States and Taxes - Changing your state tax base

There are major tax differences from state to state, varying from no state income tax (Alaska, Florida, Nevada, South Dakota, Texas, Washington and Wyoming) to those with limited taxes (New Hampshire and Tennessee tax only interest and dividends) to low (Illinois and Pennsylvania tax at 3% or so) to very high (California, Vermont and Rhode Island are all over 9%).

As such, many taxpayers wish to move out of high tax states and into states with little or no state income taxes (the differences can result in a savings of thousands of dollars per year). Please be aware, however, that the IRS tax return will look the same in the new state, as federal tax law applies to all 50 states.

Here are a few tips if you are looking to change your state tax base:

- Sell current personal residence and move.

- File state tax returns for new state showing residency there. Also, use new state’s address on returns filed with IRS.

- Change drivers licenses and voters registration cards to new state. In addition, register all vehicles in the new state to establish a nexus to this state.

- Change bank accounts to a branch in new state.

- Execute a new will or living trust using new state as current state of residence.

Q&A - Business Expenses and Tax Deductions

Question


My accountant recently told me that I could not deduct my expenses to a business convention in Las Vegas because I spent one of the days there doing personal sightseeing and only conducted business for two days while I was there. I think I can deduct the expenses. Please help, as this will cost me a lot of money.

Tom T., Seattle, WA

Answer


Tom– you are in luck, as all of your travel expenses are deductible, with the exception of any amounts you spent while sightseeing (these are personal expenses and are not deductible).

All of your travel expenses (airfare, hotel, meals/entertainment, seminar/convention fees, and local transportation would be deductible, but not the gasoline or meals for your sightseeing activities).

The basic rule is that your trip must be primarily for business (attending the convention was the main purpose and not sightseeing), and you must spend more time for business than pleasure on your trip. For purposes of determining how much time is business related, your travel each way counts as business days.

In addition, you should spend at least four hours each day while you are at the convention doing business in order to make these days count as business days. If you satisfy these rules, there is no reason why you cannot claim your travel expenses.

Just the FAQ'S - What is an IRS levy?

The IRS has levied my bank account and garnished my wages.  What should I do?

An IRS levy is a collection method the IRS uses to seize or take your property to satisfy your outstanding tax bill. The IRS CAN and WILL do this. Before the IRS can seize your property, they must do the following:

- They must assess the tax against you first. This means that the amounts owing to
the IRS are not currently under dispute.

- They must issue a notice and demand for payment.

- You must refuse to pay the assessment within 10 days of the notice and demand.

- The IRS must send you a Notice of Levy.

- You must refuse to pay the tax liability within 30 days of the Final Notice of
Intent to Levy. 

Bank levies are a one time levy where the money in your account will be seized on the day of the levy only. However, the IRS can file subsequent levies. 

Wage garnishments can be very embarrassing to you and can be devastating depending on the amount of the garnishment. The garnishment will stay in place until the tax is paid or the garnishment is released.
 
A Tax Lien can also be filed by the IRS. The IRS will usually automatically file a Tax Lien if you owe $25,000 or more. The Tax Lien is not an actual collection method, but a notice to other creditors that the IRS has an interest in property you own. The Tax Lien will usually affect your credit report. The Lien will not be removed until the tax is paid.

Relief from both levies and garnishments are available.  However, you must act quickly! For more information, please contact me at www.estillandlong.com