The morning session ended with an update on New York state taxes presented by NY-NATP chapter president Michael Novick, an EA and an attorney, who was an excellent last-minute substitute for scheduled speaker Katherine Keane. Michael was not as “colorful” a speaker as KK, but that is not necessarily a bad thing.
Mr. Novick told us –
· NY, unlike the IRS, does “correspond” with taxpayers via email.
· Clients can no longer “opt-out” of electronic filing of NY returns by tax preparers.
· NY Lottery winnings of more than $600 can be used to “offset” outstanding tax debts.
· As “same-sex” marriage is now allowed in New York, those who are so married must file NY state income tax returns as either Married Filing Joint or Married Filing Separate, regardless of the federal filing status. No doubt this will cause lots of extra work for tax preparers.
The afternoon was devoted to New Jersey state updates, beginning with a presentation on NJ State Inheritance and Estate Tax by William Dorman of the NJ Division of Taxation. There was apparently not much new for 2011, so the presentation was more of an overview of these taxes.
Mr. Dorman did point out that, when it comes to discovering new assets, the statute of limitations for NJ state inheritance and estate tax is 15 years!
Before the “famous” desert break we heard, as we had at many of the past January seminars, from John Kelly from the Division of Taxation. John is the seminar’s “comic relief”. He is entertaining and informed, but it seems that his purpose is to wake us up after lunch, with his booming voice and humorous comments and asides, so we are alert for the final presentation of the day. The bottom line is he takes sometimes valuable time away from Jim Gordon.
As has become the custom, the reason most of us come was saved for last – the Jim Gordon Show (formerly known as the Jim and Jake Show). From a scheduling point of view this is good, as it avoids a large section of the audience leaving early. Depending on the amount of changes to NJ state income and other taxes this could be bad, with time running out before everything new is fully discussed. This year it did not matter – as the timing was almost perfect.
Jim was thrilled to be able to report mostly good “stuff”, from our point of view as preparers, for a change. He touted the new Director’s accomplishments and the State’s attempts to be more “business-friendly”, talking about the online NJ Business Action Center, the Taxpayer Advocate Office, the reduction in the “minimum tax” for sub-S corporations (which takes effect with calendar year 2012) and some minor UEZ changes.
He spent much of his time on the new Alternative Business Calculation Deduction that begins in 2012. For the first time, NJ-1040 filers will be able to, to some extent, net business income and losses from four separately reported categories – net profits/losses from business (federal Schedule C), net gains/losses from rents, royalties, patents, and copyrights, passed-through partnership income/losses, and passed-through sub-S corporations income/losses (federal Schedule E). If a taxpayer had a rental loss and a self-employment profit he/she will now (beginning on 2012 returns filed in 2013) be able to reduce the self-employment income by the rental loss. There is also a carryover feature for excess losses.
This new deduction will be phased in over a 5-year period.
This is the best news for taxpayers to come out of Trenton in many years. If it had been in effect for 2010 one of my client would have saved tens of thousands in NJ state income tax. Click here for more information and several detailed examples of how the deduction will work.
Jim also told us that pizza parlors will be a top audit target for New Jersey, and that the homestead benefit issued in 2012 should be twice as much as last year and once again distributed as a credit on the municipal tax bill, possibly to show up on the first quarter payment due February 1st.
As usual, two thumbs up to the NJ chapter’s Education Committee for another great seminar, with informed and effective speakers. My only complaint is that the time allotted to the NJDOT’s Director was too small. I would give him at least an hour in the future.
Several years ago the seminar had as a speaker the Director of the NJ Division of Revenue. His presentation was quite enlightening. Perhaps it is time to invite this Division’s Director (I believe someone new) back again - in addition to and not instead of, the Division of Taxation Director. I would like updates from, and the opportunity to question representatives of, both divisions.
I look forward to the various other education sessions that the NJ chapter will be offering during 2012.