ITEMS OF INTEREST

Here are some items of interest to NJ tax professionals-

* CCH has posted a "Tax Briefing" analysis of the Housing Assistance Tax Act of 2008. Click here to download the report.

* The next breakfast mini-seminar sponsored by the NJ chapter of the National Association of Tax Professionals will be held on Wednesday, August 20, 2008 at the Crowne Plaza Monroe (formerly the Holiday Inn) in Jamesburg.

NJ Division of Taxation representatives Jim Gordon and Jacob Foy will be on hand to discuss “State of NJ Issues”. Attendees are asked to “bring your problems – both systemic and individual” for discussion. Questions and topics for discussion can be emailed in advance to njnatpsuggestions@comcast.net.

Registration begins at 8:30 am and the seminar will run from 9:00 – 10:50 am – not much time. Attendees will earn 2 CPE credits.

The cost is $35.00 for members whose registration is postmarked before 8/15/08) and $50.00 for non-members and for members whose registration is postmarked on or after 8/15/08 or at the door. Breakfast is included.

Click here to download the registration form. For more information contact Jaimee Hammer at jaimee7@comcast.net.

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* The Small Business Taxes and Management website has prepared a comprehensive special report on frequently asked questions concerning the topic “Putting Your Younger Children on the Payroll”. The reports indicates how to compute the tax savings from this strategy for all the various forms of business organization (S and C corporation, partnership, LLC and sole proprietorship).

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TAFN

HELP WANTED - CLIENT ROYALLY SCREWED!

Below is another post from THE WANDERING TAX PRO. Again it is an issue that is of interest to tax preparers – and one about which your comments and suggestions would be appreciated.

So here we go again:

The story you are about to read is true. The names have been changed to protect the screwed.

One of my clients is a couple who has been married and filing joint returns for probably close to 20 years – many of them with me. Each year they have filed as Alfred and Jane Wiedersein. They filed their 2007 Form 1040 requesting a substantial refund. When they got the check they noticed that it was less than the amount that we asked for on the 1040.

Alf called the IRS and found out that the problem was that Jane did not change her last name with the Social Security Administration when she married. The SSA still shows her Social Security number as belonging to Jane Taxpayer.

FYI, as I have been telling clients and readers for years now (below from my posting “Getting Ready to Prepare Your Return” from January 2007) -

“The IRS is very picky about matching names to Social Security numbers. If a Social Security number and name reported on your tax return does not match exactly the name in the files of the Social Security Administration the IRS will remove the name and dependency exemption of that person and automatically recalculate the tax liability as Head of Household, Married Filing Separately or Single.

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If you have changed your last name as a result of marriage or divorce during {the year} make sure to notify the Social Security Administration of the change before filing your tax return. You do this by submitting a Form SS-5 to request a new Social Security card. Go to www.ssa.gov/ssnumber.”

After all these years of filing joint returns with Alf under her married name the IRS picks 2007 as the year to question the issue!

Anyway Alf straightened things out regarding his 2007 Form 1040 with the IRS and received an additional refund. Jane subsequently changed her last name with the Social Security Administration.

But this is not the problem. Alf and Jane are now told by the IRS that they will not be getting an economic “stimulus” rebate check because a Social Security number on the 2007 Form 1040 does not agree with the records of the Social Security Administration!

As Alf had done, I, too, went to “Where’s My Stimulus Payment” on the IRS website and entered the appropriate information. Here is what I was told –

“You did not qualify for the Stimulus payment because the Taxpayer Identification Number shown on your tax return for yourself or your spouse was not valid. Your last name and/or Social Security Number did not agree with either our records or those of the Social Security Administration, or you used an IRS issued number such as an Individual Taxpayer Identification Number or IRS number. You must have a valid Social Security Number to qualify for the Stimulus payment.

Helpful Information:

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The 2008 tax instructions will include a worksheet to help those who did not qualify for a payment or those who received a reduced amount determine if they can obtain a benefit when they file their 2008 tax returns next year.”

In addition to the above response to his online inquiry, Alf was also told by an IRS representative over the phone that he would not be getting a stimulus check because of the Social Security number.

The IRS did not just reduce the rebate by the amount that would have applied to Jane – they disallowed the entire rebate check! And the check would have been substantial as Alf and Jane have three dependent children under age 17.

It is true that when I file Alf and Jane’s 2008 Form 1040 I will be able to get them the entire amount of the rebate to which they are entitled based on 2008 information. But why should they have to wait until 2009 to get this money? The whole purpose of the meshuga rebate is to get money into the economy now! And what if one of the 3 kids who were under age 17 in 2007 turn 17 in 2008. Alf and Jane will be screwed out of $300!

Jane is not a foreign citizen without a Social Security number who married an American serviceman. She is a native born American citizen. Now even Americans who marry foreigners with no Social Security number can get the rebate – but not Alf and Jane.

It apparently does not matter that the issue with the Social Security number has been resolved with the IRS for purposes of the 2007 Form 1040 refund – or that Jane has changed her name with SSA. They still do not qualify for the rebate!

I am at a loss as to what to do. I will probably write to my Congresspersons, since the IRS has blamed Congress for screwing the Wiederseins, but who knows if this will do any good.

Any suggestions?

TAFN

SO WHAT DO YOU THINK?

Below is today’s posting to my 1040 blog THE WANDERING TAX PRO. I post it here because it is an item that I think is of interest to my fellow tax preparers – and I would certainly appreciate your input and comments on the questions that are raised.

So here goes:

There are three (3) things that we know about the current economic “stimulus” rebate -

(1) Part or all of your payment can be used to offset past-due federal or state income taxes or non-tax federal debt such as student loans and child support.

(2) The rebate currently being issued is an advance on a special credit on your 2008 federal income tax return. It is calculated based on the information on your 2007 Form 1040 (or 1040A). You will reconcile your advance to your 2008 information on the 2008 Form 1040. If your situation has changed and you are entitled to a rebate that is greater than the amount you already received you can claim the additional amount on your 2008 tax return. If you got more then you are entitled to you do not have to pay back the difference.

(3) You must file by October 15, 2008 in order to get your advance payment this year.

Consider this situation -

John Q Taxpayer owes “Sam” about $10,000 in back federal income taxes from 2001 through 2004. He has been current with his 1040 payments since 2005. If he files a 2007 federal income tax return by October 15th he will not receive a “stimulus” rebate check, as the entire amount of the rebate will be applied toward his outstanding tax debt. He also will not be able to claim the rebate amount on his 2008 Form 1040 because technically he received the advance.

What if JQ filed a 2007 Form 4868 (Automatic Extension) in early April of 2008 and paid in full his anticipated federal income tax liability with the extension request. And what it JQ does not file his actual 2007 Form 1040 until December of 2008. Since he paid the entire 2007 tax liability in full with his extension there will be no penalty for late filing or late payment.

Because JQ filed his 2007 Form 1040 after October 15, 2008, he will not be eligible for an “advance” rebate.

When JQ files his 2008 Form 1040 he indicates that he is entitled to a $600.00 rebate, but did not receive an advance payment in 2008. The reason he did not receive an advance payment was not because the money was taken to pay back taxes. Because he submitted his 2007 income tax return after October 15th no advance payment was processed.

Will JQ be able to apply his $600 rebate against his 2008 tax liability on the 2008 Form 1040? Say his 2008 tax liability is $2,000 and he has $1,300 in federal income tax paid in either via withholding or estimated tax payments. Can JQ add the $600 rebate for which he qualifies, and which he did not receive as an advance in 2008, to the $1,300 in payments and only need to send “Sam” $100 when he files the 2008 Form 1040 in early 2009?

By following this strategy will JQ be able to avoid having his $600 rebate taken to offset past tax debts and be able to reduce his 2009 “out of pocket” payments for 2008 federal income taxes by the amount of the rebate if he wants to remain “current” with his 1040 filings?

Now what if JQ’s $2,000 tax liability for 2008 represents self-employment tax only? He is able to wipe out any federal income tax liability via deductions and credits. Will the amount of his rebate be applied toward self-employment tax liability? Remember, this rebate is very different from the one issued in 2001. This rebate is not an advance on a future income tax savings – but an out and out gift from the government.

So what do you think?

TAFN