The state income tax maze is risky. State tax audits can blind side you. What does this new aggressive environment mean for the working RV’er? Keep a calendar log of what you do, when, and where.
by Martin M. Shenkman, CPA, MBA, JD
Most states are struggling financially and desperate to raise revenues. That means increased and tougher tax audits and less sympathy for those who are caught.
If you are required to file a tax return in a particular state to report your earnings, and you don’t file for three years in a row, that could be a felony.
Just because whatever you did (or didn’t do, like not filing a tax return in a particular state) in the past didn’t raise state tax auditor eyebrows, don’t make the assumption that it was correct, or that it won’t create problems in the future.
You have to keep good records to minimize your taxes, audit issues, and hassles.
Just because you friends did “such and such” for tax purposes, or you heard that everyone who opens a post office box and registers their RV in State X doesn’t pay any state tax, doesn’t mean that was correct in the past, and it really doesn’t mean it will fly now and in the future as states crave tax revenues.
Keep a detailed journal log of where you lived, where you worked, and what you earned. Good records are the key to proper filing, planning to minimize tax, and to defending an audit. If you haven’t been doing this, start today.
Fill in the log daily or weekly. Try to avoid having to recreate information after the fact. Save receipts from RV parks or other places to prove where you were.
If you’re boondocking, saving receipts from the nearby store where you pick up staples may be the best independent proof of where you were. You were probably just tossing the receipts because you paid cash and they were for food and supplies, and weren’t tax deductible. Instead, file those receipts in your calendar log book to prove the accuracy of your records and that they were kept currently. Tax authorities always find current (they call them “contemporaneous”) records more persuasive.
Find out what the state income tax filing requirements are for every state where you work and every state you reside in. State tax return instructions should give you a good start on figuring out what to do.
Most states post a fair amount of state income tax information on line so you can try the research on your own. You might also want to enlist the help of an accountant (go for a CPA = Certified Public Accountant). Costly, yes. But, a lot cheaper to use a qualified CPA to get it right, then to hire a tax attorney later.
If there is a doubt, file a state income tax return. If you don’t file, interest, penalty, and possibly criminal charges can be triggered. The idea of not filing to stay under the state tax radar is in the words of my mom, “playing with fire.”
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. 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 next article in this state income tax series.
Go from this article on the importance of keeping a tax log as part of your state income tax information to the list of other articles written by Martin M. Shenkman.