Is Your State Going Broke?

With national events continuing as they are, here at Utah Real Estate Accountants, we're finding ourselves locking into "go mode" ... again.

It's unusual for us to be in this mode smack in the middle of June, but this year has not been ... usual.

This is because the tax deadline (July 15th, 2020) is barreling at us.

Many of our clients have already taken care of what they needed to, and we have filed a ton of returns (we are processing tax work on a first in, first out basis).

But if you have NOT filed your 2019 taxes ... times' a-wastin'.

Allow me to remind you, again, that two estimated federal tax payments are due on July 15th. Many states have followed suit on this, but some have not. Here's a handy list for the due dates in your state -- since, although most of our clients are based locally, we of course serve clients across the country:

https://taxfoundation.org/2020-quarterly-estimated-tax-payments-2019-tax-returns/

I brought up the states there ... and with all the financial chaos roiling around us, it's a good time to consider: is your state in financial trouble?

Chances are good that it is ... in which case: what will your state do about it, and how might it affect you?

Some thoughts...

Janet Behm's
"Real World" Personal Strategy Note

State Tax Revenue Collection and How It Might Affect YOUR Wallet

"A man should always consider how much he has more than he wants." -Joseph Addison

The financial picture for the various states in our nation is a mishmash of various revenue sources (and expenses).

Unlike, say, the federal government, the states cannot print money. So, they are forced to go hunting for it. And they get it from a few primary sources: sales tax (based on purchases/consumption), income tax (individual and business taxes based on income), property tax and "other" taxes like the tax on fishing licenses, driver's licenses and a lot of other smaller items.

And the most volatile -- and COVID-affected -- of these sources is ye olde income tax. Sales tax has obviously taken a hit as well (but people still need to buy stuff) and property taxes, well ... more about that next week.

So which states will be hunting for more revenue? This article will give you a good picture -- it's a breakdown for which states are the most reliant upon income tax revenue:

https://taxfoundation.org/state-individual-income-tax-reliance-2020/

Oregon and Maryland stand out (especially Oregon, which has no sales tax) -- but MANY states will be on the hunt for that sweet, sweet green.

You are your state's "economic stimulus plan". Make no mistake ... the next couple years will find MOST states finding ways to grab revenue from you.

This will take the form of increased property taxes (which you can fight), increased scrutiny of business operations that cross state lines (for business owners, "NEXUS" is a word you need to know), as well as chopping their expenses.

There are already school districts that are looking at laying off anywhere from 1 in 5 to 1 in 12 teachers. Half of all cities will need to make last resort cuts to their police and fire departments (regardless of the politics and wisdom of it, "defund the police" might sound pretty nice to state treasurers). And garbage services will probably take a hit.

So, what can you do about this? Well, that's where your tax pro comes in. Yes, they can help you plan out your Federal tax picture and help you save there ... but state taxes are still very much a category in which it quite literally pays to have a pro in your corner.

Don't accept "software defaults" for your state taxes. Let the pros ensure that you don't become your state's piggy bank. Legally, ethically ... and with your full financial picture in mind.

BE THE ROAR not the echo®

Warmly,

Janet Behm
(801) 278-2700

"CRISIS Action Plan" for my clients:

1) Don't marinate in other people's panic. Be mindful of your social media consumption.
2) Continue to stay financially and logistically prepared for worsening situations.
3) Make sure you have some ready, liquid assets, if you are able. (I.e., cash in the bank, and in hand.)
4) Set aside plans for any big spending until the dust settles -- but especially look out for your small business owner friends and vendors.