23. LO.4 As to those states that impose an income tax, comment on the following:
a. “Piggyback” approach and possible “decoupling” from this approach.
b. Deductibility of Federal income taxes.
c. Credit for taxes paid to other states.
24. LO.4 In May 2013, Hernando, a resident of California, has his 2011 Federal income tax return audited by the IRS. An assessment of additional tax is made because he had inadvertently omitted some rental income. In October 2013, California audits his state return for the same year. Explain the coincidence.
25. LO.4 Mike Barr was an outstanding football player in college and expects to be drafted by the NFL in the first few rounds. Mike has let it be known that he would prefer to sign with a club located in Florida, Texas, or Washington. Mike sees no reason why he should have to pay state income tax on his player’s salary. Is Mike under any delusions? Explain.
26. LO.4, 5 A question on a state income tax return asks the taxpayer if he or she made any out-of-state Internet or mail-order catalog purchases during the year. The question requires a yes or no answer, and if the taxpayer answers yes, the amount of such purchases is to be listed.
a. Does such an inquiry have any relevance to the state income tax? If not, why is it being asked?
b. Your client, Harriet, wants to leave the question unanswered. As the preparer of her return, how do you respond?
27. LO.4 Many state income tax returns contain checkoff boxes that allow taxpayers to make donations to a multitude of local charitable causes. On what grounds has this procedure been criticized?
28. LO.4 Many states have occasionally adopted amnesty programs that allow taxpayers to pay back taxes with reduced penalties.
a. Besides the revenue generatb. Could an amnesty program be used by a state that does not levy an income tax?
c. Does the IRS utilize this approach?