were reported, and there has been no word yet on the cause of the fire.
  • Bankruptcy Judge Clears Sale of Ormet Plant to Niagra Worldwide

    Bankruptcy Judge Clears Sale of Ormet Plant to Niagra Worldwide

    Monday, July 21 2014 6:17 AM EDT2014-07-21 10:17:46 GMT
    A Wisconsin firm has been cleared by a bankruptcy judge to buy the Ormet Corp. plant in Hannibal, Ohio.
    A Wisconsin firm has been cleared by a bankruptcy judge to buy the Ormet Corp. plant in Hannibal, Ohio.

As Congress works to reach a budget deal by midnight tonight, many businesses are preparing for drastic changes come Wednesday, no matter what Congress decides.

The so-called fiscal cliff has business people worried about what they might face when they get back to the office after the New Year holiday. But Steve Robey, presiding member of Arnett Foster Toothman accounting firm in Charleston, said his office has been helping businesses prepare for months.

"We've been very busy here—unusually busy, more so than in prior years," he said.

Several things could change for individuals should Congress not reach a deal. For example, the payroll tax holiday has not been extended, so individuals will pay more of their salary toward Social Security and Medicare. The so-called Bush tax cuts also could end. These cut individual tax rates, reduce the estate tax and lower taxes on capital gains and dividends. It also expanded some tax credits, including the child tax credit.

Businesses also must look at their withholdings. Many companies will process payroll immediately following the holiday break, and bookkeepers are uncertain about what their books may look like for the first pay period of 2013.

"There are businesses that will have payroll due January 1, and many controllers, bookkeepers are wondering how they need to withhold," Robey said. "There'll be 2 percent more in Social Security taxes withheld for most folks effective tomorrow. We're in limbo trying to figure out how, what the rule of the land will be tomorrow."

Robey said he, like many accountants, is keeping a close eye on the debate in Washington while trying to prepare businesses for what could be a hard punch.

"I think you have to prepare as if we're going over the cliff," he said.

Despite that, Will Carter, director of wealth management for McKinley Carter Wealth Services, said he advises individuals to pay closer attention to their own investments.

"We advise that investors focus on more long-term, fundamental economic opportunities, and make sure that they always have enough assets out of the stock market to avoid the adverse impact of short-term bear market sell offs," Carter said. "However, we do see the fiscal cliff debate as a symptom of underlying economic challenges that will affect what people will need to do to make money in the future."

The challenges, Carter said, are the uncertainty of higher taxes, the desire of some Republicans for lower government spending, slower economic growth in North America and Europe and the downward pressure on U.S. wages as a result of an increasingly educated global workforce emerging in Asia, Latin America and Africa.

Although the impending fiscal cliff no doubt has some shaking in their boots, Carter remains confident a deal will be reached before too much economic damage is done.

"However the fiscal cliff issue is resolved in the weeks and months ahead -- and it will be resolved before serious damage is done to our household and economy -- more money will eventually have to be dedicated to paying off public and private debt, which means less money to buy the goods and services the drive job and stock market growth," he said.

"These inescapable forces -- illuminated but not caused by the fiscal cliff debate -- have major implications for how people manage not only their liquid stock and bond portfolios but also their careers and businesses," Carter added.  "That is where we advise people focus their attention -- not the unfolding drama in Washington."

Robey said he has noticed a shift in wealth. Because estate and capital gains taxes are set to go up at the beginning of 2013, many wealthy individuals are transferring their funds to others.

"We've had an enormous shift in wealth over the past few months," Robey said. "Wealthy individuals are gifting monies to their children and grandchildren to take advantage of higher estate and gift tax exemptions that go away tomorrow."

As far as business goes, Robey said he and his clients are concentrating on three-phase tax planning and last-minute maneuvers.

"Typically, tax planning includes three things we look at. Historically, one of those has been to defer recognition of taxable income into a subsequent year, the idea being that a tax dollar tomorrow is worth less than a tax dollar today," he said. "There are other tax planning things such as converting taxable interest into tax exempt interests. It's better to not pay taxes rather than pay taxes. The third tax paying strategy has been to convert ordinary income into taxable gains because it's taxed at a lower rate.

"The first strategy, we feel with rates going up, we need to rethink that," Robey added. "With many of our clients, we're looking at taxable income in 2012 as opposed to 2013. If you operate under the premise that higher income individuals, which are the types of clients we historically serve, that their tax rates are going up in 2013, you'd rather pay at lower rates in 2012. We're accelerating income into 2012 and often deferring deductions until 2013."