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Last week, I shared how I get a shock every April 15th by the number of phone calls my office gets from the public looking for help with filing an extension. This April 15th didn’t disappoint!

Several of the callers knew they needed a federal extension, but they weren’t always sure about the state extension. Of course, the callers knew if they needed to file an extension for the state they lived in, but my team also asked them about other states and the response was usually silence.

This part of April 15th does not shock me because I’m constantly asking prospects and new clients about their state tax obligations and the response is always uncertainty.

More Than Just State Income Tax – State taxes usually come in three forms:

Property tax
Sales tax
Income tax

Many business owners (and real estate investors!) get into trouble by not even realizing they aren’t complying with the state tax laws. Here is a very common situation I see time and time again.

A couple has been investing in rental real estate in their home state for several years. They branch out and purchase 2 new rental properties in a neighboring state. The couple knows they need to pay real estate taxes in the neighboring state and that they need to file a state income tax return in the neighboring state. The couple thinks they have their state taxes covered.

Not so. Based on the above list, the couple has covered the property tax and income tax, but not the sales tax. And yes, many states have a sales tax on rental receipts. This couple was in one of those states.

The Scariest Part of State Taxes – The scariest part of state taxes is the huge accumulating expense that comes with non-compliance.

With this couple, the 2 new properties were in a state that had a 5% sales tax on rental receipts. The couple never knew about it, so they never collected it from their tenants. The state caught up with them 3 years later and required them to file sales tax returns for the past 3 years.

Here’s how it added up: The monthly rents for the 2 properties averaged ,000. At 5%, the monthly sales tax due was 0. This totaled to ,800 every year, so for the 3 years, the couple owed ,400. And with penalties and interest the grand total was over ,500!

The nice thing about sales tax is it can be passed through to your customer (or tenant), so you are allowed to collect it from your customer and remit it to the state. But, if you don’t know you are suppose to collect it and don’t collect it, it doesn’t mean you are off the hook. In this situation, you have to come up with the money yourself.

This couple had an unexpected sales tax bill of over ,500. Fortunately, they had the funds to pay the bill but it significantly hampered their ability to continue their real estate investing as they planned.

The Solution – The solution for this couple is very simple. Collect the sales tax from their tenants and remit it timely. It can be an expensive lesson to learn and I see too many people learn it the hard way.

With the present economical situation in the world being what it is few investors would like to delve into the stock markets. Some are also staying away from the fluctuating interest rates of the banks, even the most trusted ones, what to say of investing in the volatile foreign exchange markets. So, is there a guaranteed way to earn a fair interest on a time bound investment? Experts will have you believe that becoming a structured settlement purchaser would be the best bet when it comes to security and earning a handsome profit too.

For those who are new to structured settlement trading, or transfers, as it is legally known, we would explain in short what a structured settlement is. A structured settlement is a financial damages claim filed by an individual, firm or company against an individual, firm or company. The claimant may be claiming damages amount to any sum of money. On losing the tort suit (or in return for the claimant withdrawing the suit) the defendant may reach an agreement with the court or the claimant to pay out the demanded compensation in installments called annuities.

This agreement is documented and recorded in a court of law and states the terms of the settlement of the tort suit. The structure of the agreement will clearly define how much annuity will be paid and also the intervals it will be paid over. This document is called a structured settlement. The claimant will continue to get guaranteed payout at a stipulated date over a certain number of years or till they expire, which is the case in certain cases.

A structured settlement purchaser sees an opportunity in this scenario. A structured settlement purchaser knows that many people who opt for structured settlements will at some point want to have their hands on the full amount of the settlement in their impatience to wait for the installments. They offer these people a lump sum of cash in return for transferring the structured settlement to them. They do not mind getting paid over time because they earn a handsome amount at the end.

Becoming a structured settlement purchaser is like giving someone a loan in return for a large interest. The settlement will repay the entire amount over time in installments. The profit is the difference in the total amount being received minus the amount paid when the structured settlement is purchased from the original claimant.

As the defendant, usually an insurance company, is legally bound to pay the whole amount there is very little scope for a default because the legal penalties for a default are very high, will pay on time until the whole amount has been paid out the investment returns are guaranteed. The returns are high too because people will settle for lump sums of cash in return for selling their settlement. The difference usually amounts to over 25 percent inclusive of fee and transaction costs.

Becoming a structured settlement purchaser is easy. All it requires is register with the online structured settlement brokerage or service portals for free and wait for the best offers to be presented before you.