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State Income Tax Issues



Each State Has Independent Taxing Authority


State taxes are separate from Federal income taxes that are imposed by the IRS, and are levied by the government of each individual state. State income taxes are typically administered by the department of taxation, department of revenue, comptroller, or treasurer of that state. Like the IRS, state taxation authorities are assigned with the task of collecting taxes and utilize methods such as tax audits, tax appeals, wage garnishments, bank levies and tax liens.

Progressive Tax System

A progressive state tax is where the income tax rate increases as the taxable income or amount of taxes owed to the state increases. The progressive income tax system is used by the majority of U.S. States with tax rates typically ranging between 1-11 percent depending on the state.


Flat Tax Rate

A flat state tax is where the income tax rate remains the same percentage regardless of taxable income or amount of taxes owed. The flat rate income tax system is used by eight states, and typically ranges between 3-6 percent from state to state. Currently Flat-Tax states include Colorado, Illinois, Indiana, Massachusetts, Michigan, North Carolina, Pennsylvania, and Utah.


No Tax States

A no tax state is one which there is no personal state income tax. These states typically generate revenue from taxing other sources. Currently the no-tax states are Alaska, Florida, Nevada, New Hampshire, Tennessee, South Dakota, Texas, Washington, and Wyoming


State Tax Issues

Like the IRS, each state has significant authority in order to collect income taxes. If your taxable income has changed due to an IRS tax audit (examination), thus affecting the amount owed in state income taxes, it is likely that your state will quickly find out about the change in status as just about all states are now linked to the IRS by computer. This also means that if you fail to file or understate your income on your state taxes the state taxing authority will have immediate access to the correct information from the IRS and may trigger a state tax audit.


State Tax Collection Efforts

While the collection efforts will vary from state to state, which may include the use of external collection agencies, generally state taxation authorities have will utilize similar methods to the IRS in order to collect tax debts. Some of these methods may include bank levies, tax liens and wage garnishments.


State Imposed Tax Levies

State taxation authorities can levy against property you may own such as retirement accounts, accounts receivables, rental income, and of course bank accounts. For bank accounts, once the bank is notified by the state taxation authority of the levy, it is required to place all funds on hold for 21 days. After the 21 day period ends, the bank is then required to turnover funds from that bank account to the state. During this 21 day period it is crucial to takes steps to resolve the tax problem with the state department of taxation. It is also important to have that tax resolution in writing to use as evidence in future dealings with the state.

More about Stopping a Bank Levy >>


State Imposed Tax Liens

An state tax collections imposed tax lien is a claim against a taxpayer's real and/or personal property, which is used as collateral to pay for the state tax debt. The state taxation authority wants to ensure that the state tax debt is paid by the taxpayer and it will seek to secure payment from any source it can find.  This state tax lien will show on the credit reports of the taxpayer and can negatively affect the taxpayer's ability to secure financing for a house, car, etc.

More about Preventing & Removing Tax Liens >>


State Imposed Wage Garnishments

A state tax wage garnishment (or wage levy, as it is also called) forces your employer to withhold part of your paycheck and turn that amount over to the state taxation authority for the purpose of paying off your tax debt. While wage garnishments are continuous in nature, if a wage garnishment has been levied against you by the state, there are ways in which it can be stopped without quitting your job.

More about Stopping Wage Garnishments >>




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Sheppard Law Offices

Law offices of Columbus, Ohio based Tax lawyer  Kenneth L. Sheppard, Jr. serving clients on a national and local scale. We serve clients throughout the United States and abroad in dealing with the IRS, State, and Local taxation authorities. We have Ohio tax law offices located in Columbus, Canton, Newark, and Mt. Vernon. We handle tax issues for clients located  throughout the country, including Ohio, North Carolina, California, Florida, Illinois, Indiana, Maryland, New Jersey, New York, Pennsylvania, Texas, and Virginia.

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