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As I usually do each year about this time, this past Saturday I attended the New Jersey chapter of the National Association of Tax Professionals annual “New Jersey State Tax Seminar”, held each year at the Woodbridge Hilton in Iselin.
And, as usual, the chapter’s Education Committee did a great job.
The schedule was perfect – the presentations were limited to issues concerning New Jersey State income, payroll, sales and use, and inheritance taxes and New York tax issues. In the past some non-tax topics, however interesting and even helpful, were included in the day’s schedule. It has always been my belief that the day should be totally devoted to state tax issues.
The speakers were all familiar to those present. Kathryn Keane, former president of the New York State NATP chapter, was back to discuss New York state issues. CPA Alan Preis, who gave a presentation on Nexus issues, had presented in past years. And, thankfully, the usual team from the NJ Division of Taxation – entertaining John Kelly and the Dynamic Duo of Jim Gordon and Jacob Foy – returned.
We are usually addressed by the Director of the NJ Division of Taxation - the last 3 years Maureen Adams (her addresses were of no real value) and before than Robert Thompson (a good speaker who provided good information). This year current Acting Director Cheryl Fulmer was invited but refused to attend for some strange reason. I was disappointed, as I had so far been impressed with Ms Fulmer.
Kathryn Keane started off her New York State presentation by discussing the new required registration inflicted upon all tax professionals from Key West to Anchorage who prepare New York State income tax returns for clients. I was surprised that there was no anger or even editorial comment on the topic expressed by any of the assembled New Jersey practitioners.
While Kathryn indicated that the registration of tax preparers was a reaction to the NY state “tax gap” and a desire to assure greater compliance among tax preparers, I know that this is pure bulls**t. Unlike the effort by the IRS to register tax preparers, which is genuine in nature, the action by New York is solely for the purpose of easily raising money so that the legislature can waste it.
I still feel that New York State has no authority to charge a fee to a tax professional who has absolutely no physical presence whatsoever in New York, and wish that some tax preparer organization would take NYS to court on the issue. I also feel that if New York gets away with this, and raises substantial money in the process, other states will soon follow.
Kathryn told us that if a 2009 New York State income tax return – IT-201 or IT-203 – that generates a refund does not request direct deposit of the refund, the processing of the return will be delayed. If you choose direct deposit for the refund you will get it in 2 weeks or less. If you do not, and request a check be mailed, you will most likely have to wait months for the money.
She also told us that New York State will no longer send out Form 1099-G to taxpayers who received a NY state income tax refund in 2009. One must go online to view the form. More work for me at a time when every second is precious!
There was some good news on the New York front. NY now has its own “Taxpayer Rights Advocate”, similar to the IRS Taxpayer Advocate Nina Olsen. When I get a chance I will have to check out this new position on the NYS Department of Taxation and Finance website.
Always entertaining John Kelly, the NJDOT Chief of Legislative Analysis, talked about recent compliance and collection programs.
He reported that last year’s Tax Amnesty program was the most successful state tax amnesty in US history. It raised $746.3 Million – or actually $647.2 Million of “new money” after netting what would have been collected even without the amnesty. Taxpayers who participated in the amnesty program may be receiving some reconciling notices in the mail in 2010.
NJ also had success with its program for collecting use and excise taxes from NJ residents who purchased cigarettes online from Indian territories and at Indian casinos and did not pay any tax at point of purchase. This program is ongoing and will be expanded.
I was surprised to learn that only now is New Jersey doing matching of information returns and NJ-1040 filings for items of income that I thought were already being matched for some time now.
After lunch Alan Preis give his presentation on “Nexus and Multistate Tax Issues for NJ Practitioners”. I have no interest in business Nexus issues as I no longer accept corporate or partnership clients (it is not worth the extra agita), so I did not pay close attention to the presentation.
With Nexus, various nonresident states assert that a business has a “presence”, physical or otherwise, in their state and the business is required to pay tax on some of its income to that state. The business then takes a credit for tax paid to another jurisdiction on the resident state return. Much money is spent on compliance, collection and litigation in the Nexus area both by the taxpayer and the state tax authority, filling the pockets of lawyers and accountants.
It seems to me, and correct me if my logic is faulty, that if the federal government, or an agreement among all of the states, decreed that a business only had to pay income tax to the state in which it is headquartered, and Nexus issues no longer existed, the individual states would not lose one red cent of revenue, and would probably end up netting more for the state coffers. Not only would there be no more credits for tax paid to other jurisdictions, but reduced compliance costs by taxpayers would increase taxable profit, and the income tax thereupon paid to the state, and there would be a reduction in state tax audit and litigation costs. But then that solution is too simple.
Alan was followed by the real reason most of us came to the seminar in the first place – the annual “Jim and Jake Show” on changes in the various state taxes and state tax administration practices and procedures! It is unfortunate that this presentation is left till last, as there is never enough time to cover everything they have to present properly. I would rather the other speakers’ presentations were cut short and not those of Jim Gordon and Jacob Foy.
Unfortunately, as this is the most popular presentation of the seminar, it is scheduled last so that there is not a mass exodus early in the afternoon. It forces us all to stay until the very end.
Luckily there really was not too much new to report.
Jim talked, for the third year, about the required withholding on unincorporated and unregistered construction contractors, telling us that this is now beginning to be enforced and penalties are being issued.
Several tax pros in the room mentioned receiving billing notices regarding the property tax deduction claimed on 2004 through 2006 NJ-1040s. It seems that the amount claimed did not match the amount reported to NJDOT by the individual municipalities. Two of my clients had received such a notice, but I seem to have resolved these cases. Jim told us that the notice was computer generated as a result of a matching program and to simply reply to the notice to explain the difference.
One of the problems in this area involve unmarried joint homeowners, each with a 50% interest in the property. Even though one of the owners actually pays 100% of the property tax, and the IRS allows a full deduction on the federal return, and the other owner pays nothing, NJ allocates the deduction based on ownership interest. So the owner who pays 100% of the taxes is only allowed a deduction for half, and the owner who pays nothing is not allowed any deduction (because that person did not pay any taxes). Once again the State of New Jersey screws its residents.
Jim did point out that the correct amount of property tax deduction to be claimed on NJ-1040 Line 36(c) for recipients of the Property Tax Reimbursement (aka Senior Freeze) is the “base year” tax amount reported on the Form PTR application form. The actual tax paid must be reduced by the amount of “reimbursement” that will be received via the PTR program. However, the amount of the Homestead Rebate does not affect (i.e. reduce) the NJ property tax deduction.
Jacob began by reviewing the state’s Taxation Data Warehouse. Unlike the agencies of the federal government (as shown by what was allowed to happen on Christmas Day), the various departments and divisions of the State of New Jersey do share information. Information from various NJ agencies as well as information from the federal government and other states is gathered together in the data warehouse to help increase revenue collection and productivity.
In response to a question from the “audience”, Jacob told us that the state is seriously considering returning the NJ Homestead Rebate application for homeowners to the NJ-1040 package, instead of mailing out a separate paper application package to homeowners in May. Tenants currently apply for the rebate on Page 4 of the NJ-1040. It is very possible that the homeowner application will be part of the 2010 Form NJ-1040. I have been calling for the state to do this for several years now.
Jacob talked about the new PTR income thresholds, reporting that the income level for 2009 is $80,000. He also told us that if a person is already in the PTR “system” and moves to a new home in NJ, he/she does not have to satisfy the 3-year rule for living in the home. The first full year of residence in the new home will become the new “base year”. So if a qualified person moved within New Jersey at the end of 2008, 2009 becomes the new base year.
He also discussed the various changes to the 2009 NJ-1040 that I previously discussed here in an earlier post.
Once again – kudos to the NJ chapter of NATP for an excellent event.
TAFN
