Yesterday I attended the NJ TAX SEMINAR sponsored by the NJ chapter of the National Association of Tax Professionals, held as it is each year at the Woodbridge Hilton (Exit 131A on the GSP).
The seminar had an excellent line-up of speakers, with one exception (a lawyer who gave an excellent presentation on the final 1040, the federal 706, and the NJ Inheritance Tax and Estate Tax returns) all from either the NJ Division of Taxation or Division of Revenue. The “keynote” speaker, and as it turned out the least effective of the NJ agency speakers, was Maureen Adams, the new Acting Director of the NJ Division of Taxation.
Her predecessor, a frequent speaker at the annual NJ-NATP seminars, had to leave office because it was discovered that he and several colleagues had taken an excessive amount of “inappropriate” gifts from vendors of the NJDOT.
Ms. Adams’ was overwhelmed by complaints and comments from the audience on tax-related problems, mostly involving business clients, with the State of New Jersey. Many of the frustrations expressed by those present really had to do with the Division of Revenue, often mistaken for or erroneously considered a part of the Division of Taxation, and many of Ms. Adams’ responses were basically “that’s not my division”, which, while true, sounded like a typical cop-out.
While I keep my business clients to an absolute minimum, I can attest that more than 75% (I am being conservative) of the balance due notices my 1040 and business clients received from either the DOT or DOR in 2006 were, for lack of a better word, pure garbage.
Some of the comments reinforced my belief that, while you can toss the back-up documentation for 1040s, 1120s, NJ-1040s, CBT-100s, etc after four (4) full years, you should keep a copy of the actual tax returns, whether personal or business, forever.
Prior to being besieged by questions and comments, Ms. Adams reported on Governor Corzine’s proposal to replace the current NJ FAIR Rebate for homeowners with a direct property tax credit, like the rebate based on NJ gross income:
· $100,000 or less = 20% credit – up to $1,200
· $100,001 to $150,000 = 15% credit – up to $1,000
· $150,001 to $250,000 = 10% credit – up to $700
While legislation on this change has not yet been introduced, Adams expects that the direct property tax credit will replace the rebates that would be sent out this fall. The proposal does not effect the “Property Tax Reimbursement” (aka “Senior Freeze”) program, which will remain in effect.
One of the NJ speakers discussed NJ’s relatively new Taxation Data Warehouse program, which gathers all taxpayer information from all sources (such as federal tax data, other NJ agency data, and NJ tax return data) in one centralized location. This is a great idea, as many of the comments directed at the Acting Director indicated that “the left hand does not know what the right hand is doing” when it comes to the various NJ taxes and fees.
What would be even “more better” is that, as all information will be located in one place, there should also be one centralized collection program. The individual agencies such as DOT, DOR, Commercial Recording, etc should not each have separate collection activity.
And New Jersey should cease from using an outside collection agency to dun allegedly delinquent taxpayers, just like the IRS should. There were several comments on abuses by the current collection agency.
Andrew Pantelides (andy.pantelides@sos.state.nj.us), the Assistant Director of the Division of Revenue, made a presentation on the streamlined corporate dissolution process, which, unlike anything else in NJ government, is truly streamlined and, in my experience, works properly.
There was also an excellent presentation on the new additions to products and services subject to NJ Sales Tax – which was part of the annual 11th-hour “nickel and dime-ing” of NJ residents to balance the budget. NJ legislators, fat from supping at the public trough, continue to make it more expensive to live and work in NJ rather than cutting the pork and excesses in the budget. Another example is the ridiculous increases in the corporate minimum tax. I was disappointed that this 2007 tax change was not addressed by any of the speakers on Saturday.
The most entertaining speaker, Jim Gordon (jim.gordon@treas.state.nj.us), discussed the topic that most of us came to hear about – the new withholding requirement for construction contractor services (see my Thursday, January 4th posting).
The only parties exempt from this new withholding requirement, which became effective January 1, 2007, are government entities (I do believe a Business Registration Certificate is already required for all vendors who do business with the State of New Jersey), and homeowners and tenants who are hiring the contractor to make repairs and improvements to their personal residence.
Jim pointed out that the requirement will apply for repairs and improvements directly made to a home office, even though the home office is a part of a personal residence, and made on rental property, even if the rental property is part of the same structure as your personal residence, as in a two-family house. So this requirement pertains to Schedule E filers as well as Schedule C filers!
Businesses and landlords that withhold the required 7% from unincorporated contractors who do not provide them with a NJ Business Name Certificate will remit the withholding on a monthly basis on a new Form NJ-550. A copy of the NJ-550, or some other documentation, should be given to the contractor to verify the withholding.
For purposes of this new law, a Sales Tax Certificate is not the same as a Business Registration Certificate. The unincorporated (this, for some unknown reason, includes contractors organized as a sub-chapter S corporation) contractor must give the client an actual Business Registration Certificate. You can get a copy of a Business Registration Certificate at the NJ Business Gateway Services website.
Mr. Gordon did not say, nor was he asked, how the NJ Division of Taxation will know if a business owner or landlord does not comply with this new requirement. It would seem the only way they would find out is if they were doing an income tax audit on the tax return of a business or landlord and the tax return indicated a deduction for repairs or improvements to real property, or if an audit was being conducted on an unregistered contractor - most of whom are under the radar anyway.
This new procedure is a real pain in the arse. And it is a pain in the arse on purpose. I can sympathize with the reasoning behind the law. What NJ is trying to do is put the illegal aliens, and US citizens, who are part of the “underground economy” (i.e. they pay no taxes or fees, and hire workers who pay no taxes) out of business by making it excessively inconvenient and burdensome to hire these kind of contractors.
I only learned about this law as a result of an email from the National Society of Tax Professionals, and a subsequent posting on the NJ Division of Taxation website, and only because I am a tax preparer. I doubt very much that the general public has any idea that this new requirement exists.
TAFN
The seminar had an excellent line-up of speakers, with one exception (a lawyer who gave an excellent presentation on the final 1040, the federal 706, and the NJ Inheritance Tax and Estate Tax returns) all from either the NJ Division of Taxation or Division of Revenue. The “keynote” speaker, and as it turned out the least effective of the NJ agency speakers, was Maureen Adams, the new Acting Director of the NJ Division of Taxation.
Her predecessor, a frequent speaker at the annual NJ-NATP seminars, had to leave office because it was discovered that he and several colleagues had taken an excessive amount of “inappropriate” gifts from vendors of the NJDOT.
Ms. Adams’ was overwhelmed by complaints and comments from the audience on tax-related problems, mostly involving business clients, with the State of New Jersey. Many of the frustrations expressed by those present really had to do with the Division of Revenue, often mistaken for or erroneously considered a part of the Division of Taxation, and many of Ms. Adams’ responses were basically “that’s not my division”, which, while true, sounded like a typical cop-out.
While I keep my business clients to an absolute minimum, I can attest that more than 75% (I am being conservative) of the balance due notices my 1040 and business clients received from either the DOT or DOR in 2006 were, for lack of a better word, pure garbage.
Some of the comments reinforced my belief that, while you can toss the back-up documentation for 1040s, 1120s, NJ-1040s, CBT-100s, etc after four (4) full years, you should keep a copy of the actual tax returns, whether personal or business, forever.
Prior to being besieged by questions and comments, Ms. Adams reported on Governor Corzine’s proposal to replace the current NJ FAIR Rebate for homeowners with a direct property tax credit, like the rebate based on NJ gross income:
· $100,000 or less = 20% credit – up to $1,200
· $100,001 to $150,000 = 15% credit – up to $1,000
· $150,001 to $250,000 = 10% credit – up to $700
While legislation on this change has not yet been introduced, Adams expects that the direct property tax credit will replace the rebates that would be sent out this fall. The proposal does not effect the “Property Tax Reimbursement” (aka “Senior Freeze”) program, which will remain in effect.
One of the NJ speakers discussed NJ’s relatively new Taxation Data Warehouse program, which gathers all taxpayer information from all sources (such as federal tax data, other NJ agency data, and NJ tax return data) in one centralized location. This is a great idea, as many of the comments directed at the Acting Director indicated that “the left hand does not know what the right hand is doing” when it comes to the various NJ taxes and fees.
What would be even “more better” is that, as all information will be located in one place, there should also be one centralized collection program. The individual agencies such as DOT, DOR, Commercial Recording, etc should not each have separate collection activity.
And New Jersey should cease from using an outside collection agency to dun allegedly delinquent taxpayers, just like the IRS should. There were several comments on abuses by the current collection agency.
Andrew Pantelides (andy.pantelides@sos.state.nj.us), the Assistant Director of the Division of Revenue, made a presentation on the streamlined corporate dissolution process, which, unlike anything else in NJ government, is truly streamlined and, in my experience, works properly.
There was also an excellent presentation on the new additions to products and services subject to NJ Sales Tax – which was part of the annual 11th-hour “nickel and dime-ing” of NJ residents to balance the budget. NJ legislators, fat from supping at the public trough, continue to make it more expensive to live and work in NJ rather than cutting the pork and excesses in the budget. Another example is the ridiculous increases in the corporate minimum tax. I was disappointed that this 2007 tax change was not addressed by any of the speakers on Saturday.
The most entertaining speaker, Jim Gordon (jim.gordon@treas.state.nj.us), discussed the topic that most of us came to hear about – the new withholding requirement for construction contractor services (see my Thursday, January 4th posting).
The only parties exempt from this new withholding requirement, which became effective January 1, 2007, are government entities (I do believe a Business Registration Certificate is already required for all vendors who do business with the State of New Jersey), and homeowners and tenants who are hiring the contractor to make repairs and improvements to their personal residence.
Jim pointed out that the requirement will apply for repairs and improvements directly made to a home office, even though the home office is a part of a personal residence, and made on rental property, even if the rental property is part of the same structure as your personal residence, as in a two-family house. So this requirement pertains to Schedule E filers as well as Schedule C filers!
Businesses and landlords that withhold the required 7% from unincorporated contractors who do not provide them with a NJ Business Name Certificate will remit the withholding on a monthly basis on a new Form NJ-550. A copy of the NJ-550, or some other documentation, should be given to the contractor to verify the withholding.
For purposes of this new law, a Sales Tax Certificate is not the same as a Business Registration Certificate. The unincorporated (this, for some unknown reason, includes contractors organized as a sub-chapter S corporation) contractor must give the client an actual Business Registration Certificate. You can get a copy of a Business Registration Certificate at the NJ Business Gateway Services website.
Mr. Gordon did not say, nor was he asked, how the NJ Division of Taxation will know if a business owner or landlord does not comply with this new requirement. It would seem the only way they would find out is if they were doing an income tax audit on the tax return of a business or landlord and the tax return indicated a deduction for repairs or improvements to real property, or if an audit was being conducted on an unregistered contractor - most of whom are under the radar anyway.
This new procedure is a real pain in the arse. And it is a pain in the arse on purpose. I can sympathize with the reasoning behind the law. What NJ is trying to do is put the illegal aliens, and US citizens, who are part of the “underground economy” (i.e. they pay no taxes or fees, and hire workers who pay no taxes) out of business by making it excessively inconvenient and burdensome to hire these kind of contractors.
I only learned about this law as a result of an email from the National Society of Tax Professionals, and a subsequent posting on the NJ Division of Taxation website, and only because I am a tax preparer. I doubt very much that the general public has any idea that this new requirement exists.
TAFN
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