State Taxing Authorities Are Coming After Your Money




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Nov 01, 2021

By Ben Seyfer Senior Accountant at Terry Lockridge & Dunn

New state tax laws are making more and more taxpayers tax cheats without them realizing it is happening. Think it cannot happen to you? Here are some examples.

  • Ben SeyferYour small business registers for sales tax in Texas and you receive a letter from some obscure Texas town that says you need to send them a registration fee. Where did this come from?
  • A Florida widower with income marries a retired woman who lived in Utah for nine months. The woman has no income. He has never been to Utah, even to visit. Per Utah tax law he must now pay income tax to Utah on his Florida income if he files a joint federal tax return.
  • A Delaware resident owes Minnesota income tax for consulting work even though she never steps foot in Minnesota. This is because the company who the Delaware resident did work for has a physical presence in Minnesota. The same situation is true in California and other states.
  • You decide to retire in Nevada to enjoy the sunshine. You then receive an audit letter from New York that says you need to pay them income tax, even though you no longer live there. They demand credit card statements, your driver's license and more. You provide the information, yet their demands do not go away.
  • California routinely sends out notices to small businesses throughout the country demanding detailed sales transactions for multiple years for any of their California customer transactions. If you do not reply, you could be in for an audit from this state.
  • States are creating business fees to capture taxes from out-of-state small businesses. This is to get around national laws that protect interstate commerce. This new category of tax is in addition to income taxes and sales/use taxes.

Until national leadership provides unified interstate guidance, states will continue to get more aggressive with the creation of new tax laws. This is more prevalent as states continue to deal with lost revenue due to the pandemic. There are even situations where two states can claim tax on the same income, and you are stuck in the middle facing double taxation and tax penalties.

This ever-changing landscape requires an annual review. This is especially true if you plan to move soon or begin doing business in a new state. If you would like to discuss your specific situation, please feel free to reach out to Ben at bseyfer@tld-inc.com, or contact any of the accountants at Terry Lockridge & Dunn. They can be reached at 319-364-2945 in Cedar Rapids or at 319-339-4884 in Iowa City.



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