Taxpayers today are usually advised to pay the most attention to federal income taxes but need to know there’s room for savings (and problems) on the state and local levels as well. Although local taxes are typically far and few between, state tax problems can be even more stressful than dealing with the IRS since most states are more aggressive in their collection tactics.
State Taxes vs. Federal Taxes
While nearly all taxpayers are subject to federal income taxes (provided they have tax liability), some states do not have any state income taxes. These include Alaska, Florida, Nevada, South Dakota, Texas, Washington, and Wyoming. Additionally, New Hampshire and Tennessee do not tax wages, and only tax interest income and dividends.
State income tax rates differ from the federal tax rate and can differ considerably from state to state. All states that tax income either provide a flat tax rate or a progressive tax rate (like the IRS). Flat tax rates apply equally to all taxpayers, while progressive tax rates typically tax higher incomes more heavily. Among states with a progressive tax rate, some adjust their respective tax brackets annually, while others don’t.
There are differences in what incomes are and aren’t taxed from state to state, as well – for example, some states exempt Social Security incomes and pensions from income taxes, while the IRS doesn’t.
State Tax Problems
State tax problems can be an even greater headache than problems with the IRS, as states tend to be more aggressive in their collection pursuits. For example, state governments may threaten to restrict your driver’s license, registration, or your professional licenses in addition to failure-to-file or failure-to-pay penalties and interest. State governments can place liens on your property, garnish your wages, and levy your back accounts to pay off your debt, just like the IRS.
If you fail to file state income taxes, states have the power to prosecute you on civil or criminal charges if they find that you have been purposefully or knowingly evading taxes. Otherwise, you will still be levied a monthly tax penalty for your failure to file, depending on state laws. This penalty is separate to any penalties and interest owed in addition due to a state tax debt.
Our firm has trained professionals that know how to handle state tax problems. If you owe back taxes or are looking to negotiate a settlement on a debt, we specialize in all aspects of tax relief.
Work With a Professional
State tax problems are just as potent as federal tax problems, and your state’s respective tax agency will utilize everything in their power to try and collect. Do not take on your tax problems alone – call and get protected by our staff today.
Each state has its own set of guidelines and rules that they follow for collecting on back taxes, however the general collection process is similar between the federal government and most states. This means states will usually first impose a lien on your property, and then turn towards levies and garnished wages to try and collect your debt if you fail to make an effort to pay your taxes.
This is why it is imperative that you work with a professional that knows the ins and out of your state and local tax laws, understand your respective deadlines and penalties, and explore your options thoroughly. We work with you and your state’s tax agency to explore all options for tax debt relief.
Rush Tax Resolution can help you put your tax problems behind you.
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