IF A FEDERAL FLAT TAX IS INSTITUTED, IT WILL DEFINITLY IMPACT YOUR STATE TAX. A FEDERAL FLAT TAX IS GREAT IN STATES LIKE TEXAS WHICH HAS NO STATE INCOME TAX BUT IT WOULD AFFECT THE FILING AND PROCESSING COSTS FOR YOUR STATE INCOME TAX. THE STATES THAT DEPEND ON AN INCOME TAX FOR OPERATING REVENUE OF THE STATE HAVE A DEVELOPED INCOME TAX SYSTEM WHICH MIRRORS THE FEDERAL TAX SYSTEM. STATE INCOME TAX SYSTEMS USE THE FEDERAL TAX FORM AS A BASIS TO DETERMINE THE INCOME TAX THAT ITS CITIZENS SHOULD PAY ACCORDING TO THE TAX LAWS UNIQUE TO EACH INDIVIDUAL STATE. THEREFOR STATE RETURNS INTERACT WITH THE FEDERAL RETURN ELECTRONICALLY.
ELECTRONIC FILING OF FEDERAL AND STATE TAX RETURNS IS ALSO INTERCONNECTED, THE STATE RETURN IS PIGGYBACKED ON THE FEDERAL ON THE ELECTRONIC SUBMISSION OF THE TAX FORMS. THERE IS ALSO AN AUTIOMATIC ELECTRONIC COMPARISONS OF FEDERAL AND STATE RETURNS IN REGARDS TO THE INCOME ITEMS AP;PLICABLE TO EACH. THIS SYSTEM REPLACES THE OLD SYSTEM OF INCOME COMPARISONS BETWEEN FEDERAL AND STATE WHERE AS THE FEDERAL AND STATE TAX SYSTEMS HAD A SEPERATE INCOME SHARING PROCESS WITH EACH STATE FOR EACH INDIVIDUAL USING THE INDIVIDUALS SOCIAL SECURITY NUMBER AS A BASE REFERENCE, WHICH WOULD REQUIRE BOTH THE FEDERAL AND STATE TO INVESTIGATE ANY DISCREPENCIES OF INFORMATION OF ANY INDIVIDUAL AND WHICH USED TO PICK UP ANY INDIVIDUAL WHO WOULD USE DIFFERENT IN FORMATION TO TAKE ADVANTAGE OF DIFFERENCES BETWEEN FEDERAL AND STATE TAX LAWS . THE REMOVAL OF THE CURRENT SYSTEM WOULD INCREASE THE COSTS OF BOTH THE FEDERAL AND STATE TO DETERMINE THE PROPER TAX LIABILITY FOR EACH ENTITY. WHEN COSTS OF PROCESSING AND INFORMATION SHARING INCREASE, THOSE ADDED COSTS WILL FIND THEIR WAY INTO THE TAX LIABILITY OF EVERY INDIVIDUAL TAXPAYER.
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