File state taxes if you are required to do so, warns CPA and tax attorney Shenkman, and you may need to in multiple states. This is part of his series on income tax liabilities for working RVers.
Some States May Tax You or Make You File Tax Returns on Very Little Work
by Martin M. Shenkman, CPA, MBA, JD
Most folks would think that the less you say the better. While that's true when you're visiting your mother in law, it may be the worst thing you can do when it comes to taxes. If a state requires you to file a tax return even if you only worked a very short time, and even if you don't owe them any income or other taxes, you're better off fessing up and filing than giving them the silent treatment you give your mother in law. Failing to file a return can itself trigger penalties. If you file a return, after some number of years (often three, but it can vary) you're home free and cannot be audited. But, if you don't file state taxes, the time period you can be audited never ends.
But I Don't Live in State X How Can They Tax Me
No doubt you've heard the phrase the 'long arm of the law.' Well the tax arm of many states is longer and has a pretty tight grip. How can a state tax you even if you don't live there? Well they often can, and the rules differ from state to state (that's why you were advised to look up the requirements for every state you visit, live in, or work in).
If you "wander" for a few days a year to another state to work, you might just face tax in that state. You have to check the rules for each state. You may need to file state taxes even if you don't need to pay them.
Example: You're full-time RVing and for now primarily working in State X at a job with an entertainment company in that state. When they have events, you work. When they have gaps in their calendar between events, you either relax or seek out part time work. June was a slow month with no events so you sought out a job and found a three-week stint with a business 20-minutes away, over the state border in State Z. State Z might have a rule that below a certain amount you don't have to pay tax or file (and the amounts for each may be different). If you're trying to impress your fellow campers with some good tax Latin, this is called a deminimus rule.
Many, perhaps most, states don't tax you if you work less than a certain number of days. But then again they may. We can now sing the refrain we've been singing in most of these articles on state taxes. Look up the requirements on line and be sure you know what is required and if you must file state taxes.
Planning tip: Whatever the rule is about paying tax, there may be a stricter rule as to whether you have to file an income tax return with State Z. Many tax authorities have strict filing requirements even if it turns out you don't owe any tax – they like to keep tabs on prospective taxpayers.
This is Serious Stuff
If you worked only sporadically in New York, as an example, and owe tax but fail to file three years in a row, it is a felony under New York law.
Better Safe then Sorry
If you pay tax in State X and reside in State Y, you might just qualify for a credit in State Y on the tax you paid to State X. However, if you don't file the appropriate tax returns and are later nabbed on audit, you may no longer qualify for the credit. Filing is always the safer route, and often the cheaper approach as well.
Planning tip: File all returns Certified Mail Return Receipt and save the proof that they tax authority received it.
Find out what the rules are. Each state is different and the rules of whether you need to file state taxes may not be consistent. Whenever you might have to file state taxes, err on the side of filing. Whatever you file, save a copy for your tax file.
Martin M. Shenkman, CPA, Esq. sponsors a free legal website LawEasy.com.
Martin is an RVer with a special cause. He is an avid fundraiser for the National Multiple Sclerosis Society and The Michael J. Fox Foundation For Parkinson's Research. See his RV4TheCure.com website for how you can help him fight MS. Besides RV business tax and legal information, he will share some of his RVing and fundraising experiences with us.
Caution: This article and other columns can never substitute for professional legal, tax, and accounting guidance. These columns can provide only broad general advice, which may not apply to your situation. The rules differ substantially from state to state. Tax, business, and other laws change rapidly over time so there can be no assurance that the information in this column is current. The best approach is to review the ideas in this article with your own CPA and attorney. The application of general tax and legal principles to some of the unique facts presented by RV working is particularly complex and there is little specific law providing guidance to rely upon.
Go to the previous article in this income tax series.
Go to the next article in this state income tax series.
Go to the page that lists all of Attorney Shenkman's articles.
Go from this File State Taxes article to the Workers On Wheels Work for RVers and Campers blog.