If you are running a business in the United States of America, then you must be aware of the fact that in this country there are a total of nine states without income tax. This means that these nine states do not ask for income tax from individuals and you will not have to pay anything from your personal income while residing in these states. If you are currently staying in one of these states, then you will only be required to submit a federal tax return during the tax season.
List of states with no income tax
Here is a list of states without income tax in the US where individuals won’t have to pay any taxes:
Wyoming
South Dakota
Nevada
Alaska
Texas
Florida
Tennessee
Washington
New Hampshire
Apart from these states, there is another set of nine states in the United States where the income tax rate is flat which means every individual from these states will have to pay their taxes at a specified rate (no matter what their earnings are). As for the remaining states, they have applied a progressive income tax which means the higher your income the more taxes you will be required to pay.
With a 3.07% flat tax, Pennsylvania has the 10th lowest income tax rate in the US.
According to a study conducted by United Van Lines, in 2020 a lot of people relocated to states without income tax such as Florida, South Dakota, etc. from popular states of the United States such as California, New Jersey, etc. (where the tax rates are very high) due to the COVID-19 pandemic.
However, you need to be extremely careful before making up your mind and moving into one of these income tax free states because even though you will be exempted from individual income tax you will still have to pay your taxes if you are running a company or business.
Why do you need bookkeeping in the states without an income tax?
It is true that if you move to one of these states without income tax then at a personal level you won’t have to pay taxes, however (as mentioned earlier) you will have to file a federal tax return during the tax season. More importantly, if you are running a business you need to understand that these tax-free states do ask for corporate taxes from the companies who are currently running their businesses in these states.
As a business owner, you should be already aware of the fact that bookkeeping is a key component of the financial administration of a business or company and that is why you need to tread carefully when it comes to bookkeeping.
A lot of business owners think that they can easily handle bookkeeping by themselves but by doing so not only do they waste their precious time, but they might also have to face compliance issues which will eventually be harmful to their company or business.
All of these indicate the significance of hiring a bookkeeper for a small business because the duties and obligations of a professional bookkeeper are not just limited to bookkeeping or handling the company’s accounts. They can also streamline the financial operations of your business and help you plan an effective strategy to ensure that your business can flourish.
Let us have a look at how bookkeeping services can help you and your business in states without income tax.
Give a boost to your business growth
When you are bound to pay corporate taxes then it is extremely important for you to handle the finance of your company with care. This way you will have a better understanding of your company’s overall financial health and implement an effective strategy that will benefit your business.
More importantly, when tough situations arise you will also be able to make proper decisions while keeping in mind the company’s financial position. At the same time, efficient bookkeeping services will give you enough insights into the cash flow, accounts receivable, etc. Your firm will be able to better understand its performance and make strategic decisions by putting in place a good accounting system, which in turn will set the company on the road to success.
Following up with the regulations and norms
Although it is true that you don’t need to pay any income tax in states like Florida, Nevada, Texas, Alaska, etc. but the same does not apply when you are running a company or business.
More importantly, you have to invest lots of money, effort, and other resources to establish and run your business but if you are not aware of the previous as well as recently updated regulations and norms the SEC or United States Securities and Exchange Commission will knock on your door. This way it will definitely become extremely difficult for you to run your business.
As businesses expand, tax reporting becomes more difficult and time-consuming since it includes profit and loss statements and other important things. A reputable bookkeeping service such as IBN Technologies has a thorough understanding of US tax regulations and processes, which makes it simpler for you to steer clear of troublesome situations. Due to their experience in handling such jobs, they can spot abnormalities immediately and guarantee that your accounting records are accurate, helping you to stay in compliance.
Individual income taxes are levied by the majority of states in the United States on residents and income earners.
Save your company cost and time
In these states without income tax, a lot of people (business owners) will try to do the bookkeeping by themselves, but this is not a wise decision because it will eventually cost you both your resources and time which otherwise would have been used more productively and efficiently.
By taking a professional approach to bookkeeping, such as hiring a bookkeeping outsourcing company, your business can save a lot of money and resources. Moreover, the bookkeeping services will offer assistance in various areas of bookkeeping, such as tax management.
It will cost you more than a few thousand dollars a month to hire an experienced full-time accountant, not to mention significant training time and costs. Additionally, your business won’t lose staff members because of financial instability or expensive mistakes.
Easy to apply for tax breaks
In terms of the Government’s income sources, corporate income tax occupies the third position. In the 2029 fiscal year, the total amount of corporate taxes the US government collected was $230.2 billion which was 6.6% of the government’s total income.
In this scenario, we can say that hiring a bookkeeper would be a very good option for the company owners because with the help of the professionals they will be able to take advantage of the tax deductions and other tax efficiency breaks which will result in you paying fewer taxes. All of which will result in you saving your resources, maximizing income, and minimizing your expenditures.
Final words
No business owner or organization could argue against the value of having a knowledgeable bookkeeper. Furthermore, you also have the option to outsource your bookkeeping service in these states without income tax because it will leave you with more time to focus on your business or company. IBN Technologies is one of the experts in providing bookkeeping services to different companies and organizations.
They have been offering bookkeeping services to companies for more than 22 years and have an expert team of bookkeepers dedicated to serving clients. They also offer personal bookkeeping services (in case you need one). By opting for their bookkeeping services, you will receive additional benefits such as data security, cost-effectiveness, software expertise, etc.
FAQ
- Q.1 In what states don’t you have to pay income tax?
- There are a total of nine states without income tax in America and these include Florida, Texas, Nevada, Alaska, Washington, etc.
- Q.2 What are the 3 states that don’t tax retirement income?
- There are a total of 11 states in the United States that don’t ask for any taxes from retirement income. These states include all the states without income tax along with New Hampshire, Mississippi, and Illinois.
- Q.3 What are the top 3 most heavily taxed states in the US?
- The three states of the US that remain at the top in terms of income tax rate are California with a 13.3% interest rate, Hawaii with an 11% interest rate and New Jersey with a 10.75% interest rate.
- Q.4 What is the highest taxed city in the US?
- The city with the highest tax rate in the US is Bridgeport which asks for a whopping 22% in state and local taxes from the taxpayer in the city.
