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Comment by ChuckMcM | Hacker News Reader

Sigh. I understand the angst, tax organizations are the worst. However, a piece of advice.

If you file a tax return in a state, and then you leave. Make sure you file a tax return the next year as well but put down zero taxable income.

What I have seen states do, is take the last year you filed a return "presume" you made that much in the next year but just "forgot" to file, and then charge you for back taxes. You counter this behavior by filing a $0 tax return so that the last year on the books you made $0 and when they use the last year you filed to compute your 'expected' return for the current year they will start with $0. A CPA friend suggested that you continue this for three years as that was the 'average' over which they might make a computation.

Either way, its a pain. But filing a state return with $0 on it is pretty straight forward thing these days with efiling.

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But filing a state return with $0 on it is pretty straight forward thing these days with efiling.

It's stupid to have to do that. They shouldn't be estimating your income, they know exactly how much you make from your W-2s, 1099s, etc. This is all to be reported to the state by an employer.

As for the guy in the article, there isn't something quite right. The state could be completely wrong here but there is something fishy with his ownership of part of a business in MA. If everything is as he says is true and the MA tax lawyer isn't getting this settled, he needs to get a different lawyer.

Two part response:

"It's stupid to have to do that." - yes it is. However, as the author points out, states are broke, so they do everything they can to maximize revenues. (California is horrible at this, they twiddled two of the digits in my social security number and the first I heard about it was a tax lien filed against my house, really sad.) For a long time not filing a tax return effectively deferred your tax liability until you did. They aren't willing to wait that long any more.

"As for the guy in the article, there isn't something quite right." - Of course not, tax stories like this are always more nuanced than the 'victim's point of view. Combined with the common practice of "interpreting" the statutes to mean one thing or another, its what keeps tax attorneys gainfully employed.

Of the latter my favorite is the "home business" or "hobby" interpretation. Your home business of shipping coal to New Castle may be losing money year after year, but the IRS doesn't technically get to call it a hobby, even if there is no evidence to believe it will ever make any money. People abuse that "loop hole" all the time, it is an opinion of whether or not its a "business" and the IRS isn't technically allowed to make judgements along whether it is or isn't. That doesn't stop them from trying to intimidate people though.

It is bad behavior by the states, high income earners explicitly avoid ever residing in certain areas that are notorious for long term harassment -- even when they have zero problem with the tax rate itself.

Several states are playing the all in card on their expenses, because they know when there is a real financial crises its much easier, politically, to purge excess expenses (The Federal government is doing this too I think.) The more they spend today the quicker that day arrives.

In MA at least you should file a Form 1-NR/PY Nonresident or Part-Year Resident. http://www.mass.gov/dor/forms/personal-income/2011/form-1-nr...

You write on it when you leave the state and then they know you are no longer a resident. I suspect there is something similar in most states.

That's excellent advice, thank you!

If however this is a commonly expected thing to do, shouldn't a CPA (such as the one the author hired) be expected to advise you of that?

Yes, I would expect a CPA who handled your taxes the previous year, knew you weren't filing in some state you filed in before this year, would suggest you file a $0 income return in that other state.

That is really good advice. This is nothing new. The author seems to attribute it to the times but I had something very similar happen in California about twenty years ago when the state was quite flush.

Whoever didn't warn you that this could happen once there was a lien was giving you bad advice.

I like the suggestion of filing a $0 return because once you get on the radar of the state tax agencies it gets very expensive to get them off your back. As a kid I failed to file because I owed like $20 (but I did file a federal return, which alerted the state). They eventually froze my account and it cost about $1k to settle the matter. At the time that was real money to me.

Jeez I thought our tax system was broken. This must happen all the time.

Thankfully Australia's taxation is handled federally.

We have federal income taxes too. The US IRS will play the same sort of tricks for delinquent taxes (imagined and real).

I've found the IRS to be incredibly reasonable. I had a high tax bill due to non-realized gains (sigh...), but was able to get them to do a payment plan at low interest for a couple years. They were nothing but polite and accommodating.

I also spoke with IRS CID on another matter (someone was making death threats to IRS agents, and they had mail through my anon remailer). Way saner than FBI or even USSS. (I had no information, by design, but being able to tell someone that and explain how remailers worked without them threatening to seize servers was refreshing.)

Well, a member of my own family has not had such a wonderful experience with them. Nor have I found my own interactions with them ideal. I expect they are like anything else, some good and some bad. It's a fact though, that IRS agents have a tremendous amount of power to wield over a person's life. Taxes being such a contentious issue, it's not surprising that people are sensitive about having their assets seized.

I had a high tax bill due to non-realized gains...

Do you mind elaborating? I was under the impression that capital gains aren't taxed until they're realized, would love to hear when that's not the case.

It probably has to do with Alternative Minimum Tax (AMT), which is calculated under different rules. It hit some of the Silicon Valley millionaires hard when they exercised their options before the dot-com bust, then held onto the shares for a year to get the lower capital-gains rate, and then the bottom dropped out of the market. Under AMT, those stocks represent millions in income even if they're now worthless.

AMT

I moved to Austin in 2011 and have worked here since 2012. I'm going to make sure to do this at the same time I file my tax return here. I don't want to give California the chance to retroactively change what I owe. Thanks for the advice!

Good move.

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