Due to certain issues within some states, anyone who has withholdings in Massachusetts, New Jersey, or Pennsylvania will be unable to receive a refund of those funds with this tax strategy. A potential workaround is to open an entity or place one's address in another state and then receive the income there as a non-resident.
For example, Massachusetts and New Jersey have requirements for filing a "Non-Resident Tax Return" when income is earned within the state, despite one's situs / address being in another state, specifically when earnings exceeded allowable prorated personal exemption limits.
And for Pennsylvania, the state law only allows four deductions against income: Medical Savings Account contributions, Health Savings Account contributions, IRC Section 529 Qualified Tuition Program contributions, and IRC Section 529A Pennsylvania ABLE Savings Account Program contributions.
All of these states are essentially "missing" a box that lets one notify the state of their lawful money redemption.
These states may feign ignorance stating they are only required to follow Title 26 regarding the application of taxes for its citizens; however, 31 U.S.C. § 3124 recognizes that an obligation of the United States is to be honored by all states, and we quote: “obligations of the United States Government [i.e. lawful money / public credit / U.S. Bank Notes] are exempt from taxation by a State or political subdivision of a State”. Since this is positive law, meaning it has been approved and passed by Congress who has superseding authority over a “State’s Rights” via the “Supremacy Clause” which dictates that States may not tax federal property (i.e. lawful money / public credit / U.S. Bank Notes). Therefore, this controversy can be argued and won. That being said, if one doesn’t desire this confrontation and to pay for an attorney’s defense it is best to simply use this for federal filings and avoid state filings for the above-mentioned states.