Last week, I shared how I get a shock every April 15th by the number of phone calls my office gets from the public looking for help with filing an extension. This April 15th didn't disappoint!
Several of the callers knew they needed a federal extension, but they weren't always sure about the state extension. Of course, the callers knew if they needed I Talk Telekom Malaysia file an extension for the state they lived in, but my team also asked them about other states and the response was usually silence.
This part of April 15th does not shock cheap internet calls because I'm constantly asking prospects and new clients about their state tax obligations and the response is always uncertainty.
More Than Just State Income streamyx combo packages - State taxes usually come Streamyx Account three forms:
Property tax
Sales tax
Income tax
Many business owners (and real estate investors!) get into trouble by not even realizing they aren't complying with the state tax laws. Here is a very common situation I see time and time again.
A couple has been investing in rental real estate in their home state for several years. They branch out and purchase 2 new rental properties in a neighboring state. business broadband internet couple knows they need to pay real estate taxes in the neighboring state and that they need to file a state income tax return in the neighboring state. The couple thinks they have their state taxes covered.
Not so. Based on the above list, the couple has covered the property tax and income tax, but not the sales tax. And yes, many states have a sales tax on rental receipts. This couple was in one of those states.
The Scariest Part of State Taxes - The scariest part of state taxes is the huge accumulating expense that comes with non-compliance.
With this couple, the 2 new properties were in a state that had a 5% sales tax on rental receipts. The couple never knew about it, so they never collected Satellite High Speed Internet from their tenants. The state caught Offer High Speed with them 3 years later and required them to file sales tax returns for the past 3 years.
Here's how it added up: The monthly rents for the 2 properties averaged $3,000. At 5%, the monthly sales tax due was $150. This totaled to $1,800 every year, so for the 3 years, the couple owed $5,400. And with penalties and interest the grand total was over $6,500!
The nice thing about sales tax is it can be passed through to your customer (or tenant), so you are allowed to collect it from your customer and remit it to the state. But, if you don't know you are suppose to collect it and don't collect it, it doesn't mean you are off the hook. In this situation, you have to come up with the money yourself.
This couple had an unexpected sales tax bill of over $6,500. Fortunately, they had the funds to pay the bill but it significantly hampered their ability to continue their real estate investing as they planned.
The Solution - The solution for this couple is very simple. Collect the sales tax from their tenants and remit it timely. It can be an expensive lesson to learn and I see too many people learn it the hard way.
I get a shock every April 15th by the number of phone calls my office gets from the public looking for help with filing an extension. This April 15th didn't disappoint!
