Archive for the ‘Florida’ Category

New York, California, and Illinois Lose AGI & Population Per IRS Data

Sunday, December 25th, 2022

The Tax Foundation produced a report showing the overall gain (and loss) of population and taxpayers’ Adjusted Gross Income (AGI) during the second half of 2019 through the first half of 2020.  For the most part, high tax states were the biggest losers while low tax states were the biggest winners.  While the data includes a portion of the pandemic, “These data, therefore, capture many of the interstate moves made early in the pandemic—between mid-March and mid-July 2020—but do not necessarily capture the bulk of pandemic-related moves, many of which occurred later in 2020 and even into 2021. As such, when interpreting these data, it is important to keep in mind that many of these moves happened before the even more pronounced shift away from large cities and high cost-of-living areas that occurred during the pandemic. [emphasis in original]”

Some of these losses are eye-popping.  New York (which is dead last on this list) lost $19.5 billion in AGI and 248,305 taxpayers.  California (ranking 46th) lost more in population (263,344) but “only” $17.8 billion in AGI.  Meanwhile, Florida gained $23.7 billion in AGI and 166,707 in taxpayers (ranking 4th).  Idaho topped the list with a gain of $2.1 billion in AGI and 36,655 in taxpayers.

This is one area where it’s a zero-sum game.  Every taxpayer who moves between states ends up somewhere else.  If a state loses enough population, the state is forced to make changes.  Indeed, that time is likely coming soon for New York and Illinois–their current trends are just not sustainable.  Meanwhile, the legislature in New York proposed tax increases.  (To her credit, Governor Hochul vetoed the legislation.)

For those who say it’s related to weather, sure, that’s a factor.  Yet Maine–not exactly the warmest state in the Union–ranks seventh.  Indeed, combine sound fiscal practices and great weather and you get Florida.  I’d advise politicians in California, New York, and Illinois to carefully read the study (but I doubt they will).

Here’s an image from the Tax Foundation:

Hurricane Ian: IRS Extends Deadline for All Floridians to February 15

Thursday, September 29th, 2022

The IRS announced today that because the state of Florida has been declared a disaster zone that tax deadlines for Floridians have been extended until February 15, 2023.  This includes the individual and C-Corporation extended deadline of October 17th, the trust/estate (Form 1041) extension deadline of September 30th, payroll tax deadlines of October 31st and December 31st, and the January 17, 2023 Estimated Payment deadline.  Do note that tax payment deadlines that have already passed have not been extended.  However, interest and penalties do not accrue during disaster extensions, so there won’t be any additional interest and penalties.

I would expect the Florida Department of Revenue to extend the corporation tax deadline of October 17th to February 15, 2023 soon.

 

2022 State Business Tax Climate Index: Bring Me the Usual Suspects!

Friday, December 17th, 2021

Yesterday, the Tax Foundation released its list of the business tax climate in the 50 states.  Not much has changed, and for those in New York, New Jersey, and California wondering why businesses are moving to Florida and Nevada, you just need to look in the mirror.  The top 10 states are:

  1. Wyoming
  2. South Dakota
  3. Alaska
  4. Florida
  5. Montana
  6. New Hampshire
  7. Nevada
  8. Tennessee
  9. Indiana
  10. Utah

There’s also a bottom 10:

41. Hawaii
42. Louisiana
43. Vermont
44. Arkansas
45. Minnesota
46. Maryland
47. Connecticut
48. California
49. New York
50. New Jersey

The best states either lack a major tax or levy all the major tax types with low rates on broad bases.  Meanwhile, the worst states share, “complex, nonneutral taxes with comparatively high rates.”  My state, Nevada, ranks 7th with low individual and property taxes but high sales and unemployment insurance taxes (corporate tax is ranked in the middle, 25th).  My former state, California, ranks in the bottom four in corporate taxes, individual taxes, and sales tax, in the middle for unemployment insurance, and above average for property tax.  The worst state, New Jersey, ranks in the bottom ten in all taxes except unemployment insurance (where it ranks below average, 32nd).

Yes, taxes aren’t everything but they’re a huge reason why my business left the Golden State and moved to the Silver State.

Bozo Tax Tip #5: Ignoring California

Monday, April 6th, 2015

Perhaps I should call this Bozo Tax Tip “Forming a California Trust.” Why? Let me explain.

Let’s assume John and Jane, two California residents, form a trust to benefit their children, Ann and Bob. Ann lives in Florida; Bob resides in California. The trust is an irrevocable trust, so it files its own tax return (a Form 1041). The income to the beneficiaries is reported on Schedule K-1s. Ann is surprised and calls her accountant when she receives both a federal K-1 and a California K-1.

The issue is simple: The trust is a California trust, so the income is California-source. California requires that a Schedule K-1 for Form 541 (California’s trust tax return) be included. Yes, Ann must pay California tax on the income. Ann’s CPA called me and asked me why I included the K-1 from California. My response was succinct: I have to and Ann has to pay the tax.

California’s desire to have anyone and everyone pay California tax has led to many trusts relocating to Nevada (which has no state income tax) and other trust-friendly states. California isn’t one of those states. Ann’s parents, John and Jane, could have formed the trust in Nevada but because they didn’t Ann is stuck in the Hotel California. You can check out any time but you can never leave.

Ignoring the California K-1 is a Bozo idea. Instead of just paying tax, you will get the joy of paying tax, penalties, and interest. If your parents are in California and thinking of forming a trust to benefit you, it may be worth your time to talk about Nevada to them. Otherwise, welcome to the Hotel California.

“Ripping Off Your Refunds” In the Miami Herald

Sunday, February 22nd, 2015

There is an excellent article in the Miami Herald on the identity theft tax fraud crisis. The epicenter of this is South Florida (as noted in the article). I don’t have much to add to the frustrations of victims with the IRS’s conduct in these cases. One quote:

“The IRS call center person acted as if we were the ones who had done something wrong.”

Is a “Dealer Add-On” a Tip or a House Fee?

Sunday, August 10th, 2014

Poker dealers are paid a low hourly wage; they make most of their money from gratuities (tips) from players. Those tips are, of course, taxable. In a poker tournament, dealers also receive tips. Some come from the prize pool while some come from the players themselves when they win or place high in the tournament. Some tournaments offer players a “Dealer Add-On.” The Dealer Add-On costs players a small fee–say, $5 to $50. In return, the player receives an additional amount of tournament chips.

Clearly, a dealer who receives a portion of that add-on must report it as income; all income is taxable unless exempted by Congress, and such Dealer Add-Ons haven’t been exempted. However, there’s a dispute in Florida as to whether the Dealer Add-On is considered income to the casino.

The Florida Division of Pari-Mutuel Wagering (which regulates non-Indian casinos in the state) now says the money is income to the casino, and tax must be paid to the state on it. Until this July, Florida said that Dealer Add-Ons were not income to the casino. The Isle Casino in Pompano Beach, Florida has sued the state charging the rule is, “an invalid exercise of delegated legislative authority.”

Given that Dealer Add-Ons are small compared to the other income that a casino brings in, this dispute will have a minor impact on the casinos. However, it could cause an increase in the fees that a casino charges for running tournaments; that could negatively impact poker tournaments.

Bozo Tax Tip #7: Ignoring California

Thursday, April 3rd, 2014

Yesterday I looked at the idea of forming a Nevada Corporation while in California and being able to avoid California taxes. It doesn’t work. Today’s focus is on something that comes up now and then and applies to trusts.

Let’s assume John and Jane, two California residents, form a trust to benefit their children, Ann and Bob. Ann lives in Florida; Bob resides in California. The trust is an irrevocable trust, so it files its own tax return (a Form 1041). The income to the beneficiaries is reported on Schedule K-1s. Ann is surprised and calls her accountant when she receives both a federal K-1 and a California K-1.

The issue is simple: The trust is a California trust, so the income is California-source. California requires that a Schedule K-1 for Form 541 (California’s trust tax return) be included. Yes, Ann must pay California tax on the income. Ann’s CPA called me and asked me why I included the K-1 from California. My response was succinct: I have to and Ann has to pay the tax.

California’s desire to have anyone and everyone pay California tax has led to many trusts relocating to Nevada (which has no state income tax) and other trust-friendly states. California isn’t one of those states. Ann’s parents, John and Jane, could have formed the trust in Nevada but because they didn’t Ann is stuck in the Hotel California. You can check out any time but you can never leave.

Ignoring the California K-1 is a Bozo idea. Instead of just paying tax, you will get the joy of paying tax, penalties, and interest. If your parents are in California and thinking of forming a trust to benefit you, it may be worth your time to talk about Nevada to them. Otherwise, welcome to the Hotel California.

1700 Miles and a 7% Difference

Sunday, April 28th, 2013

One of the most difficult things to explain to a non-tax practitioner is the tax concept of domicile. For most individuals, your domicile is your residence. I reside in Las Vegas, Nevada. It’s my only home. In my case, my domicile and residence are identical (as is the case for most people).

However, some individuals have multiple residences. Take Ken Mauer. Mr. Mauer has a home in Afton, Minnesota (just east of the Twin Cities). He also has a home in Fort Meyers, Florida. They’re both residences, so which is his domicile? If Mr. Mauer’s had residences in Nevada and Florida, this wouldn’t be a big issue (neither state has a state income tax). However, Minnesota has a state income tax so being considered a Florida resident would save Mr. Mauer thousands of dollars in state income tax.

Shock of shocks, Mr. Mauer declare himself a Florida resident and didn’t file Minnesota tax returns for 2003 or 2004. After the Minnesota Department of Revenue objected, he filed a part-year 2003 return. Mr. Mauer was audited by the Department of Revenue and lost. He appealed the decision to the Minnesota Tax Court and lost. He then appealed to the Minnesota Supreme Court. That court upheld the previous decision.

I’m not going to into Minnesota’s 26-factor test, or the factors that led to Mr. Mauer being considered a resident of the Gopher State rather than the Sunshine State. One factor, though, is key: Mr. Mauer spent more time in Minnesota than Florida. Few tax agencies will consider you a resident of the other state if you continue to spend a lot of time in their state. Suffice to say, it you are in such a situation it’s best to cut all ties to your old state…or at least spend 183 days in your new home. In Mr. Mauer’s case, he’s liable for Minnesota state income tax for 2003 and 2004.

Hat Tip: How Appealing

“First Lady” of Tax Fraud Indicted for Fraud

Thursday, December 20th, 2012

We have a late entry for the 2012 Tax Offender of the Year. Rashia Wilson bragged on her Facebook page, something that many individuals do. But it’s what she said that likely got her in trouble. According to the Tampa Bay Times, Ms. Wilson said,

“I’m Rashia, the queen of IRS tax fraud,” Wilson said May 22 on her Facebook page, according to investigators. “I’m a millionaire for the record. So if you think that indicting me will be easy, it won’t. I promise you. I won’t do no time, dumb b——.”

She may have been correct: It took a little over six months for her to be indicted.

Technically, she hasn’t been indicted for tax fraud. The 57 counts she and her boyfriend, Maurice Larry, face include conspiracy, wire fraud, filing false tax returns, theft of government property, and aggravated identity theft. The pair are looking at very lengthy terms at ClubFed if found guilty of all charges. The government is also seeking a money judgment in the amount of $1,176,787.00; that’s how much the pair allegedly profited from their scheme.

This is not Ms. Wilson’s first brush with law enforcement. She was arrested in September on a weapons charge.

While this alleged tax fraud ring is based in Florida, it apparently may have received information on identities in California. A story in the San Francisco Chronicle noted that 931 Berkeley residents may have had their identities stolen by this ring. The Chronicle story also notes that Ms. Wilson hosted “tax fraud parties” that allegedly raised more money than drug dealing.

A hint to those who want to begin a life of crime: Don’t brag about it on Facebook. Yes, law enforcement does read the Internet.

I’m Shocked to Find That People Move from High-Tax States to Low-Tax States

Sunday, June 3rd, 2012

Well, not really. This post by the Tax Foundation notes that New Yorkers are finding other states, such as Florida, far less taxing and are relocating there. The story references the New York Post; that newspaper ran a story noting that $20 billion of income migrated south.

Foundation analyst Nick Kasprak said taxes play a role in people’s decisions to relocate.

“You generally see people moving from higher-tax states to lower-tax states,” he said. “Certainly, taxes are one way that states compete with one another.”

Now, you know that, I know that, but do the people running California know that? Back in December I posted about how California has lost $48 billion of AGI (Adjusted Gross Income) from 1993 to 2008. In total, the Bronze Golden State lost just over 720,000 tax returns while losing that income. However, at the same time, California’s population increased by 5 million.

The conclusion is obvious: High income individuals have left and were replaced by low income individuals. People like me left the state and have gone to less taxing environments.

Another conclusion is equally obvious: California must make fundamental reforms to its taxation system. This is going to be horribly painful (especially if you are in a public employee union). Both the number of employees, what they do, what they’re paid, and what their benefits are, must all be cut–and cut substantially. Even the most golden of climates can turn ugly.