The United States is generally considered a good financial bet. This was proven once again during the worst part of the recession when people, institutions and countries around the world invested in treasury notes. This practical faith allows the federal government to spend far more than it takes in without much in the way of short term consequences. The same is not true for states.

The current financial status of states is brutal. If they were individuals or companies, most would’ve been forced into bankruptcy long ago. They have racked up years of debt and now have major cash shortfalls. There are three steps they can take at this point. One is to cut expenditures. The second is to raise taxes. The third is to increase audits of individuals and businesses to try to find lost revenues. The first two will happen at the last moment because politicians don’t want to be associated with either act, but audits are already amping up.

States are in desperate need of money. That means more audits. Make sure your tax records are in good shape before that happens.