NEW JERSEY TAX PRACTICE BLOG

EVERYBODY WANTS TO GET INTO THE ACT!

2012-01-23T05:00:00.000-05:00

Enoughalready!

Imust register with the IRS and get a number (PTIN) if I want to continue toprepare tax returns for a fee, which is how I make my living. I also have to take a test to prove to theIRS that I know what I have been doing for 40 years now. And I have to maintain a minimum number ofannual credits in continuing professional education in federal income taxation(I take more than the required annual CPE each year anyway – so this is not anissue).

BecauseI do about 20 New York resident and non-resident state income tax returns Ialso have to register with the State of New York, give Albany $100, and getanother number for NY returns only, even though I do not live or work in NewYork. NY CPAs and attorneys are exemptfrom this fee because the State already gets a licensing fee from them. NY EAs were originally not exempt, but noware.

TheState of New York does not care if I know what I am doing – they just want my$100 (which I pass along to my NY clients as a $5.00 “NYS Tax PreparerExtortion Fee”). However, a panel hasrecommended that those who prepare NY state income tax returns also take a testand maintain minimum annual state-specific CPE.

Whenthe NY state registration first came out I knew that once NY was successful incharging “unenrolled” tax preparers everywhere in the world $100 for theprivilege of preparing a state return, other states would follow its lead as aneasy way to raise additional funds for its legislatures to waste on pork andentitlement. NJ legislators love towaste taxpayer money on pork and entitlements – and this would be a natural forthem.

Nowa colleague has informed me that “The NewJersey Assembly Regulated Professions Committee is considering A.1752 {theTax Preparers Licensing Act – rdf}, whichwould create a State Board of Tax Preparers and establish requirements for taxpreparers. Enrolled agents (and other legacy Circular 230 practitioners) areexempted in the bill. However, unlike other state legislation, tax preparersare not exempted (i.e., "grandfathered") by virtue of length ofpractice.”

ThisAct states –

“No person shall provide, nor present, call orrepresent himself as able to provide, tax preparation services for compensationunless licensed in accordance with the provisions of this act.”

And–

“No person shall assume, represent himselfas, or use the title or designation “tax preparer” unless licensed pursuant tothe provisions of this act.”

Itcreates a “State Board of Tax Preparers” within the NJ Division of ConsumerAffairs to administer the licensure of paid tax return preparers, which is made up of 3 political patronage members and 4 actual tax preparers.

Inorder to be licensed a tax preparer must –

· beof good moral character,

· havesuccessfully completed high school or its equivalent,

· havesuccessfully completed an approved course of study of 60 hours, which includesinstruction in basic personal income tax law, theory and practice, and

· havepassed an examination administered or approved by the Board, which measures theapplicant’s knowledge of New Jersey and federal personal income tax law, theoryand practice.

Licensedtax preparers will also have to complete continuing education courses, thenumber of actual credits, not to exceed 20 hours every two years, to bedetermined by the Board.

And,of course, “A fee to be determined by theboard shall accompany each application for licensure”, which must berenewed, for another fee, “biennially”. I expect that there will be another license number issued that preparerswill have to enter on NJ returns.

TheAct would exempt attorneys and CPAs licensed to practice in NJ and EnrolledAgents. As usual the exemption ofattorneys and CPAs is ridiculous. Iwould even question the exemption of EAs when it comes to state tax issues.

Itis unclear if only those preparers who live and work in NJ must be so licensed,or if anyone who wants to prepare a certain number of NJ individual income taxreturns, regardless of location, be licensed.

TheBoard will be able to revoke a license under a variety of conditions.

OK. Eitherthe federal government, in the form of the Internal Revenue Service (or, as Ihave suggested) an independent industry-based agency, tests and credentials taxreturn preparers, like they do with Enrolled Agents, or the individual statestest and license tax return preparers, as is done with CPAs and attorneys. Having both is ridiculous.

Aperson who wants to prepare income tax returns for a fee currently mustregister with the IRS and pass a competence test maintained by the InternalRevenue Service. Under the proposed NJact, If that person happens to live in New Jersey and wants to also prepareNJ-1040s he/she will have to be tested againon federal tax issues. If he/she doesnot pass this test he/she cannot prepare either federal or state tax returns,although the federal government allows him/her to preparer federal 1040s?

Doesthe IRS not share the names of resident PTIN holders with the individualstates, so that the states need a separate registry?

Ican see the need for CPE in resident state tax issues. The IRS could amend the federal CPErequirements to include 4 hours annually in state-specific tax updates, eitheras part of the current 15 hours or in addition thereto. I already take 8 hours in state CPE (mixed NJand NY) each and every year, so, again, this would not affect me.

NJwants tax preparers to take a 60 hour course in basic federal and state taxtopics to be licensed. I learned how toprepare federal and state income tax returns not by taking any classroom coursesbut through “apprenticeship” – actually preparing federal and state income taxreturns in the office of a tax professional. This is a truly valid method of education.

Thetext of the act does not mention any grandfathering. Does that mean that I, who have beenpreparing federal income tax returns for 40 years and NJ state income taxreturns for as long as there has been a state income tax, must now go back toschool and take basic tax preparation courses? You know damned well that I will not waste my money in this way.

Tobe honest, I would prefer individual state licensing of tax return preparers,under a Department of Consumer Affairs, to federal licensing by the IRS. But, of course, I would require some kind ofgrandfathering of at least any basic course of study requirements, and forcompetency testing as well.

Afederal registry with PTIN issuance could be a part of each state’s requirementas an alternative to having each state issue separate license numbers. In such a situation there should be no fee toregister with the IRS and receive a PTIN, as there had been no fee to obtain aPTIN before the regulation regime was proposed.

Enoughalready!

Whatdo you think?

TAFN

THE TAX PROFESSIONAL

2012-01-19T08:49:00.000-05:00

Youdo know that, in addition to THE WANDERING TAX PRO and this blog, I also writea blog titled THE TAX PROFESSIONAL.

Thisblog is written for NJ tax professionals, and tax pros who prepare NJ stateincome tax returns. THE TAX PROFESSIONALis for tax pros everywhere.

Asstated in the blogs inaugural post . . .

“. . . the purpose of this site is to provideupdated advice, information, and resources for tax professionals who prepareindividual federal income tax returns.

It will addressindividual income tax topics and issues relevant to both newcomers to the fieldand experienced veterans.

I hope it will alsoserve as a forum for discussion among professionals via the use of ‘comments’.”

Themost recent post continues an ongoing discussion on measuring the success oftax preparer regulation.

So if you have not already checked it out –please do so.

TAFN

A LETTER TO THE DIRECTOR OF THE NJ DIVISION OF TAXATION

2012-01-18T05:00:00.000-05:00

AsI had mentioned in my “review” of the recent NJ-NATP “Famous State Tax Seminar”,a member of the audience brought up a very serious problem with the NJ Divisionof Taxation. To follow up on this I havesent the following letter to Michael Bryan, Director of the NJ Division ofTaxation:

DearMr. Bryan:

Thankyou for addressing the NJ chapter of the National Association of TaxProfessional’s annual State Tax Seminar last Saturday, and for bringing alongthe state’s new Taxpayer Advocate, and speakers John Kelly and Jim Gordon. Mr. Gordon’s annual presentation is always,at least for me, the highlight of the seminar.

Iwant to add my voice to that of a colleague who brought up a very serious “systemic”problem during the presentation by Sheri Silverstein - the current practice ofthe NJ Division of Taxation to totally ignore individual and business taxpayeroverpayments.

Ifa taxpayer sends the IRS too much money in payment of a tax on a Form 1040,1120, 1041, 941 or whatever, or submits a payment that the Service is not surehow to apply, the taxpayer will, relatively promptly, receive a letter from theIRS acknowledging the overpayment, or the unidentified payment, and asking whatthe taxpayer wants done with the money -. send a refund or apply it to anothertax liability - or how to properly apply the payment.

Ifthe NJ Division of Taxation receives an overpayment on a tax return, or aninadequately identified payment, it does absolutelynothing! One has the impression thatthe Division hopes the taxpayer will not realize that an overpayment was madeand therefore allow the State to keep the money.

Thispractice first came to my attention when I discovered a huge error in theprocessing of balance due 2005 Form NJ-1040s that were submitted online viaNJWebfile.

TheNJWebFile system automatically created a payment voucher with pre-printedtaxpayer and payment information. Theclient would send a check to the NJ Division of Taxation along with thispayment voucher in time to meet the April 15th deadline.

Theerror was that the extensive pre-printed code on the bottom of the voucher,which was “read” by the Division’s computer system when the payment was beingprocessed, indicated that the payment was for tax year 2004 and NOT 2005. Thepayment was applied to the taxpayer’s 2004 “account”, obviously creating anoverpayment, and in the fall the taxpayer received a billing notice for the taxdue on the 2005 NJ-1040, which had already been timely paid, plus penalty andinterest.

Whenthis improperly applied payment created an overpayment in the 2004 “account”why did the NJ Division of Taxation not refund the overpayment, or send anotice to the taxpayer telling them that there was an overpayment on their 2004account and asking for clarification, or apply the 2004 overpayment to thealleged 2005 balance due? The Divisiontotally ignored the existence of the overpayment, hoping to keep the money.

Thisproblem happened again in 2007.

Inanother example of this practice, I recently come across a situation where acorporate employer double-paid the NJ Gross Income Tax withheld from employeesfor the year. I had submitted thepayments quarterly when filing the NJ-927 online, and the taxpayer erroneouslysent payment for the total withholding when filing the annual W-3transmittal. The NJ Division of Taxationhas never contacted the client about this double payment.

Thisis a very serious problem that needs to be addressed as soon as possible. If you need to contact me about this issueyou can email me at rdftaxpro@yahoo.com.

Thankyou for your cooperation. I look forwardto a change in the policy of the NJ Division of Taxation on this issue.

Verytruly yours,

RobertD Flach

Ialso sent a “cc” to Sheri Silverstein, the NJ Taxpayer Advocate.

Iwould urge any fellow NJ tax professional who has come across this problem inthe course of your practice to write a similar letter to the Director, withcopy to the Taxpayer Advocate, detailing your experience.

Iwill let you know if I get a reply.

TAFN

OOPS - THEY DID IT AGAIN! PART II

2012-01-17T07:04:00.000-05:00

Themorning session ended with an update on New York state taxes presented byNY-NATP chapter president Michael Novick, an EA and an attorney, who was anexcellent 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.

· Clientscan no longer “opt-out” of electronic filing of NY returns by tax preparers.

· NYLottery winnings of more than $600 can be used to “offset” outstanding taxdebts.

· As“same-sex” marriage is now allowed in New York, those who are so married mustfile NY state income tax returns as either Married Filing Joint or MarriedFiling Separate, regardless of the federal filing status. No doubt this will cause lots of extra workfor tax preparers.

Theafternoon was devoted to New Jersey state updates, beginning with apresentation on NJ State Inheritance and Estate Tax by William Dorman of the NJDivision of Taxation. There wasapparently not much new for 2011, so the presentation was more of an overviewof these taxes.

Mr.Dorman did point out that, when it comes to discovering new assets, the statuteof limitations for NJ state inheritance and estate tax is 15 years!

Beforethe “famous” desert break we heard, as we had at many of the past Januaryseminars, from John Kelly from the Division of Taxation. John is the seminar’s “comic relief”. He is entertaining and informed, but it seemsthat his purpose is to wake us up after lunch, with his booming voice andhumorous comments and asides, so we are alert for the final presentation of theday. The bottom line is he takessometimes valuable time away from Jim Gordon.

Ashas become the custom, the reason most of us come was saved for last – the JimGordon 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 NJstate income and other taxes this could be bad, with time running out beforeeverything new is fully discussed. Thisyear it did not matter – as the timing was almost perfect.

Jimwas thrilled to be able to report mostly good “stuff”, from our point of viewas preparers, for a change. He toutedthe new Director’s accomplishments and the State’s attempts to be more“business-friendly”, talking about the online NJ Business Action Center, theTaxpayer Advocate Office, the reduction in the “minimum tax” for sub-Scorporations (which takes effect with calendar year 2012) and some minor UEZchanges.

Hespent much of his time on the new Alternative Business Calculation Deductionthat begins in 2012. For the first time,NJ-1040 filers will be able to, to some extent, net business income and lossesfrom four separately reported categories – net profits/losses from business(federal Schedule C), net gains/losses from rents, royalties, patents, andcopyrights, passed-through partnership income/losses, and passed-through sub-Scorporations income/losses (federal Schedule E). If a taxpayer had a rental loss and aself-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 excesslosses.

Thisnew deduction will be phased in over a 5-year period.

Thisis the best news for taxpayers to come out of Trenton in many years. If it had been in effect for 2010 one of myclient would have saved tens of thousands in NJ state income tax. Click here for more information and severaldetailed examples of how the deduction will work.

Jimalso told us that pizza parlors will be a top audit target for New Jersey, andthat the homestead benefit issued in 2012 should be twice as much as last yearand once again distributed as a credit on the municipal tax bill, possibly toshow up on the first quarter payment due February 1^st.

Asusual, two thumbs up to the NJ chapter’s Education Committee for another greatseminar, with informed and effective speakers. My only complaint is that the time allotted to the NJDOT’s Director wastoo small. I would give him at least anhour in the future.

Severalyears ago the seminar had as a speaker the Director of the NJ Division ofRevenue. His presentation was quiteenlightening. Perhaps it is time toinvite this Division’s Director (I believe someone new) back again - inaddition to and not instead of, the Division of Taxation Director. I would like updates from, and theopportunity to question representatives of, both divisions.

Ilook forward to the various other education sessions that the NJ chapter willbe offering during 2012.

TAFN

OOPS - THEY DID IT AGAIN! PART I

2012-01-16T08:26:00.002-05:00

Conductedanother successful “Famous” State Tax Seminar, that is.

Iam talking about the New Jersey chapter of the National Association of Tax Professionals, whose annual state tax update seminar I attended on Saturday, asusual at the Woodbridge Hilton in Iselin. I have been to just about every one of the 20+ the chapter has sponsored,missing only a couple due to the weather.

Theroom was packed full – thanks to the relatively good weather. I was surprised that there were only two“vendors” who had rented tables. While Ipersonally do not visit the vendors at this function, I am concerned becausethis represents a loss of income to the chapter, I wonder if the lack of vendors means thechapter charges too high a fee, or if other attendees also avoided the vendortables as I do and not enough business was generated to justify theexpense. The two vendors who did showwere new to NJ-NATP, and represented services of interest to many taxprofessionals. I will admit I took onevendor’s brochure while passing through the hall.

Thepurpose of the seminar is to provide updates to and discuss new developments inthe various taxes of the State of New Jersey and, often, the taxes ofneighboring states. If time permitsthere is usually also a general information presentation that is of interest toaccountants and tax preparers.

Theday’s schedule began, after the usual greetings, with an all-too brief “keynote”presentation by the current Director of the NJ Division of Taxation – MichaelBryan, CPA. Whether the 30-minute timeallotment was due to the Director’s schedule or the time constraints of theday’s itinerary I do not know.

Mr.Bryan had appeared at last year’s seminar, where he was touted as the “fairhaired boy” with high expectations for reforming and repairing the NJDOT. Coming to the seminar I had felt there wasnot much noticeable improvement in the Division in the past year. I was, however, aware that, to his credit, thenew Director had created a Director’s Advisory Council and a state TaxpayerAdvocate Office. Now, thinking back, itappears to me that I did not have to deal with as many NJDOT FUs in 2011 as Ihad in past years – so perhaps there has been progress.

TheDirector told us that NJDOT, like the IRS, in giving more scrutiny to claimsfor the Earned Income Credit. If the IRSbelieves that close to 1/3 of all Earned Income Credit claims are fraudulent,it follows that a similar percentage of NJ claims could also be suspect. All state returns that include the EITC areindividually processed.

Healso reported that he is making progress on processing correspondence. All correspondence received by the Divisionis now initially scanned and entered into the system. I have found over the years that the rule,and not the exception, is that my written correspondence to NJDOT is totallyignored. If not totally ignored, Icertainly do not receive any reply or response.

Mr. Bryanexpects that electronic filing of state corporate income tax returns will beginfor calendar year 2012 activity – for returns filed in 2013. E-filing of CBT returns will not bemandatory.

TheDirector was followed by Sheri Silverstein, the chief of the new Office of theTaxpayer Advocate, who was given slightly more time.

MsSilverstein discussed the guidelines for submitting cases to the OTA –

(1) You face a threat of immediate adverseaction for a disputed liability, or

(2) You have experienced a delay of morethan 120 days to resolve a tax account problem or in receiving a response to aninquiry to the Division.

Consideringthat my written correspondence is generally never responded to, I certainlyhave not received a response to an inquiry to the Division in more than 120days – so I will be reviewing my 2011 state correspondence file later thisweek.

TheOTA also investigates “systemic” problems – deficiencies in the NJDOT systemsthat affect many taxpayers.

Oneapparently submits a request for assistance from the OTA on Form NJ-OTA-911(Request for Assistance from the Office of the Taxpayer Advocate). This form was discussed by several speakersduring the day, but no sample or blank form was included in our package ofhandouts.

Duringthe Taxpayer Advocate’s presentation a member of the audience brought up a veryserious “systemic” problem – which probably should have been done during theDirector’s time – the fact that the NJ Division of Taxation does notacknowledge or question taxpayer, individual or corporate, overpayments.

Ifa taxpayer sends the IRS too much money in payment of a tax, or submits apayment that the Service is not sure where to apply, that taxpayer will,relatively promptly, receive a letter from the IRS acknowledging theoverpayment, or the unidentified payment, and ask what the taxpayer wants donewith the money (i.e. a refund or application to another tax, or where it shouldbe properly applied).

Ifthe NJ Division of Taxation receives an overpayment it does absolutely nothing, hoping that thetaxpayer will not realize that an overpayment was made and therefore allow theState to keep the money to waste on political pork and entitlements.

Thisis indeed a serious ongoing problem, and one that I will address in a futureposting at this blog.

TheTaxpayer Advocate promised to “look into” the issue.

Anotherproblem was presented by a few audience members. It seems that a client wanted to dissolve acorporation and the tax pro submitted all the appropriate paperwork. Before being issued a tax clearance theclient is informed that the Division has no record of the 1990 (or 1991 or1992) corporate income tax return being filed, and requests a copy beforeissuing the clearance and officially dissolving the corporation.

Veryfew corporations, and even less tax professionals (although not me), would havea copy of a tax return filed 20+ years ago on file. This certainly creates a hardship in theclient and preparer, and causes delays that result in (already excessive)additional minimum corporate tax payments by the client.

Inlast year’s presentation Director Bryan discussed the issue of alleged “tooold” tax deficiencies. Here is what Ireported in last year’s “review” of the NJ-NATP state tax seminar –

“A participant told the Director aboutreceiving a notice from NJDOT for a tax (and accumulated penalty) due from thelate 1980s. Mr. Bryan told us he was aware of this problem and that it wastotally ridiculous. He plans to in the very near future establish a reasonabledate and “write off” alleged outstanding balances from before this date.”

Morework needs to be done on this issue – as more than one audience member hadexperienced the same problem when trying to dissolve client corporations.

Nextup was the non-update presentation on “Relocating from New York/New Jersey toFlorida – Tax Implications” from attorney Mary W Browning. Ms Browning did a good job discussingresidency and domicile issues as they apply to both the state income tax andstate estate and inheritance tax.

tobe continued . . . . .

TAFN

NJ PRACTITIONER LIAISON MEETINGS AND SEMINARS

2012-01-02T08:09:00.003-05:00

TheI RS will be discussing various federal tax issues, such as Identity Theft,Preparer Tax Identification Number (PTIN), and Tax Law Updates at variouslocations throughout New Jersey and New York in January.

Clickhere for the dates and locations of the various NJ meetings.

Clickhere for a registration form for the meeting held at Seton Hall.

Clickhere for information on the NY meeting.

TAFN

CHANGE OF ADDRESS

2011-12-31T11:23:00.001-05:00

I just noticed that there is a change in the address for mailing balance due 1040s and 1040As for NJ taxpayers.

Refund returns are still send to Kansas City. But, as per my 1040 Quickfinder Handbook and the IRS website, balance due 1040s and 1040As are now sent to -

INTERNAL REVENUESERVICE
POB 970011
STLOUS M0 63197-0011

Balance due returns for residents of New York and Pennsylvania still go to

INTERNAL REVENUE SERVICE
POB 37008
HARTFORD CT 06176-0008

HAPPY NEW YEAR!

TAFN

NJ-NATP WINTER 2011 NEWSLETTER

2011-12-22T13:57:00.000-05:00

The NJ-NATP Winter 2011 newsletter is nowavailable to download. Click here.

Page 2 has a picture of me receiving my “ChapterMember of the Year Award” at the annual meeting in September, despite the factthat the heading suggests the NATP national conference in St Louis.

I also have two articles in the issue on NJand NY state tax topics.

VP (and former President) Marilyn Ayers talksabout NJ Technical Advisory Memorandums or TAMs, and other items discuss thenew NJ Taxpayer Advocate and the NJ/PA Reciprocal Income Tax Agreement.

And there is a registration form for the annualmust-attend “January State Tax Seminar”.

TAFN

NJ-NATP ANNUAL STATE TAX SEMINAR

2011-11-25T05:00:00.000-05:00

The NJ chapter of NATP has announced thedetails for its annual January 2012 can’t miss “Famous State Tax Seminar”.

It will be held on Saturday, January 14, 2012,at the Hilton Woodbridge in Iselin. Registration begins at 8:00 am and the seminarruns from: 8:30 am – 4:35 pm.

The speakers and their topics are -

Keynote Speaker = Michael Bryan,Director, NJDivision of Taxation

Sheri Silverstein = Chief, Office of theTaxpayerAdvocate

Mary Browning, Esq = Relocating fromNY/NJ toFlorida – Tax Implications

Kathryn Keane, EA = NY Tax Update

Michael Rubino = NJ Inheritance Tax Updates

John Kelly = NJ Pending Legislation

Jim Gordon = State of NJ Current Events andUpdates

As usual they have saved the best forlast. The annual Jim and Jake Show isnot the Jim Show only, as Jacob has been promoted. The program qualifies for 8 CPE credits.

The cost is -

Postmarked before 1/11/12 = Member$200, Non-member $250

Postmarked on or after 1/11/12 or at thedoor = Member or Non-member $260

Continental breakfast, lunch and afternoondessert is included in the price. Clickhere for the registration form,

The chapter will be taking a collection forthe Leon Hess Cancer Center.

Hope to see you there!

TAFN

CHECK IT OUT

2011-11-02T07:41:00.001-04:00

Intoday’s post at THE TAX PROFESSIONAL – “Won’t You Take This Advice I Hand You Like A Brother” – I provide some advice for new tax preparers -

“As a veteran tax professional I am oftenasked for advice from tax preparers who are starting out in ‘the business’. What I tell them involves a song lyric andtwo advertising slogans.”

Checkit out!

MY NEW BLOG

2011-11-01T05:00:00.000-04:00

Oops, I did it again. I have started a new blog – THE TAX PROFESSIONAL.

It will provide advice, information,and resources for tax professionals who prepare 1040s (and 1040As).

I also hope it will serve as a forumfor the discussion of federal income tax and tax practice management topics andissues.

So now I have three blogs –

THE WANDERING TAX PRO – advice,information, and resources for the individual taxpayer,

THE NJ TAX PRACTICE BLOG – advice,information, and resources for New Jersey professionals (limited to state taxtopics and issues), and

THE TAX PROFESSIONAL – advice,information, and resources for tax professionals who prepare federal individualincome tax returns.

TAFN

THE NY STATE TASK FORCE ON REGULATION OF TAX RETURN PREPARERS

2011-10-27T11:51:00.000-04:00

The New York State Department of Taxation andFinance (DOTAF) has announced that “The New York State Task Force on Regulation of Tax Return Preparers has issued its report”.

“Legislationenacted in 2009 required the Commissioner of Taxation and Finance to convene atask force charged with making recommendations related to the effectiveregulation of tax return preparers.”

The members of the Task Force come from thetax profession, business, academia, advocacy groups, and state agencies,

Currently the State of New York extorts anannual $100.00 fee from “unenrolled” tax preparers for the privilege ofpreparing New York State tax returns. There are no requirements other than being able to come up with the$100.00.

I charge each of my clients with a NYS returnan additional “NYS tax return preparer extortion fee” (so separately identifiedon my invoice) of $5.00 to cover this payment.

Here, from the report, is what has beenrecommended (any highlights are mine) -

“TheTask Force proposes the following additional qualifications for commercial tax returnpreparers (those who prepare 10 or morereturns annually for compensation) who prepare NYS personal income taxreturns. These qualifications would be in addition to the existing statutoryregistration requirements. Such preparers would have to:

• Meet the IRS requirements, including passing thecompetency exam.

• If new to the field of NYS personal income tax, take a16-hour basic New York income tax course prior to preparing returns forcompensation. Experienced preparers, asdefined by the Commissioner ofTaxation and Finance, would not be required to take this course.

• Pass a New York State income tax competency exam priorto preparing returns for compensation. Experienced preparers would be allowed totake and pass the exam within a 3-year phase-in period.

• Annually participate in 4 hours of continuing professionaleducation (CPE) in New York personal income tax topics, in addition to the IRSrequirement.

• Be at least age 18 and a high school graduate orequivalent (G.E.D).

Commercial tax returnpreparers who prepare NYS income tax returns but are located outside New YorkState would have to comply with these requirements.

The Task Force developed additional guiding principlesfor administration of these requirements -

• The Department of Taxation and Finance should enroll alltax return preparers in its subscription services mailing list as they registeron-line.

• New York State’s regulation of tax preparers should buildon and complement the IRS initiative to regulate tax preparers. Duplicativerequirements should be avoided.

• The IRS initiative requires all compensated preparersto register, even if they are members of other regulated professions, while thecurrent New York registration program exempts public accountants, CPAs,attorneys, and enrolled agents. In light of the new IRS initiative, theLegislature should consider whether ending these exemptions from registrationwould serve the overall purposes of the program.

• The Department should work with the IRS and otherstates to share tax preparer information and identification numbers as much aspossible, in order to make registration and testing processes easy andefficient. A single, seamless registration system should be the goal for the

• The Department should maintain a public database so thatanyone can check whether a particular tax preparer has met the minimumqualifications and has registered.

• Administrative costs are an important consideration, bothto tax preparers and to New York State.

• The Department should insure that cost-effective CPE isavailable to preparers, using new technology where appropriate.

• The Department should annually provide information aboutthe most common issues and mistakes made on personal income tax returns.

• The Department should use available data to analyzepatterns and identify preparers who are not doing what they are supposed to do.

• The Department needs to learn more about the populationof preparers who operate in New York, the types of returns they prepare, thetypes of clients they serve, and the characteristics of their business models.

• The Department should gain experience in administeringtesting and educational requirements for income tax preparers before expanding theserequirements to preparers of other types of returns.

• Volunteer tax preparers should be encouraged to participatein continuing education activities.”

While I like that there is somegrandfathering with regard to the required 16-hour course, I personally wouldbe tempted to sit in on the course to refresh my NYS knowledge, I would, however, want this grandfathering beexpanded to cover the initial proficiency test.

And I actually would not object to 4 hours ofCPE in NYS tax updates each year, as long as “cost-effective CPE is available to preparers”.

The above requirements are, at this point, onlyrecommendations by the Task Force and are nowhere near becoming actual law – sothere is no need for immediate concerns. However I expect that a form of these recommendations will eventually bepassed.

To be honest, if these recommendations doeventually become law I would simply make sure that I did not “prepare 10 or more returns annually forcompensation”. I would have tochoose those clients for whom I currently prepare NYS returns that provide themost potential for agita (or actual agita) and tell them that I am no longerable to prepare their returns – so as to bring the number of IT-201s and IT-203sthat I do each season down to 9. The3-year time period to be tested would allow me to “phase-out” these clientsover a couple of tax seasons.

The DOTAF also has an update on the state’s “E-fileMandate for Tax Preparers”. Luckily I amnot covered under this mandate. According to the mandate “You muste-file all mandated tax documents if , , , you use tax software to prepare one or more of these tax documents in2012” – and I do not use flawed and expensive tax software to prepare anyincome tax returns.

TAFN

PTIN UPDATE

2011-10-22T07:09:00.004-04:00

IRS has made the registrationprocess to renew your PTIN available at www.irs.gov/ptin.

If your initially signed upelectronically, you may renew electronically.

If youoriginally signed up by paper, IRS will send you an activation code in the mailso that you can use the electronic registration form. You can still use paperform W-12 if you so choose.

The 2012 fee is $63.00.

PTINs must be renewed by December 31, 2011.

One fellow tax blogger, RussFox of TAXABLE TALK, experienced problems and agita when renewing online, butwas eventually successful. Another, THEMISSOURI TAX GUY Bruce McFarland, had no problems with his online renewal.

I must wait to receive theactivation code in the mail.

TAFN

A CHANGE FOR THE BETTER

2011-10-10T05:00:00.000-04:00

Inmy July 22^nd post “Something New” I talked about a new wrinkle to NJstate income taxes that I had come across when a client attempted to sell atwo-family home that had once been rental property. I was asked by the client’s lawyer to fillout a “bulk sale” certificate and calculate an estimated tax payment.

Asit turned out no such certificate was required in the situation because thetwo-family home was not currently “income producing”.

Ijust discovered in the WHAT’S NEW section of the NJ Division of Taxationwebsite the following –

“P.L. 2011, Chapter 124,which was signed into law on September 14, 2011, takes effect immediately andalso applies retroactively to sales, transfers and assignments made on or afterAugust 1, 2007. It amends P.L. 2007, c. 100, § 5 (N.J.S.A. 54:50-38, ‘Bulk SaleAct’) by exempting from application of the Act, the transfer or assignment of ‘asimple dwelling house’ if the seller, transferrer or assignor is an ‘individual’,‘estate’, or ‘trust’ as those terms are used for the purposes of the ‘NewJersey Gross Income Tax Act’, N.J.S.A. 54A:1-1 et seq. By ‘individual’ is meant‘a single-person, married or civil union couple, spouse or civil union partner’.”

The notice went on to explain – “A ‘simple dwellinghouse’ may include an attached or detached dwelling unit, but not more than atwo-family building or structure. . .” And that “a seasonal rental unit, including a timeshare estate” isalso exempt from bulk sale reporting.

Soa NJ homeowner would not be required to file the “Notification of Sale, Transfer,or Assignment in Bulk” and “Asset Transfer Tax Declaration” if the propertybeing sold was “not more than atwo-family building”, or, as in the case of my client, an actual two-familybuilding.

WhiIethe notice does state the exemption “doesnot include a structure or structures containing commercial property including,or in addition to, the units of dwelling space”, I see nothing in thenotice that says the exemption does not apply if the two-family building, seasonalrental unit, or timeshare estate is income producing. Residential rental property is not commercialproperty.

Thisis good news – less work for us!

Whatof NJ homeowners who had already sold a two-family house, with one rental unit,in 2011, and had made an estimated tax payment? According to the notice –

The Bulk Sale Section iscurrently returning checks that are received by those parties who are nowexempt from the Bulk Sale Act, with a letter clearing the seller, transferee orassignee and citing the law change to the original Act.

TAFN

A CALL FOR HELP

2011-09-26T08:39:00.003-04:00

I need your help.

I have been using ONE WRITE PLUS general ledger software for decades. It is no longer published (bought out by Peachtree to do away with competition many years ago) and, while I still like the program, I am looking for a replacement.

I do not need much specialized bells and whistles - just a basic general ledger program. I do not need to create and track invoices or manage inventory or do budgeting. I just need basic Accounts Payable (write and print checks) and Payroll (generate and print paychecks and quarterly and annual reports).

I have seen Quickbooks at a client and it seems a bit too much detail for my purposes. The easier to use the better is my motto.

The only program that I have looked at so far is Sage Peachtree Complete Accounting. Has anyone out there had experience with this program, or other Peachtree packages?

What general ledger program do you use - and what would you recommend for my needs, and why?

You can email me at rdftaxpro@yahoo.com.

My sincere thanks for any assistance you can provide.

TAFN

NJ-NATP ANNUAL MEETING

2011-09-23T10:41:00.003-04:00

YesterdayI attended the Annual Meeting, and all-day education session, of the NJ chapterof the National Association of Tax Professionals. While the chapter’s January session isdevoted to state tax issues (in my opinion a “must attend” for all NJ taxpreparers), the September session covers federal tax issues. As usual, the session was held at the Woodbridge Hilton in Iselin.

Theeducation portion was billed as “A Day With Kathryn Keane”, a popular speakerfrom Brooklyn NY who formerly served on the national Board of NATP and the NYchapter’s Board. This format follows thatof successful September offerings of previous years, which included “A Day WithDavid Mellem” (former NATP Research Director) and “A Day With AliceOrzechowski” (popular NATP instructor).

What tax preparer could resist “A Day With KathrynKeane”?

Kathryn’s topics for the day were –

* Foreclosures, Short Sales and the 1099C,

* Ins and Outs of Schedule D,
* Ethics (groan), and
* Hot Topics (real estate professionals, Schedule Eaudits, and hobby vs business audits).

As expected Kathryn provided an excellent overviewof the chosen topics, with lots of personal anecdotes from her practice topunctuate her points. To her credit sheeven kept me awake during the Ethics portion (the full required “100 minutes”)by basically turning it into a stand-up routine, and actually provided me witha few new things to think about.

My constant complaint about all CPE offerings isthat it seems at least every other one contains the 2 hour ethicsrequirement. So, while the IRS willrequire I take 2 hours per year, I end up with 4 or 6 (and, in my opinion, 2 is already too much)! Unfortunately, as an NJ-NATP Board membertold me a few years back, if they do not include Ethics on the agenda the attendancedrops.

The attendance at this fall session was upsubstantially from past years – almost doubled. One wonders if it is because of the new CPE requirements for previouslyunenrolled preparers (which actually does not begin until 2012), the ethicsoffering, or Kathryn Keane as the speaker. With the new CPE requirements I do expect attendance at CPE offerings toincrease beginning next year.

My only complaint concerns the Schedule Dpresentation, and is common to Schedule D offerings. The one area I want to hear about is “putsand calls” – after 40 years this still confuses me somewhat – but this item isusually at the end of the presentation, and due to time constraints is usuallypassed over with just a brief instruction to “read what is in your text”.

I realize that KK was giving an “overview” of the ScheduleD, and would like to see a more detailed offering specifically on more “non-traditional”Schedule D items in the future. Perhapsa day of “unique” Schedule A, D, C, and E topics.

If I may pick another nit with the Schedule Dpresentation, KK quoted the IRS’s initial position on “demutualization” ofinsurance companies – the basis of the stock received is 0 – she did not reportthat the United StatesCourt of Federal Claims in Eugene A. Fisher et al. v. UnitedStates ruledthat a taxpayer recognizes no gainfrom the demutualization of a mutual insurance company. The basis of “demutualized”shares is not “0”, as the IRS claimed, and we tax preparers had reported onsales of such shares over the years. A basis is allowed against demutualizationproceeds. According to the Courtdecision the basis of the shares inthe insurance company received in demutualization is equal to the value of theshares on the date of the demutualization, up to a maximumequal to the total of the premiums the taxpayer had paid for the insurancepolicy up to the point of the demutualization. To be fair, KK did state thatthere was a Tax Court case on the subject (but provided no detail).

One of the items in the Annual Meeting portion ofthe day was the announcement of and presentation to the annual Chapter Memberof the Year. As I sat there listening tothe description of the 2011 winner I thought to myself, “hey, that could be me”(the presenter mentioned that the person wrote regularly for both national NATPand NJ-NATP publications) – and it was!

I was truly surprised. I was told the Board debated whether to tellme in advance, or to leave it as a surprise, and I am glad that it came as asurprise. My sincere thanks to the Boardfor this honor. If I may continue horn tootin’ – this follows my selection asnational NATP’s January 2011 Member of the Month.

The NJ chapter of NATP is offering a few moreeducation sessions – both half-day and full-day – before year-end. More information is available on the chapter’swebsite – www.njnatp.com. I am looking forward to the annual Januarystate tax seminar.

TAFN

NJ NATP NEWSLETTER

2011-09-21T07:12:00.001-04:00

The FALL 2011 issue of NJ TAXINGTIMES, the newsletter of the NJ chapter of the National Association of TaxProfessionals is now available.

Click here to download.

Will I see you tomorrow at thechapter’s Annual Meeting?

TAFN

A RESOURCE FOR CALCULATING COST BASIS

2011-09-20T16:05:00.003-04:00

As I have often said inthe past, and as I am sure you will agree, one of the biggest PITA’s, and timewasters, during the tax filing season is trying to determine the cost basis ofstock sold by a client – especially stock that has split often since itsoriginal purchase, or was acquired via spin-off or merger. The most a client will provide is the cost ofthe initial purchase of the investment (i.e. 100 shares purchased for $1000),though often I do not even get this basic information.

I recently came acrossthe website CostBasis.com, a free tool to help relieve some of the PITA-ness ofthis process. According to the site’spublicity -

“Confused aboutthe cost basis of your investment securities or how to accountfor those stock spin--offs, mergers, splits, split-offs, rights, or class action claim checks?

We explain in plain English the steps you need to take tocalculate your cost basis. We give you ideas about what questions toask and where to find the information you need.”

I have so far used it to look up twostocks that had been acquired via merger, and found it very helpful in thesetwo situations.

If you use it let me know how itworked for you.

Cost basis information, calculators,worksheets can also often be found in the Shareholder Services sections ofcompany websites.

TAFN

2012 IRS NATIONWIDE FORUMS

2011-09-19T05:00:00.000-04:00

FYI - the Internal Revenue Service has recentlyannounced the dates and locations of the 2012 IRS Nationwide Tax Forums -

Orlando,FL June 19-21, 2012

Atlanta,GA July 10-12, 2012
SanDiego, CA July 17-19, 2012
LasVegas, NV July 31 - August 2, 2012
Chicago,IL August 21 - 23, 2012
New York,NY August 28-30, 2012

It isgood to have the forum back in NYC.

TAFN

NJ PROPERTY TAX RELIEF PROGRAMS UPDATE

2011-07-27T12:29:00.003-04:00

I have checked the NJ Division of Taxation website to find out updated information on the 2010 Property Tax Reimbursement (aka Senior Freeze) and Homestead Benefit programs, now that a new fiscal-year budget is apparently in place.

Here is what I found (the highlights are mine)–

(1) The 2010 Homestead “Benefit” will again be applied as a credit against actual property taxes “in one or more installments to 2012 property tax bills." The 2009 “benefit” reduced the May 1st, 2011 quarterly real estate tax payment. “By April 1, 2012, eligible homeowners can expect to receive a revised property tax bill or advice copy from their tax collector that will reflect the amount of the benefit.”

(2) “Senior and disabled homeowners with gross income up to $150,000 will receive Homestead Benefit credits averaging $540 this year, and non-senior homeowners with gross incomes up to $75,000 will receive credits averaging $404.”

(3) “Under the terms of the State Budget for FY 2012, residents applying for the 2010 {Property Tax} reimbursement must have total income for both 2009 and 2010 that is $70,000 or less (the original limit was $80,000). These limits apply regardless of marital/civil union status. However, applicants who are married or in a civil union must report combined income of both spouses/CU partners.”

(4) Qualified homeowners who did not receive a Property Tax Reimbursement check in calendar year 2009 did not receive a check in 2010, even if they had qualifying income of $70,000 or less for both calendar years 2008 and 2009. For this year a recent press release stated that “Every individual who qualifies for the Senior Freeze program will receive a benefit this year”. So it appears that if you qualified for the Senior Freeze, based on income of $70,000 or less for both 2009 and 2010, you will receive a check this year, even if you did not receive a check last year.

(5) “The Christie Administration, through the Treasury Department’s Division of Taxation, has already begun mailing Senior Freeze checks to senior and disabled homeowners. Checks for the Senior Freeze program, which protects senior citizens and disabled residents from increases in property taxes, will average more than $1,200 this year, going directly to recipients who earned $70,000 or less in 2009 and 2010.”

(6) And once again - “While residents whose income was over $70,000 but not over the original income limit of $80,000 will not receive reimbursements for 2010, even if they met all the other program requirements, they should apply to establish their eligibility for benefits in future years. Even though these applicants will not get a check for 2010, they have established their ‘base year’ for any future reimbursements for which they may be eligible, and they will receive a notice advising them of this.”

As reported here in an earlier post, the deadline for filing the Property Tax Reimbursement application (Form PTR-1 or PTR-2) has been extended till October 31, 2011, so there is still time to file your application and, if not getting a check, at least establish a “base year”.

TAFN

SOMETHING NEW

2011-07-22T07:45:00.001-04:00

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I received an odd request recently.

I got an email from a law firm regarding the sale of a property listed as a two-family home by long-time clients. I was asked to fill out a “Notification of Sale, Transfer, or Assignment in Bulk” and an “Asset Transfer Tax Declaration” for the upcoming sale of the property.

In my almost 40 years preparing 1040s I have only filled out these forms when a business entity, such as a corporation, sold its business activity in an “asset sale”. I have never filled out, or heard of anyone ever filing out, these forms for the sale of personally owned real estate.

The clients in question, an elderly married couple, are selling the two family home, half of which has been their primary personal residence since the mid 1950s, and moving into a nearby assisted living facility. The facility is in New Jersey – they are not leaving the state.

The second unit in the home had been rented to the wife’s sister. The sister passed away in mid 2007, and the clients decided not to rent out the apartment any more. The unit was not rented, nor was it available for rent, from July 2007 to the present – a period of 4 full years. A Schedule E was filed for the first 6 months of 2007, but has not been filed since.

This request seemed odd to me. As I said I have never in almost 40 years heard of the need for filing these forms in such a situation.

I contacted a fellow NJ tax professional, who had also never come across the filing of these forms for a situation like that of my clients. She, like me, had only seen these forms filed in connection with the sale of a business.

I also contacted a NJ real estate professional, and was told –

“Yes, it is a new rule that applies to two family homes and it is required.”

She went on to say -

“However, you should discuss your clients’ particular situation, regarding the property not being used as a rental since 2007, with their attorney. This may affect the filing. I was recently involved with the sale of a 2 family home where the sellers’ son resided in the 2nd unit rent free, so, although a 2 family, it was not ‘income producing’. They received a tax clearance letter requiring no escrow.”

So it appears that these forms do now need to be filed with the State of New Jersey on the sale of a s-family home, and an appropriate escrow deposit be made, unless the property is not “income producing”.

This is just one more way for the DFBs in Trenton to grab our cash to waste on continued pork and entitlements.

Has any other NJ tax professionals come across this new requirement? Please send me a comment or an email (to rdftaxpro@yahoo.com) with your experience if you have.

TAFN

COMMENTS

2011-07-14T15:34:00.005-04:00

It has come to my attention that some readers have been unable to post comments to my NJ TAX PRACTICE BLOG posts.

If the "system" will not accept your non-spam comment you can email your comment to me at rdftaxpro@yahoo.com. Be sure to put 'NJTPB COMMENT" in the "subject line".

TAFN

NATIONAL ASSOCIATION OF TAX CONSULTANTS

2011-07-12T14:46:00.001-04:00

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A while ago, while wandering on the internet, I came across a new, at least to me, membership organization for tax preparers – the National Association of Tax Consultants.

What first caught my eye on their website was a mention of a national conference to be held in San Antonio in October. I would love to return to San Antonio – and even more better in the fall when it is not 97 degrees!

I sent in a membership application, although I have not as of yet received anything in the mail as confirmation.

The details of the fall conference did arrive via email, probably in response to an email to the President asking for details and a confirmation of my membership. Click here to find out more about the San Antonio conference.

Unfortunately the topics to be covered at the conference are not of interest to me – not enough to justify the expense of attendance. I do not do estate planning or returns or farms, have had enough ethics for a lifetime (and expect to get my mandatory two hours via NATP year-end classes), and do not need “the basics” after 40 tax seasons.

Just thought I would bring this organization, and this conference, to your attention.

TAFN

IS ANYBODY THERE? DOES ANYBODY CARE?

2011-06-29T07:26:00.003-04:00

I only received one response to my “An Open Question for Tax Pros Who Prepare NJ-1040s “, and that was in reply to an email I sent specifically asking for guidance.

Just in case anyone is interested, here is the response –

“I would and have used the IRA distribution rule for these type of deferred compensation withdrawals. It is not a regular monthly pension and therefore you must use the IRA distribution rule not the three year rule or pre determined life rule.”

This is what I had planned to do, and did do, and was happy to have my decision verified.

TAFN

AN OPEN QUESTION FOR TAX PROS WHO PREPARE NJ-1040s

2011-06-22T14:32:00.003-04:00

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An open question to fellow NJ tax return preparers. Consider the following example –

John Q Taxpayer was a police officer for a New Jersey municipality for 25 years. He retired from the force and took a job in the public sector.

During his employment as a police officer he contributed to the state pension fund, and also contributed to the Deferred Compensation Plan for municipal employees. The employee contributions to the state fund and municipal plan were considered to be “pre-tax” for federal income tax purposes, but not for NJ state income tax purposes. His contributions reduced the federal wages reported in Box 1 of his annual W-2, but did not reduce the state wages.

Upon retirement John began to draw a regular monthly pension check from the New Jersey Division of Pensions. He is not required to take money from the Deferred Comp Plan until age 70½, although he can request distributions from this plan in any amount at any time.

On the NJ-1040 John used the “3-Year Rule” to recover his “after-tax” contributions to the state pension fund. Once all of his contributions were recovered, within two years as it turned out, he reported 100% of his pension distributions as income on his NJ-1040.

John wanted to purchase a new automobile a few years after retiring. Rather than getting an auto loan he decided to take the money for the car from his Deferred Compensation Plan. He withdrew $27,000, $7,000 of which was withheld for federal income taxes. This $27,000 was a one-time withdrawal. He did not “annuitize” the balance in his account, taking out $27,000, or any amount, each year thereafter. In the two year after the $27,000 was withdrawn he took nothing whatsoever from this plan, and does not plan to do so until required unless a special need arises (like the car).

The $27,000 was fully taxed on his federal Form 1040, as all of his contributions to the plan while employed were “pre-tax” for federal income tax purposes. But how much does he report as taxable on his NJ-1040?

The NJ-1040 instructions indicate there are two methods of recovering “after-tax” contributions. First there is the “3-Year Rule”. That does not apply here. The other method is to deduct his contributions evenly over a pre-determined “life”. It appears that would also not work – as the withdrawal was a one-time deal.

The only method for applying after-tax contributions to the one-time distribution is the one that the State of New Jersey allows for determining the taxable portion of IRA distributions, even though the Municipal Deferred Compensation Plan is not an Individual Retirement Account.

How would you calculate the state taxable portion of the $27,000 one-time withdrawal if this was your client? You can submit your answer as a Comment to this post, or via email to rdftaxpro@yahoo.com.

TAFN

COMPARING THE IRS AND THE NJ DIVISION OF TAXATION

2011-06-20T05:00:00.004-04:00

Say what you will about the Internal Revenue Service - and, believe me, I have said a lot about the IRS over the past 40 tax filing seasons - when it comes to its dealings with individual taxpayers the Service really does attempt to be fair, honest, consistent, and, at times, even flexible.

Obviously there are individual auditors and collection agents who are arbitrary, abusive, dishonest, and difficult. But on the whole, the Service itself does try to be honest with the taxpayer.

Now the New Jersey Division of Taxation is something else altogether. I certainly cannot say the same thing about this tax agency.

Let us say you made a payment to the Internal Revenue Service and the Service did not know what it was for. Or the Service erroneously applied the payment to the wrong year, creating an overpayment for a particular tax year. The IRS would automatically send you a letter asking you to explain what the payment was for, or identifying the fact that there is an overpayment in your “account” for a particular year and ask for clarification. The Service may even automatically send you a refund for the overpayment.

Not so the New Jersey Division of Taxation.

For two non-consecutive years in the recent past the NJ Division of Taxation applied timely payments by taxpayers, who had submitted their NJ-1040 online via NJWebFile, of balances due on their NJ-1040 to the wrong year.

A taxpayer submitted his/her 2005 NJ-1040 online via NJWebfile, or I so submitted a return for a client, and there was a balance due. The system would automatically create a payment voucher with pre-printed taxpayer and payment information which the taxpayer, or I, would print out. The taxpayer or client would send a check to the NJ Division of Taxation along with this payment voucher in time to meet the April 15th deadline.

The problem was that the extensive pre-printed code on the bottom of the voucher, which was “read” by the NJDOT computer system when the payment was being processed, indicated that the payment was for tax year 2004 and NOT 2005. The payment was applied to the taxpayer’s 2004 “account”, creating an overpayment, and in the fall the taxpayer received a billing notice for the tax due on the 2005 NJ-1040, which had already been timely paid, plus penalty and interest.

Did the NJ Division of Taxation send a notice to the taxpayer telling them that there was an overpayment on their 2004 account and asking for clarification, or send the taxpayer a refund check for the overpayment, as the Internal Revenue Service would have done? What do you think? Of course not! The NJ Division of Taxation kept the money and kept quiet – hoping the overpayment would not be discovered by the taxpayer and our corrupt elected officials would have more cash to waste on entitlements and pork.

In most cases the taxpayer receiving the balance due notice would either give the notice to me, or their tax preparer, as they should have done, or call Trenton directly and tell them of the FU. In both cases the problem would eventually be resolved and the taxpayer’s payment would be properly credited.

I am sure that there are also cases where the taxpayer receiving the balance due notice, intimidated by any government correspondence, paid the amount billed without telling anyone – effectively paying the tax due on their 2005 return twice. Hopefully if they used a tax preparer he/she would discover the double-payment when preparing the 2006 state return.

This problem was fixed for tax year 2006, but happened once again for tax year 2007. With the 2007 FUs I was actually able to get the NJ Division of Taxation to issue letters of apology to my affected clients, as I dealt with a specific NJDOT employee, one of the rare honest and competent ones, on fixing all the FUs.

I recently come across a situation where a corporate employer double-paid the NJ Gross Income Tax withheld from employees for a particular year (the employer’s error), a while ago, and in all the time that has elapsed since the double-payment the NJ Division of Taxation has never contacted the employer to ask why the payment was made twice. As they had hoped to do with double payments made by 2005 and 2007 NJ-1040 filers using NJWebFile, they simply “took the money and ran”, crossing their fingers that the double-payment would not be discovered by the taxpayer.

I admit I am cynical on this topic - a result of having grown up in Hudson County, NJ (at one time the "poster child" for political corruption in the most politically corrupt state in the union). I obviously cannot say for sure if the NJ Division of Taxation, or the State of New Jersey, purposefully does not contact taxpayers regarding unidentified payments or overpayments so it can keep the money, or if they are too lazy or cheap to program this into their internal software system, or if they are just idiots.

This problem has not occurred to a client of mine in the past year or so, so maybe the new Director of the NJ Division of Taxation has already fixed the problem.

I will continue to point out problems with the NJDOT in future posts - and welcome fellow NJ tax preparers to submit examples of problems they have identified with the DOT's administration of taxes.

TAFN

A PTR FYI

2011-06-16T15:47:00.001-04:00

I just got “the word” from NJ-NATP chapter President Jaimee Hammer, who in turn got the word from “the horse’s mouth” at the NJ Division of Taxation – one of the few (in my opinion and from my experience) honest, competent, knowledgeable, and reliable sources at NJDOT.

I had asked about the amount of a pension distribution to include as income when determining eligibility for the Property Tax Reimbursement (aka Senior Freeze) – the “gross” distribution or the “net” distribution after taking into account recovery of employee/taxpayer contributions.

A retired client had received a distribution from his former employer’s Savings Plan, a substantial portion of which ($6,000 +) represented a return of “after tax” employee contributions. The Form 1040, and the NJ-1040, taxed only the net distribution. If I included the gross distribution in PTR income the client would exceed the $80.000 income limit – if I included the net distribution he would qualify.

Jaimee asked my question of the reliable source, and the answer she got is –

“The ONLY amount that can be excluded is a rollover distribution. Employee contribution recovery is considered income and includable, even though it is not taxable income.”

I was not surprised by the answer – as it is what I had expected. The DFBs!

Thanks, Jaimee.

TAFN

NJ TAXING TIMES

2011-06-11T05:00:00.001-04:00

The Summer 2011 issue of NJ-NATP’s newsletter “NJ TAXING TIMES” is now available to download.

The newsletter provides information on upcoming chapter education –

* On Thursday, September 22 the day-long NJNATP Annual Conference will provide “A Day with Kathryn Keane”, a veteran tax preparer and former member of the NATP national Board. From past experience I can tell you that Kathryn is an experienced and knowledgeable speaker.

Held, as usual, at the Woodbridge Hilton in Iselin NJ, the conference will cover –

· Ins and Outs of Schedule D
· Foreclosures, Short Sales and the 1099-C
· Hot Topics, including Schedule E, hobby rules, and real estate professionals, and, of course
· Ethics (apparently there will be no CPE class anywhere without the now required ethics topic)

The cost for registrations postmarked before September 19th is $200.00 for members and $250.00 for non-members. Continental breakfast, lunch, and afternoon dessert is included.

A registration form is included in the newsletter.

* A “Breakfast Seminar” on Estate Issues with attorney Michael Feinberg will be held in Tinton Falls on the morning of Thursday, October 27th.

* Kathryn Keane will return to the Woodbridge Hilton to teach a full-day seminar on the 1120S Corporation on Thursday, December 8.

* And the “Famous State Tax Seminar” will be on Saturday, January 14th, 2012 – guess where.

Click here to download the newsletter.

TAFN

OOPS - THEY DID IT AGAIN!

2011-05-26T16:57:00.002-04:00

As I expected, the New Jersey Department of the Treasury has just announced that the deadline for filing the Property Tax Reimbursement application (Form PTR-1 or PTR-2) has been extended to October 31, 2011.

Each year the initial filing deadline for the PTR form is June 1st. And each year at the end of May the deadline is extended, first to August and then to October. This year the Treasury Department has skipped the interim extension and gone directly to October.

October 31st is also the deadline for submitting an application for the New Jersey Homestead Benefit (formerly Rebate). The application forms for the “benefit” will be mailed out between June 4 and June 16 as follows –

Camden, Hudson, Hunterdon, Salem, Somerset = June 4
Bergen, Burlington, Cumberland, Warren = June 7
Gloucester, Mercer, Middlesex, Passaic = June 9
Cape May, Union = June 11
Atlantic, Essex, Monmouth, Sussex = June 14
Morris, Ocean = June 16

As was the case of the benefit distributed this year, qualified homeowners will receive a credit on their local 2012 property tax bill. Under the proposed budget the benefit will be provided to senior and disabled homeowners with a 2010 NJ Gross Income of $150,000 or less, and to all others with a 2010 NJ Gross Income of $75,000 or less.

Information on both benefit programs is available on the NJ Division of Taxation website.

TAFN

AN INTERESTING PTR SITUATION

2011-05-18T11:13:00.014-04:00

Sorry I have been “away” for so long, but I am working on the GD extensions.

Here is an interesting situation.

The New Jersey Property Tax Reimbursement Program (aka Senior Freeze) reimburses senior and disabled homeowners for the annual increase in local real estate taxes.

As the NJDOT website explains –

“The amount of the reimbursement is the difference between the amount of property taxes that were due and paid for the "base year" (the first year that you met all the eligibility requirements) and the amount due and paid for the current year for which you are applying for the reimbursement, provided the amount paid for the current year was greater. You must meet all the eligibility requirements for the base year and for each succeeding year, up to and including the current year to qualify for the reimbursement.”

It seems that Berkeley Township (Toms River) did a complete re-evaluation of property taxes, which resulted in an actual reduction of real estate taxes assessed for calendar year 2010. For one client the taxes assessed and paid for 2010 was $600.00 less than the “base year” tax on the PTR-2. For another client the current taxes were over $100.00 less than the current "base year". So there will be no reimbursement for 2010.

If a homeowner fails to file a PTR-2 for a particular year, whether or not due to increases in income, it is my understanding that the old “base year” is lost and a new base year must be determined by filing a PTR-1 based on two consecutive years of income in a subsequent year.

So if the senior homeowners whose taxes went down do not file a 2010 Form PTR-2, and re-enter the program next year by filing a 2011 Form PTR-1 using 2010 and 2011 income for qualification, the base year for current and future PTR filings will be the real estate taxes assessed and paid in calendar year 2010. In these two cases the taxes assessed and paid for 2010 are lower than the “old” tax base that they had been using.

As of this writing I have advised the clients not to file a 2010 Form PTR-2, and will probably do the same thing next year. The original filing deadline, as it is every year, is June 1st. But, as happens every year, this deadline is extended and extended again until eventually October.

Do any of my fellow NJ tax preparers disagree with, or have anything to add to, this strategy? Please comment or email me at rdftaxpro@yahoo.com.

TAFN

THE CAFONES!

2011-02-01T15:33:00.001-05:00

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I did my first Form 1040 of the season – and my first NJWebFile submission – early this morning.

However when I attempted to submit the second NJ-1040 of the season via NJWebFile I was told I could not use the system because the taxpayer (a married couple) had NJ Gross Income of over $150,000!

The cafones!

Last year – when preparing the 2009 NJ-1040 – an income level of $150,000 meant something because of the reduction of the allowable deduction for Real Estate Taxes.

However for the 2010 NJ-1040 Real Estate Taxes are deductible in full, up to $10,000, regardless of income. So why will NJWebFile not accept and process a submission with NJ Gross Income of over $150,000?

It seems the NJ Division of Taxation is too cheap to pay someone to fix the NJWebFile software!

New Jersey wants returns submitted electronically – so why do they set up “road blocks”?

TAFN

NCPE FELLOWSHIP WEBINAR

2011-01-19T08:13:00.000-05:00

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The NCPE Fellowship, a new tax preparer membership organization, will host a Webinar on the latest in tax changes for the 2010 filing season – “what the tax professional has to know to be current, proficient and beneficial for this tax season” – presented by Fellowship Executive Director Beanna J Whitlock, EA, CSA (FYI – a great instructor). It is available "On Demand" beginning January 25, 2011.

You can earn 1 hr of CPE upon completion of 5 test questions. The Fee is $25.00 for a NCPE Fellowship member, $35.00 for those who attended the fall NCPE seminar, and $50.00 for all others.

To reserve your "on demand" presentation go to www.ncpefellowship.com, or call 877-403-1470 for more information.

TAFN

CSEA SUPER SEMINAR 2011

2011-01-14T05:00:00.000-05:00

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The California Society of Enrolled Agents will present its SUPER SEMINAR 2011 for tax professionals from May 10-12 at Bally’s Las Vegas, and from June 2-4 at the Grand Sierra Resort & Casino in Reno.

Receive up to 25 hours of quality CPE credits, plus visit an exhibit hall filled with vendors “specifically selected for your tax practice”. Register before mid-March for early-bird prices.

I have attended this seminar in Reno on several occasions over the years and have found it to be an excellent source of high quality CPE. I looked briefly at the schedule, and they offer some interesting classes.

As it is held in Vegas and Reno the seminar hotel rate is extremely reasonable, and I expect airfare is also relatively inexpensive. The cost of the seminar itself is also a good value for Enrolled Agents. Unfortunately I am not an EA.

For more information go to www.superseminar.org.

TAFN

PROPERTY TAX RELIEF

2011-01-13T06:25:00.002-05:00

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FYI, I have posts explaining the NJ Homestead Benefit and the NJ Property Tax Reimbursement programs over at THE WANDERING TAX PRO.

Click below to read -

THE NEW JERSEY PROPERTY TAX RELIEF PROGRAMS – PART I
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THE NEW JERSEY PROPERTY TAX RELIEF PROGRAMS – PART II

TAFN

THE NJ VIETNAM VETERANS' MEMORIAL

2011-01-11T05:00:00.000-05:00

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I have been asked to pass this information along to my readers:

Support New Jersey Vietnam Veterans’ Memorial Foundation by Checking Line 60 on New Jersey Income Tax Form!

As you put the final touches on your New Jersey income tax return, remember you can direct a portion of your return to the New Jersey Vietnam Veterans’ Memorial Foundation by checking line 60 and designating the amount you’d like to contribute. The Foundation oversees the New Jersey Vietnam Veterans’ Memorial and Vietnam Era Museum & Educational Center in Holmdel, NJ.

As a not-for-profit organization, the New Jersey Vietnam Veterans’ Memorial Foundation relies on contributions from people to support its efforts to encourage and foster a thorough understanding of the Vietnam era including the political, historical, social, cultural and military aspects that affected the United States, and especially New Jersey.

Each year, more than 9,000 school children pass through the doors of the Vietnam Era Museum & Educational Center and visit the New Jersey Vietnam Veterans’ Memorial. Private contributions enable the Foundation to update displays, bring guest lecturers, exhibitions and educational programs to the Museum & Educational Center and host several special events. As a result, the Foundation has become a trusted resource for all New Jersey veterans.

“I ask everyone to consider directing a portion of their New Jersey income tax return to the New Jersey Vietnam Veterans’ Memorial Foundation. This simple act has become one of our most significant funding sources,” said board chair Clark W. Martin. “There is no more fitting time than while our nation’s service men and women are fighting overseas to support the ongoing education of our young people and to honor those who served during the Vietnam era, especially the 1,562 New Jerseyans who never returned home.”

The Vietnam Era Museum & Educational Center is located adjacent to the New Jersey Vietnam Veterans’ Memorial off the Garden State Parkway at exit 116. The Museum & Educational Center are open Tuesday through Saturday, 10 a.m. to 4 p.m. For information on the New Jersey Vietnam Veterans’ Memorial and Vietnam Era Museum & Educational Center, visit the website at www.njvvmf.org or call 732-335-0033.

TAFN

THE NJ NATP ANNUAL "FAMOUS" STATE TAX SEMINAR

2011-01-10T05:00:00.000-05:00

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On Saturday I attended the annual “NJ Famous State Tax Seminar” presented by the New Jersey Chapter of the National Association of Tax Professionals, held, as it is each year, at the Woodbridge Hilton in Iselin.

This year the seminar was devoted entirely to state tax issues. In addition to New Jersey state taxes, we were to hear from representatives of neighboring states New York, Pennsylvania, and Delaware. A great idea, and a great line-up, evidenced by the fact that it had the best attendance for a NJ state tax seminar in years, despite the predicted snowfall. The only point in the day when my attention began to drift was during the Delaware presentation, as I currently do not prepare any Delaware state income tax returns.

We were greeted by newly-elected chapter President Jaimee Hammer, who led us in a well-deserved round of applause to thank outgoing President Marilyn Ayers for her great job.

First up was the “keynote” speaker – which has historically been the current Director of the New Jersey Division of Taxation (except last year when the then Acting Director refused to attend). This year we were introduced to the new, currently “Acting” (until officially approved by the legislature), Director – Michael Bryan.

My first reaction was – Gott in Himmel, he is young! He certainly looked young, although based on his resume he is probably in his late 40s.

Mr. Bryan is, surprisingly and thankfully, a true outsider – coming from a corporate audit background. He brings a fresh and unique perspective to the job – approaching it as, as he described, a “frustrated taxpayer”.

In his short time on the job he has already done some good things. He has created an Advisory Board of professionals (former NJNATP President Marilyn Ayers represents the tax practitioner community on the Board) and a NJ Taxpayer Advocate office, which will begin operating on February 1st. He has also decided to publish on the Division’s website previously private “Letter Rulings” as guidance for taxpayers and tax professionals.

A participant told the Director about receiving a notice from NJDOT for a tax (and accumulated penalty) due from the late 1980s. Mr. Bryan told us he was aware of this problem and that it was totally ridiculous. He plans to in the very near future establish a reasonable date and “write off” alleged outstanding balances from before this date.

He also indicated that the Conference and Appeals division is dragging its feet and has too large a backlog of cases. He is instructing this division to clear the backlog by resolving open issues as quickly as possible.

And he has hired 137 new auditors, and, apparently something not done before, these auditors have been properly trained.

For the first time in many, many years I have great hope for the future of the mucking fess that is the New Jersey Division of Taxation.

The Acting Director was followed by presentations on PA taxes by Enrolled Agents and PA-NATP leaders Amy Gambler and Kathryn Bowman, DE taxes by James Stewart, Assistant Director of the Delaware Division of Revenue Office of Personal Taxes, and NY taxes by the Kathryn Keane, former NATP Board member.

The deadline for filing the PA-40 state income tax return will follow the federal return and be extended to April 18, 2011, although the 1st Quarter PA estimated tax payment will be due April 15th. The PA presentation included a great hand-out – “Common Federal and State Tax Differences”.

Delaware has decided to join its neighbors and not send out state income tax booklets to its taxpayers. DE taxpayers who choose to pay their state tax due via credit card will not be charged a processing fee if the payment is less than $2,500.

If you elect to deduct state and local sales tax instead of state and local income tax on your 2010 federal Schedule A, this deduction must be added back, like state and local income taxes, when determining New York State itemized deductions on the NY resident and non-resident state income tax returns (IT-201 and IT-203). State and local sales tax is not deductible in calculating NY state income tax. Beginning for tax year 2012 New York will institute 1099 filing requirements.

Before breaking for lunch the state tax speakers, including the NJDOT representatives, participated in a Q+A panel discussion. This started out slow, and I did not think it would fill the allotted time, but it quickly picked up steam and became quite lively.

The entire afternoon was given over to the main reason most of us attend this annual event – the Jim and Jake Show. Popular, excellent, and well-informed speakers Jim Gordon and Jacob Foy from the NJ Division of Taxation have been presenting NJ state tax updates each year at this seminar for quite a while now. Their obvious ability and competence is truly unique among employees of the Division of Taxation. Hopefully this will change under the leadership of its new Director.

Jim Gordon began his portion of the J+J Show by stating that he, too, as an employee of the NJDOT, has great hope for the future of the Division under Director Bryan.

Jim covered corporate and business issues. The 4% “surcharge” on the corporation business tax expired on June 30, 2010. This addition to NJ-CBT tax liability no longer applies on calendar year 2010 returns, and does not appear on the 2010 Form CBT-100. So now the minimum tax liability for a NJ corporation is $500.00, and not $520.00. New Jersey will also allow a 20-year carryover of NJ-CBT net operating losses (NOLs), beginning with losses from tax years ending after June 30, 2009 (i.e. calendar year 2009 losses)

Jim very briefly touched on his favorite topic – the 7% contractor withholding requirement – reminding us that, as the new Director had reported, the Division has added 137 new auditors.

Jacob’s part of the show concerned individual issues. The most important part of his presentation concerned the property tax “relief” programs – the NJ Homestead Benefit (no longer Rebate) and the NJ Property Tax Reimbursement (PTR-1 and PTR-2). For detail on his discussion of these programs see my Tuesday and Thursday posts at THE WANDERING TAX PRO.

There was not much change to the NJ-1040. He mentioned that NJ-1040-H replaces TR-1040 for 2010 (see the Tuesday TWTP post), the 2010 NJ Earned Income Credit is reduced to 20% of the federal EITC (it was 25% for 2009), and that NJ will no longer mail out paper Form 1099-Gs to report state income tax refunds. The 1099-G info will be available for download on the NJDOT website – although not yet.

As usual the committee did an excellent job of putting together a great, and truly informative, program. Any complaint I had in the past concerned the fact that the day’s schedule included topics that, while often interesting and well presented, did not really have anything to do with state tax issues. As I mentioned in the beginning of this post, this year the entire day was properly devoted to state taxes and had an excellent line-up of speakers. My only comment is that the New Jersey presentation should have briefly included NJ Department of Labor updates – i.e. the new unemployment, disability and family leave contribution information.

And I actually met one of my blog readers during a break. While standing in the back of the room I was approached by a young fellow attendee who asked if I was Robert Flach. He told me that he was a regular reader of TWTP and this blog and that he found my postings especially helpful as a relatively new member of the tax preparation community. He congratulated me on my Member of the Month honor and thanked me for writing the blogs. It was the best part of a truly great day.

TAFN

THE JANUARY ISSUE OF THE SCHEDULE C LETTER

2011-01-07T14:09:00.000-05:00

The January 2011 issue of THE SCHEDULE C LETTER has “gone to press”.

This issue contains the following –

• STARTING THE YEAR OFF RIGHT – year-beginning tax planning advice,

• THE 2010 TAX RELIEF ACT – a discussion of the provisions of the act that affect Schedule C filers,

• ONLINE RESOURCES – a regular column highlighting a unique website, page or other online resource that is helpful to Schedule C filers,

• PUTTING YOUR KIDS ON THE PAYROLL – explaining the tax benefits of employing your dependent children in your Schedule C business, and the right way to do it,

• USING YOUR CAR FOR BUSINESS – just about everything you need to know to deduct the business use of your car, and

• SOMETHING TO THINK ABOUT – what to do regarding the new requirement to issue a Form 1099 to every vender to whom you pay more than $600 for goods and services in 2011.

While THE SCHEDULE C LETTER is normally only available via subscription ($24.95 per year), I will send you a copy of the January 2011 issue (Volume 1 Number 1) for $6.00. If you decide to subscribe after reading this issue I will subtract the $6.00 from the $24.95 annual subscription price.

Click here for more information on THE SCHEDULE C LETTER.

If you would like to receive a copy of the first official issue of THE SCHEDULE C LETTER send a check or money order for $6.00, payable to TAXPRO SERVICES CORPORATION, and your name and postal mailing address to –

THE SCHEDULE C LETTER
TAXPRO SERVICES CORPORATION
SUITE 304
72 VAN REIPEN AVENUE
JERSEY CITY NJ 07306-2806

MERRY CHRISTMAS!

2010-12-25T05:00:00.000-05:00

MERRY CHRISTMAS!

HO! HO! HO!

2010 NJ-1040

2010-12-23T08:54:00.001-05:00

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Click here and here for information on the 2010 Form NJ-1040.

FYI – the 2010 NJ income tax forms are now available to view and download at the NJ Division of Taxation website. See above posts for links.

TAFN

NJ-NATP NEWSLETTER

2010-12-20T12:36:00.000-05:00

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The Winter 2010 issue of NJ TAXING TIMES, the newsletter of the NJ chapter of NATP, is now available to download.

The issue contains information and a registration form for the January 8, 2011 annual FAMOUS STATE TAX SEMINAR.

FYI, you can now advertise in NJ TAXING TIMES.

Click here to download a copy.

TAFN

2011 NJ DEPARTMENT OF LABOR EMPLOYEE CONTRIBUTIONS

2010-12-13T12:21:00.000-05:00

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The 2011 wage base for employee contributions for NJ state unemployment, disability and family leave is $29,600 - $100 less than 2010!

The withholding rates for unemployment and disability remain at .00425 and .005, but for the period January 1 – June 30, 2011 the family leave rate is cut in half – from .0012 to .0006.

Therefore, the 2011 maximum withholding will be –

Unemployment = $125.80

Disability = $148.00

Family Leave = $17.76

TAFN

CCH TAX BRIEFING ON BO/CONGRESS COMPROMISE

2010-12-08T12:30:00.001-05:00

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Hey, the fat lady has not sung yet. There is nothing for BO to sign, so I will not be wasting posts on what may be.

However, if you are interested CCH has published its Tax Briefing on the “Obama And GOP Compromise On Two-Year Extension Of Most Tax Cuts”.

Click here to download.

TAFN

2010 NJ-1040 DUE DATE EXTENDED TO APRIL 18, 2011

2010-12-03T13:35:00.001-05:00

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The New Jersey Division of Taxation has properly decided to tie in the 2011 initial due date for filing the 2010 NJ-1040, and paying any tax due, with the extended federal deadline.

According to the NJDOT website (highlight is mine) -

“In 2011, April 15 falls on a Friday, and Washington, D.C. will observe that day as a legal holiday, Emancipation Day. April 16 and 17, 2011, fall on a Saturday and Sunday respectively. Because of the Emancipation Day holiday and following weekend, it is anticipated that the Internal Revenue Service will extend the due date for Federal income tax returns from April 15, 2011, to April 18, 2011, and announce that 2010 Federal income tax returns are due on or before April 18, 2011.

The Division has determined that the due date for filing of all 2010 New Jersey tax returns and payments that are normally due on April 15, 2011, will correspond with the Federal income tax due date of April 18, 2011. Any New Jersey tax form, instruction or publication that currently shows an “April 15, 2011” due date should now be read as “April 18, 2011.” This extension applies to deadlines for filing a return, making a payment or deposit, requesting an extension or filing a refund claim.”

TAFN

THE SCHEDULE C LETTER

2010-11-09T07:39:00.000-05:00

I have decided to publish a new print newsletter titled THE SCHEDULE C LETTER.

THE SCHEDULE C LETTER is a bi-weekly newsletter that provides tax planning and preparation advice, information, and resources for sole proprietors and one-person LLCs who report their business activity on IRS Schedule C.

I have completed a sample issue – which I will send you free of charge as a pdf email attachment. I will also send a print copy of the issue for a Self-Addressed-Stamped- Envelope (SASE).

The sample issue discusses –

• THE ONE PERSON LLC

• THE EFFECTIVE COST OF THE SELF-EMPLOYMENT TAX

• SOME GREAT NEWS FOR THE SELF-EMPLOYED!

• LISTED PROPERTY

• HOME OFFICE DEDUCTION FOR A RENTER

It also introduces regular columns ONLINE RESOURCES and BIZ BUZZ.

A one-year subscription (6 issues) of THE SCHEDULE C LETTER, which will begin publication in January 2011, is only $24.95. The newsletter subscription will be sent via postal mail.

Subscribers will receive as a free gift my package of SCHEDULES, FORMS AND WORKSHEETS FOR SELF-EMPLOYED TAXPAYERS, a dozen unique forms, logs and worksheets that I have developed in my 1040 practice over the years to help document your Schedule C tax deductions and to help organize and gather the tax information needed to give to your tax professional. Please be aware that this is copyrighted material and for your internal use only.

And subscribers will also receive special email alerts on breaking news of relevance to Schedule C filers.

To request your free copy as a pdf attachment send an email to rdftaxpro@yahoo.com with THE SCHEDULE C LETTER in the subject line. To get a print copy send a SASE to

TAXPRO SERVICES CORPORATION

THE SCHEDULE C LETTER

SUITE 304

72 VAN REIPEN AVENUE

JERSEY CITY NJ 07306-2806.

TAFN

ALL ABOUT NATP

2010-11-05T12:16:00.002-04:00

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* Here is an email I just got from NATP – asking me to help spread the word about their $150.00 give-away. Check it out.

“The purpose of my e-mail today is to bring to your attention the giveaway that the National Association of Tax Professionals (NATP) is holding. I thought you and/or your readers would be interested in this. We would love if you posted this on your blog. We appreciate all you post about us on your blog!

Thank-you for your time and have a great weekend.

Connect & Win! The National Association of Tax Professionals (NATP) is giving away a $150 gift card! The drawing will be held now until November 15. If you’re the lucky winner, you can apply this prize to any of our products or services, including membership, live education, e-education, textbooks, client folders, client newsletters, reference books, and so much more.

Visit us on Facebook to win!”

I think you can also enter at the NATP page at Twitter. I entered a week or so ago.

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If you are not already a member of NATP you should be – especially now with the new testing and CPE requirements for preparers. Plus, as residents of NJ you automatically belong to our great local chapter.

If you would like information on becoming a member of NATP please email me at rdftaxpro@yahoo.com.

* And speaking of the great NJ chapter of NATP – it has announced the agenda for its “2011 Famous State Tax Seminar” to be held on Saturday, January 8th at, you guessed it, the Hilton Woodbridge in Iselin NJ.

The keynote speaker will be newly appointed Director of the NJ Division of Taxation Michael Bryan. The previous Acting Director refused to make an appearance – and the one before that might as well have, considering the value of her presentations. Hopefully Mr. Bryan will be as good, informative, and relevant a speaker as Robert Thompson had been (before he was fired to taking “gifts” from NJDOT vendors).

The seminar will also feature a panel of speakers on state issues from New York (former NATP Board member Kathryn Keane), Pennsylvania Amy Gambler and Kathryn Bowman, both EAs), and Delaware (James Stewart, Assistant Director of Delaware’s Office of Personal Taxes). I do not believe I have ever done a Delaware state tax return in my 39 tax seasons – but the addition this state for the first time at NJ-NATP is fortuitous for me, as I have two clients who have retired to Delaware in 2010.

And, thankfully, as usual the afternoon will be spent with the dynamic duo of NJDOT – Jim Gordon and Jacob Foy.

The cost is $200 for members, $250 for non-members, and $357 for new members (includes the first year’s dues) if your registration is postmarked before 12/31/2010 and $250 for both members and non-members ($367 for new members) if postmarked in 2011 and at the door.

Keep an eye-out at the “Upcoming Events” section of the chapter’s website for a “downloadable” registration form.

TAFN

I GOT IT!

2010-10-30T12:40:00.001-04:00

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I wanted to update the saga of my PTIN application.

I just received, via email attachment, a 2-page “Welcome Letter” from the IRS that stated –

“We’ve accepted your application for a Preparer Tax Identification Number (PTIN).”

The letter indicated that my “assigned PTIN” was the same as the one that I have been using for the past few years.

The letter also identifies the “Next Steps” -

“1) Pass a competency test

Many return preparers will need to take a competency test given by the IRS to retain their PTINs. This test will be available soon after June 1, 2011. We will provide you with more instructions at that time. (In certain limited situations, a tax return preparer may not be required to take a test. We will provide specific guidance before testing begins.)

You will have until December 31, 2013, to complete and pass the test. After you pass the test, you will be an IRS Registered Tax Return Preparer.

If you do not pass the test by December 31, 2013, your PTIN will no longer be valid. This will affect your status as a tax practitioner as well as your ability to prepare returns.

2) Complete annual continuing education

We will also be implementing a continuing education requirement. We will notify you when the requirement begins and to whom it will apply. At that time, we'll also provide additional guidance, including how to find approved education sponsors.

3) Keep your PTIN account current

You'll need to renew your PTIN within one year of the date of this letter. Please be sure to also update your account any time your information changes. You can make these updates online at www.IRS.gov/taxpros using your User ID and password. You can also visit your account online to check your PTIN renewal date, or find other relevant information.”

It also stated –

“You indicated on your application that you're currently in compliance with your federal tax obligations. To ensure that you maintain compliance in the future, the IRS will conduct periodic tax compliance checks.

The IRS may also conduct a background check, and you may need to provide fingerprints. Having a felony conviction on your record could affect your status as a tax practitioner as well as your ability to prepare tax returns. For more information, see Treasury Department Circular 230 § 10.51.”

I have some objections to providing my fingerprints (not that I am trying to hide any felony convictions) – and certainly hope it does not come to that.

I am pleased, and relieved, that my PTIN application process has been completed. I already take more than 15 hours of CPE per year, so there is nothing extra I have to do there. The next step is having to take a test to prove that I know what I have been doing successfully and without incident for 39 years – but I have three years to worry about that. Not that I will wait till the last minute to take the test – I will probably take it in the summer of 2012.

TAFN

HOMESTEAD "BENEFIT" FILING DEADLINE EXTENDED

2010-10-29T13:58:00.001-04:00

The deadline for filing the 2009 Homestead Benefit application has been extended from November 1, 2010, to January 3, 2011.

The application is filed with online or via telephone.

“New Jersey residents who owned a home that was their principal residence on Oct. 1, 2009, and paid property taxes on that home, will qualify for a Homestead Benefit, provided their 2009 New Jersey gross income was $75,000 or less, or if they are senior or disabled homeowners and their 2009 New Jersey gross income was $150,000 or less.”

There is no more Homestead “Rebate”. It is now a Homestead “Benefit”. Those who qualify will not receive checks from Trenton in 2010. Instead they will/should receive a direct credit against their 2011 actual real estate tax bill which will probably show up in the 2nd quarter. This is “more better” – and how it should be.

More information on the “benefit” is available on the NJ Division of Taxation website.

PTIN REGISTRATION UPDATE

2010-10-29T08:59:00.002-04:00

I had set out to “fabreze” my existing PTIN, as required under the new tax return preparer regulation regime, online at the IRS website once the process become available.

My initial attempts to submit my application online were unsuccessful. Apparently from what I have read in my online “wanderings” other tax pros also had problems with the online process. I discussed these attempts in the post “What a Mucking Fess” at TWTP.

As a result of my difficulties registering online I filed a paper application on Form W-12 on October 4th. I was concerned when I checked the other day to find that my check for payment of the $64.25 fee had not yet been cashed.

I have been told that while the IRS has resolved most of the initial issues it encountered at the start-up of the online process, there are still problems with “authentication”. This is because of slight differences between the way tax preparers have entered their addresses in the application and what appears on their last tax return, mostly in terms of punctuation and abbreviations.

I was not alone in abandoning the online registration and turning to a paper application. This has created a backlog in processing W-12s, with which the IRS is trying to figure out how to deal. I have been assured that the IRS is working through the issues – and I do believe the assurances.

So if you gave up on the online system and filed a W-12, and have not heard back from the IRS yet (or your check also remains uncashed) do not worry. Have patience.

TAFN

THE LATEST INCOME-RAISING ATTEMPT BY NJ DIVISION OF TAXATION

2010-10-28T10:33:00.000-04:00

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I have heard from several clients who received a letter from the New Jersey Division of Taxation dated October 1st stating –

“A review of your 2007 New Jersey Gross Income Tax Return together with information provided by the Internal Revenue Service has revealed a discrepancy in the Taxable Amount Received for Pensions and Annuities reported on Line 19 of the return.”

A “Deficiency Worksheet” is attached, showing the amounts reported on the original NJ-1040, the change, and the corrected amounts. The bottom line is additional tax, penalty and interest due.

In all of the cases that have come across my desk so far the amount of pension and annuity income was not reported on the NJ-1040 because it was exempt from NJ Gross Income Tax as a recovery of “after-tax” employee contributions..

Two cases involved distributions from the “Deferred Compensation” plan of Fire Fighters employed by the City of Newark. The third concerned a pension from a state employees’ retirement plan, and the distribution for the year in question was exempt under the “Three-Year Rule”.

In each case the pension distribution had been fully taxable on the federal return, because the employee contributions were “pre-tax” for federal income tax purposes when the contributions were made. However, as the contributions were not made to a 401(k) employer plan, they were “after tax” for purposes of the NJ-1040.

In all three cases I send a letter of explanation to the NJ Division of Taxation – but, as of this writing – have heard nothing back from Trenton.

TAFN

NO SURPRISE HERE

2010-10-27T06:46:00.001-04:00

The Tax Foundation’s TAX POLICY BLOG reports “New State Business Tax Climate Index Released Today” – today being October 26th.

“Today we released the 2011 State Business Tax Climate Index, which ranks from 1 (best) to 50 (worst) the tax systems of the 50 states. South Dakota's tax system is most welcoming to economic activity while New York's tax code ranks 50th as the least hospitable.”

The 10 state with the worst business tax climate on the first day of the 2011 fiscal yer (July 1, 2010) are –

50. New York
49. California
48. New Jersey
47. Connecticut
46. Ohio
45. Iowa
44. Maryland
43. Minnesota
42. Rhode Island
41. North Carolina

Residents of the Garden State are certainly not surprised to find New Jersey the third worst. It is actually better than most of us would have thought!

The ten states that had the best tax climates were South Dakota, Alaska, Wyoming, Nevada, Florida, Montana, New Hampshire, Delaware, Utah and Indiana.

According to the report -

“The worst state tax codes tend to have:

• complex, multi-rate corporate and individual income taxes with above-average tax rates;
• above-average sales tax rates that don't exempt business-to-business purchases;
• complex, high-rate unemployment tax systems; and
• high property tax collections as a percentage of personal income.”

TAFN

THE DFBs!

2010-10-22T15:36:00.003-04:00

And I definitely mean DFB in its intended “non-clean” version (i.e. I do not mean "damned fool bureaucrats").

I just got a notice from the New York State Department of Taxation and Finance telling me that they will no longer selling bulk copies of NYS income tax forms.

Originally NY, like NJ and once upon a time the IRS, would mail resident or non-resident tax booklets to individuals who filed a return for the prior year. The booklet would include full instructions, including tax tables and rate schedules, and 2 copies each of the appropriate forms. If a taxpayer filed a 2001 IT-203 he/she would get a 2002 IT-203 booklet in January of 2003. If the taxpayer were a client he/she would give me the booklet with the tax “stuff” so I would have the forms needed to prepare the NY state return.

The NYS Department of Taxation and Finance decided not to send out any state tax booklets to anyone for tax year 2009. In order to get the forms I would have to buy them from the DOTAF via a “bulk order” placed on Form TP 1.3. I actually had been using this order form for some time, as I needed to order a minimal supply of supplemental forms and schedules not included in the tax booklets and I wanted to have a small inventory of IT-201 and IT-203 and supplemental forms on hand. The Form TP 1.3 was mailed to me each year.

Today’s notice announces – “We’re no longer automatically mailing Form TP 1.3, Order Form for Bulk Quantities of New York State Income and Corporation Tax Returns. The easiest way to get tax forms is to download them from our Web site at www.nystax.gov. Income tax forms are also available on CD-ROM”. The notice included an order form for the CD-ROM.

I looked to see if I could find the Form TP 1.3 available for download at the NYS website – but I could not. So I guess this form has bit the dust, and NYS will not mail me tax forms even if I pay for them.

Another notice was included in the mailing that stated -

(1) "Opt-out has been eliminated - Clients can no longer opt out of e-filing their returns", and

(2) "No separate fee for e-file – You can’t charge clients a separate fee for e-filing their returns."

What balls!

(1) There are individual taxpayers who have legitimate concerns about the electronic filing or paying of anything, and seriously prefer to do things “the old fashioned way”. What right does the state have to ignore the honest concerns of these taxpayers?

(2) If it costs a tax professional more to e-file a return than to file a paper return, for example if he/she uses an e-file service, the tax pro should be permitted to pass the additional cost along to the client. The State of New York is not going to reimburse the tax pro for the additional costs. I suppose the tax pro can get around this by instead of charging an additional fee to e-file just increase his/her base fee for NYS returns.

Luckily it appears I am not subject to the e-file mandate for NYS returns. According to the web page that explains “Who the mandate applies to” –

“You must e-file all individual income tax, fiduciary and partnership returns . . . and individual and partnership extensions beginning January 1, 2011 if you’re a tax return preparer and:

• you were subject to the mandate in a prior year, or
• you meet both of the following conditions:

* you prepared more than 100 combined original individual, fiduciary and/or partnership returns for 2009 in calendar year 2010, and

* you use tax software to prepare one or more New York State individual, fiduciary and/or partnership returns for tax year 2010 in calendar year 2011."

As you may be aware, in 39 tax seasons I have never used flawed tax software to prepare income tax returns - either federal or state – so it looks like I am “off the hook”. At least NY has the sense not to force me to either waste thousands of dollars on software or give up preparing NYS returns.

I have been mad at the NYS Department of Taxation and Finance ever since they created the Form IT-2 – a W-2 “substitute” – and required me to hand write all the pertinent information from the W-2 on this form instead of simply including a copy of the W-2 with the return. A waste of valuable time when there is no time to waste!

The DFBs!

TAFN

LUNCH WITH THE DIRECTOR OF NJDOT

2010-10-12T05:52:00.002-04:00

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I just got an email from the New Jersey Chamber of Commerce inviting me to attend a luncheon with the new Director of the NJ Division of Taxation on Wednesday, October 20th in New York City.

Here is what the email said –

“Michael Bryan was appointed Director of New Jersey’s Division of Taxation in July. Director Bryan brings over 20 years of tax and accounting experience, both in the private and public sector, to the Division. You are invited to join Director Bryan over lunch at the New York City offices of Reed Smith LLP. Director Bryan will discuss upcoming initiatives and other New Jersey tax policy matters.

In addition, Mary Ellen Peppard, Manager of Government Relations for the New Jersey Chamber of Commerce, will provide an update on New Jersey legislative and administrative developments.

There is no cost to attend, but space is limited.”

And, the email also points out, membership in the NJ Chamber of Commerce is not required to attend.

Event Details:

Wednesday, October 20
Noon to 1:00 pm
Law Offices of Reed Smith LLP
599 Lexington Avenue
22nd Floor
New York, NY 10022

To register for the event click here.

TAFN

ANOTHER FYI

2010-10-05T12:01:00.001-04:00

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Here is some news about the IRS online PTIN application process – which, as reported by several tax bloggers (myself included), has been experiencing some problems -

**The IRS Online PTIN Sign-Up System will be unavailable beginning approximately 8:00 a.m. EDT Saturday, October 9, 2010 until approximately 8:00 a.m. EDT Monday, October 11, 2010 due to system maintenance. We apologize for any inconvenience.**

FYI

2010-10-05T05:00:00.001-04:00

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On August 17th I prepared an amended 2009 Form 1040 to claim the First Time Homebuyer Credit for a “long-time” homeowner who purchased a home in 2009 within the guidelines of the extended credit. I attached copies of all requested documentation with the filing.

I just got a note from the client dated September 30th to tell me that he received his check.

There had been some talk that these claims were being seriously delayed. However in this case the client received his refund check within 6 weeks.

Just thought you might be interested.

TAFN

NEW JERSEY IS EXPENSIVE!

2010-10-04T12:43:00.002-04:00

Duh! Constipation, Mr Holmes.

We residents of the “garden state” know full well that is costs way too much money to live here.

Some supportive documentation -

(1) No surprise here. In “Highest Property Taxes in the Country” CNN MONEY tells us -

“New Jersey residents pay the highest annual tax bill of any state - a median $6,579 per year, according to the Tax Foundation, which calculated the tally using data the U.S. Census Bureau released on Tuesday.”

(2) Today’s “Your Business” section of the STAR LEDGER tells us “Looking to Stare A New Business? Deep Pockets a Necessity in NJ”. (online title = "Jersey City and Newark Among Most Expensive Cities to Run a Business”).

“The pair {Jersey City, my hometown, and Newark – rdf} joins other such pricey towns as New York, Philadelphia, Chicago and San Francisco, according to the 16th annual Cost of Doing Business Survey by Claremont McKenna College in California.”

It appears that Jersey City (#5) beats out New York City (#6)!

This survey looked at 413 cities across the nation and examined their licensing fees and property, utilities and sales taxes.

Jersey City and Newark were the only NJ cities in the survey. Perhaps NJ could have claimed all 10 of the top 10 spots if the entire state had been reviewed.

“The study found Jersey City has the highest property tax rate of all cities, at 6 percent, and a retail licensing fee of $40,000. Newark has a property tax of just a little over 1 percent, and a licensing fee of $2,300 — but it also charges a 1 percent payroll tax.”

5 of the 10 least expensive cities in which to do business are in Texas, home state of my fellow tax-blogger Kay Bell of DON’T MESS WITH TAXES. Included is Kay’s hometown of Austin, “which boasts a low property tax rate and doesn’t levy any business taxes or fees”. I, however, would never move my business to Austin – too hot!

The article quotes Brad Jensen, a researcher at the Rose Institute, which conducted the study, as explaining –

“Texas is a state that gets it. They understand that if you want to provide government services, you have to balance how much you charge in fees and taxes, otherwise you’ll end up strangling the golden goose."

I seem to recall reading somewhere not too long ago that states with lower overall tax burdens are currently in much better financial shape than highly-taxed states like near-bankrupt New Jersey.

The bottom line – two more good reasons to embrace the philosophy of GRIP (Get Rid of Incumbent Politicians) and vote the bastards out at the next election.

TAFN

WHAT A MUCKING FESS!

2010-09-30T11:49:00.001-04:00

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On Tuesday (September 28th) I made my first attempt to “fabreze” my PTIN online as part of the new tax preparer regulation regime.

Before I could submit the PTIN application I first had to create an “account”. I completed this process and was “told” that I would receive an email from the IRS with a temporary password for my account.

It never came!

Two hours later I went online to try again, stating that I needed help with my password when “logging in”. After properly answering the security question I had established in my initial try I was again “told” that I would receive an email with a new password.

It never came!

I gave up for the day.

On Wednesday morning I repeated what I had tried on Tuesday – began the log-in process and indicated that I needed help with my password. I was again told that an email was forthcoming – and this time it promptly arrived in my in-box!

I could now successfully log-on to my account to begin the process of the PTIN application.

However this time, no matter how I configured my name and address, I was told the information did not match my 2009 income tax return. I finally came to the conclusion that this was because I had entered my full middle name – David – when creating my account, as I had been asked, but had used only the middle initial – D – on my 2009 tax return. I made the change to my account and tried again – but this time I was told that I had used up my allotted attempts to register and would have to try again in 24 hours.

It is now Thursday – the third day of my attempt to register online.

I logged in successfully and continued on with the previously failed application – but again, no matter how I configured my name and address I was told that what I had entered did not match. I double-checked, and my Social Security number and date of birth was entered correctly in the correct format.

One of the problems concerned how I was asked the address used on my 2009 tax return. The first question was “Street Name” – not “Street Address”. I entered the name of the street on which I live without any number. The next line asked for the 1st line of my street address – and I provided both the street number and the street name. I also tried this configuration by entering the full street number and name on the line that asked for only the “Street Name”.

After my third unsuccessful re-attempt to properly configure the address from my tax return I just gave up. I have decided to submit a written application via the new Form W-12.

I am not alone in my frustration. Russ Fox of TAXABLE TALK fame also did not get an email with his temporary password until the second day of trying – although he was finally able to submit the application. See his posts here and here. There are also several “Discussion Boards” at the National Association of Tax Professional’s “Member2Member” talking about application FUs.

Trying to register for a PTIN online has been a real PITA!

TAFN

PTIN REGISTRATION NOW UP AND RUNNING

2010-09-28T13:25:00.000-04:00

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You can now register to receive a new, or, as David Williams has put it, “fabreze” an existing PTIN at the IRS website.

Click here.

TAFN

SO WHAT DO YOU THINK?

2010-09-20T09:56:00.003-04:00

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When you get a chance please check out today's post at The Wandering Tax Pro on "The New E-File Mandate".

Your comments on this topic are welcome.

DISABLED TENANT RECEIVED NJ HOMESTEAD REBATE

2010-09-14T15:22:00.000-04:00

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The word I had gotten from the NJ Division of Taxation website, and elsewhere, was that there would be no rebate checks for tenants, despite the fact that the Form 1040-TR had still been page 4 of the 2009 NJ-1040 filing.

For most of us tenants that was nothing new. I haven’t received a NJ Homestead Rebate for at least the past two years now.

I just received an email telling me that a client, a tenant who is disabled under Social Security and files for the tenant rebate each year as “disabled”, just received a $50.00 rebate check from Trenton.

So, as I kind of expected, senior and disabled tenants will receive a rebate check this year.

$50.00 ain’t much. But, as my mentor James P Gill would say, “better in your pocket!” It is certainly better in the pocket of seniors and the disabled then the pockets of the crooks in Trenton!

TAFN

SPECIAL OFFER FOR TAX PRO FORMS COLLECTION

2010-08-31T11:35:00.000-04:00

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I have been preparing 1040s for individuals in all walks of life since February of 1972. Over the years I have developed a collection of forms, schedules and worksheets that have proven very helpful in my practice - and which you might find them helpful to your practice as well.

Some of my “homemade” forms are given to clients to help them provide me with the information I need to properly prepare their returns. Some are used as “memos” to the client’s copy and my office file copy to back-up items reported on the returns. Others are used as attachments to the returns.

The regular price for this collection is $6.00, but you can have this package of forms, schedules and worksheets for a limited time for half price – only $3.00! While this special offer was originally limited to members of NATP it is now expanded to include all readers of the NJ TAX PRACTICE BLOG.

The forms package will be sent as a “word document” email attachment, so you may edit and revise them as you see fit to personalize them to your firm, to customize them be more relevant to your particular practice or clients or specific professions, or to update information for annual COLAs or tax law changes.

Here is a listing of what is included in the package.

A. SCHEDULE A –

1. Supplement to Schedule A
2. Medical Expense Worksheet
3. Medical Expenses – Out of Pocket Analysis
4. Charitable Contribution Listing – for non-cash contributions
5. Charitable Contribution Record – for cash contributions (2 pages)
6. Charitable Mileage Record
7. Contribution Worksheet
8. Employee Business Expenses – generic format, can be customized
9. Employee Business Expenses – Police Officer – example of customized
10. Conventions, Conference and Education
11. Miscellaneous Expenses #1
12. Miscellaneous Expenses #2

B. SCHEDULE C – (some of these forms can also be used for employee expenses)

1. Allocation of Expenses
2. Automobile Expense Worksheet
3. Auto Mileage Log
4. Business Expenses of a Freelance Writer
5. Business Travel Record
6. Computer Use Log
7. Election to Deduct Organization Expenses
8. Employee Expense Report
9. Employee Time Card
10. Home Office Deduction Worksheet
11. Cell Phone Log

C. SCHEDULE D – 1. Cost Basis Worksheet

B. SCHEDULE E –

1. Owner-Occupied Multi-Unit Rental Property Expense
2. Statement of Rental Income and
3. Statement of Rental Income and Expenses – Vacation Property
4. Multi Family Building

D. GENERAL –

1. Alternative Minimum Tax Worksheet
2. Does Not Have To File
3. Statement of Dividend Income
4. Statement of Pension Income

Send your check or money order for $3.00 (payable to TAXPRO SERVICES CORPORATION) and your email address to –

TAXPRO FORMS SPECIAL OFFER
TAXPRO SERVICES CORPORATION
PMB 304
72 VAN REIPEN AVENUE
JERSEY CITY NJ 07306-2806

FYI – I do not accept Paypal.

TAFN

FOR YOUR INFORMATION

2010-08-30T07:41:00.002-04:00

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FYI – the link to look up the amount of your Homestead Rebate check (received in calendar year 2009 and earlier) is no longer available on the NJDOT home page, or on the “Homestead Benefit” program information page.

It is available through the “Electronic Services” menu under the “Individuals” category. Click on “Property Tax Relief” and then “Check the Status (Amount) of your Homestead Rebate”.

Or click here.

TAFN

HOMESTEAD “BENEFIT” APPLICATIONS TO BE MAILED IN SEPTEMBER

2010-08-27T09:34:00.001-04:00

The NJ Division of Taxation has announced the mailing schedule for the application for the 2009 Homestead Benefit (the benefit formerly known as the NJ Homestead Rebate) -

Atlantic, Essex, Monmouth, Sussex = Wednesday, September 8
Morris, Ocean = Saturday, September 11
Camden, Hudson, Hunterdon, Salem, Somerset = Wednesday, September 15
Bergen, Burlington, Cumberland, Warren = Saturday, September 18
Gloucester, Mercer, Middlesex, Passaic = Wednesday, September 22
Cape May, Union = Saturday, September 25

Not everyone will receive their application the day delivery is expected to begin. It may take the Postal Service a few days to deliver all the applications in your county.

Applications will not be sent to homeowners who were identified by the Division of Taxation as having New Jersey Gross Income (Line 28 on the NJ-1040) for 2009 that exceeded the income limit of either $75,000 (for non-senior, non-disabled homeowners) or $150,000 (for homeowners age 65 or older or disabled), as they are not eligible for a 2009 Homestead Benefit.

There will be no rebate checks issued in 2010. Instead eligible homeowners will receive their homestead benefit for 2009 as a credit on the property tax bill for the second quarter of 2011. However the filing process remains the same.

If the “benefit” is really distributed as a reduction of one’s actual tax payment to the municipality I will be very pleased. This is the way it should be done. By doing it this way there are no potential adverse federal income tax consequences. And it will be one less piece of information I will need to pry from my clients!

The NJDOT website says that “Tenants will not receive a 2009 rebate”. Since no distinction has been made I assume this means senior and disabled tenants as well us “regular” folks.

Click here for more info on the progam.

TAFN

NJ-NATP FALL NEWSLETTER

2010-08-25T18:21:00.001-04:00

The Fall 2010 issue of NJ TAXING TIMES, the newsletter of the NJ chapter of the National Association of Tax Professionals, is now available. Click here to download.

This issue features two (2) articles on NJ taxation by me –

CAPITAL GAINS AND NJ STATE INCOME TAX and

ALLOCATING NEW YORK STATE WAGES FOR A NEW JERSEY RESIDENT

It has other good “stuff” too!

TAFN

HE TOOK THE WORDS OUT OF MY MOUTH

2010-08-20T05:00:00.002-04:00

I realize that this post may not be strictly tax-related – but I could not help but pass along the great insights of Bob Ingle’s POLITICS PATROL column from Wednesday’s ASBURY PARK PRESS.

Titled “Teachers Unions Ignore Lessons of L.A. Study” the column discusses the findings of a report that appeared in the LA Times.

According to Bob – “The newspaper obtained seven years if math and English test scores from the school district and rated teachers on their students’ progress on standardized tests from year to year, then compared each student’s performance with his or her past years.”

The report concluded –

“Most districts act as though one teacher is about as good as another. As a result, the most effective teachers often go unrecognized, the keys to their success rarely studied. Ineffective teachers often face no consequence and get no extra help.”

It went on to say –

“In Los Angeles, and across the country, education officials have long know of the often huge disparities among teachers. They’ve seen the indelible effects, for good and ill, on children. But rather than analyze and address these disparities, they have opted mostly to ignore them.”

Bob also quotes Jeanne Allen, president of the Washington-based Center for Education Reform, who responded to the report by saying –

"Path-breaking analysis ... confirms without a doubt that teacher effectiveness is not related to their tenure, seniority or pay grade. Great teachers help their students achieve at significantly high rates as a result of knowing the subjects they teach.”

And –

"The new data underscores why policymakers must implement reforms that make teacher quality the single factor that drives pay and contracts. The union rejects the conclusions ... saying that the data ignores the ‘complicated and creative process of teaching’. Fortunately, the public now understands that teaching isn't about process at all, but about producing real education value in our schools."

Bob takes the words out of my mouth when he sums up the problem here in New Jersey (the highlight is definitely mine) –

“When you have a school system dominated by teachers' unions, like the New Jersey Education Association, the NJEA, you have misplaced emphasis. The NJEA is like any other industrial union. It is not about educating kids, it's about perpetuating itself and collecting dues to buy off lily-livered politicians more interested in getting re-elected than education.

The union doesn't like merit pay based on performance because it maintains all teachers are equal at the same experience and education level. That's absurd on its face. Tenure also is a problem. Guaranteed job protection after three years practically assures a job for life. Job security and pay then are based on seniority, not performance.”

The NJEA’s domination of NJ’s school systems is one reason why we have the highest property taxes in the country. Thank God Gov Christie is not afraid of the NJEA and is apparently willing to take it on.

It is not just the NJEA. The primary goal and underlying motivation of any organism is to survive – to continue to exist. This is true for an organizational entity as much as it is for a biological entity.

There was a time in our history when unions were necessary and important. But with all the local and federal labor laws and protections on the books today the continued need for unions is in question, and they can often do more harm than good to the economy. However, a union is an organizational entity and will never say, “We have accomplished our purpose of protecting the American worker and can now dissolve.” The number 1 goal and motivation of a union is not to protect and serve its membership, or to benefit society, but to continue to exist.

Similarly, the main goal and motivation of any politician at any level is not to protect and serve its constituents, but to get re-elected.

In defense of unions my labor lawyer friend pointed out, and rightfully so, that there is nothing wrong with a union asking for the moon for its members, whether or not it is deserved, feasible, practical, or appropriate. In theory the purpose of the union, second to continuing to exist, is to get as much as it can for the worker, without regard to the consequences to “management” or shareholders or, in the case of a municipal, state or federal employee union, the general taxpaying public.

Frankly nothing can be said in defense of politicians.

TAFN

THE NJ DIVISION OF TAXATION IS LOOKING FOR A FEW GOOD MEN (AND WOMEN)

2010-08-19T05:00:00.002-04:00

Fifteen (15) to be exact.

Here is the story – “The Division of Taxation is proud to announce the formation of the Tax Director’s Advisory Council”.

The purpose of “TDAC” will be –

“1. To provide a public forum for communication between New Jersey’s Tax Director and representatives of the public interested in New Jersey tax policy, and

2. To provide ideas, input and perspective to the New Jersey Tax Director, assisting him in developing tax policy and identifying improvements in the administration of New Jersey’s taxes and to offer constructive observations regarding current or proposed New Jersey Tax policies.”

If you are interested in becoming a member of the “TDCA” click here to download the application form. Applications must be “postmarked, faxed, or emailed on or before September 15, 2010.”

According to the release – “Applicants must have a strong tax or business background, excellent communication skills, practical tax administration experience and knowledge, and the ability to interact in a diversified environment.” You must submit a detailed statement of your experience and qualifications and a resume with the application.

TAFN

UPDATE ON NYS TAX PREPARER REGISTRATION

2010-08-18T16:26:00.002-04:00

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It looks like the New York Society of Enrolled Agents has won a victory in getting EAs, wherever they are located in the world, excluded from the need to pay the $100.00 extortion fee to New York State in order to be able to prepare NYS income tax returns.

Here is the word from a recent “NAEA E@lert” (the highlight is mine) -

“New York Enrolled Agents Gain Registration Exempt Status

The New York State Society of Enrolled Agents celebrated a legislative victory this week as Governor David Paterson (D) signed A8556A, which included the state registration exemption for enrolled agents. As previously reported in E@lert on July 16, 2010 a New York court ruled against NYSSEA's claim that enrolled agents should be included in the same exemption from state registration that attorneys and certified public accountants enjoyed. Governor Paterson signed the legislation into law on July 30, 2010. Without the current exemption enrolled agents would have been required to register and pay an annual fee to the New York Department of Taxation and Finance. With the new exemption, enrolled agents throughout the country are treated on par with certified public accountants and attorneys nationwide. Further, the law excludes anyone working for an EA, which will provide significant value over the years to EAs owning an office with multiple staff members.”

What remains uncontested, apparently because it is not worth the expense for any tax preparer organization to take up the fight, is New York’s right to charge non-resident preparers the fee.

So a tax preparer (who is not a CPA, Attorney or EA) in Alaska who wants to prepare NYS returns for a client has to pay New York $100.00 for the privilege.

As I have said before – NY cannot force a barber located in New Jersey to pay a regisration fee to NYS in order to be able to cut the hair of a NY resident, so what gives it the right to charge a tax preparer located in New Jersey for preparing a tax return, in an office located in New Jersey and without stepping one foot in New York, for a NY resident?

I wonder how many other cash-strapped states (is there one that is not cash-strapped) will join the bandwagon and begin to extort non-resident tax preparers?

TAFN

FYI

2010-08-12T05:00:00.000-04:00

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For those of you who are interested I just received the following email -

“Dear Colleagues:

We at the National Tax Institute are looking forward to our fall programs, and we would like to notify you that space is currently available at all of our locations.

Visit with NTI in Sonoma (wine country); relax in beautiful Sicily, Italy or at the newly renovated Greenbrier with its new casino; view fall foliage in Stowe, Vermont or Asheville, North Carolina; enjoy the sunshine and beaches in Boca Raton, Florida; or take in Palm Springs with the featured topic “Health Care Reform and Taxation.”

In November, enjoy the beaches of Grand Cayman, or Maui at the fabulous Kapalua resort; or enjoy the excitement of Las Vegas at the incomparable Wynn Hotel. And if you can’t get away until the holidays, don’t pass up NTI’s Christmas in New York program in mid-December or Walt Disney World over New Year’s Eve!

Please visit NTI’s web site at www.nti-inc.com or call CPE Meetings at 800-588-8491 for further information on locations and topics. We look forward to seeing you in 2010!”

TAFN

IRS ANNOUNCES 2011 NATIONWIDE TAX FORUMS

2010-08-11T10:58:00.002-04:00

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The IRS has announced the dates and locations of the 2011 Nationwide Tax Forums –

6/28-30/11 – Atlanta, GA – Marriott Atlanta
7/12-14/11 – Orlando, FL – Hilton Orlando
7/26-28/11 – Dallas, TX – Hilton Anatole
8/9-11/11 – Anaheim, CA – Hilton Anaheim
8-16-18/11 – Las Vegas, NV – Caesar’s Palace
8/30-9/1/11 – National Harbor, MD – Gaylord National

I attended the Forum in NYC yesterday. Check out my review at TWTP.

TAFN

SOME NEWS FROM THE NATIONAL ASSOCIATION OF TAX PROFESSIONALS

2010-08-02T05:00:00.000-04:00

Here is some news from the National Association of Tax Professionals, which I received in an email early Friday evening -

“The NATP exclusive social networking community -- Member to Member -- is ready for all NATP members to ask questions, find answers, read and write blogs, comment on discussion boards, listen to podcasts, talk tax, create common interest groups, and so much more!

On Tuesday, August 3rd, the Member to Member Grand Opening is happening with great incentives to get involved, for example:

• If you logon to Member to Member on August 3rd and simply update your status and add one colleague by the end of the day, you will automatically be entered in a drawing to win one of two $200 cash prizes.

• Enjoy a lively discussion on the timely topic of Return Preparer Registration with three NATP staff members from 10 a.m. - 12 p.m. CDT. There will be a discussion and then the board will be opened up to questions.

• NATP staff members will be out on Member to Member all day -- watch the active discussion boards, add to the conversation, and have fun!

To enter the Member to Member community you must be logged into the NATP website as a member of NATP. Check the upper right-hand box of the homepage to verify this. Click the Member to Member image on the homepage and enter the community! Once at the Community, read and agree to the user agreement, then click the Member to Member logo to join the community.

NATP is the ONLY tax association to offer a social network EXCLUSIVELY for its members. Now, no matter how small your business might be, you have a community of thousands here to help you with any question you might have -- from where to find a tax answer to where to find great seafood in Philadelphia. The community has endless possibilities for you.

If you have any questions or need help getting signed on, please contact Member Services at 800.558.3402, ext. 3. or visit www.natptax.com.”

So if you are a member of NATP and have not already joined the M2M community do so today – and return tomorrow to participate in the Grand Opening and enter the drawing.

If you are not a member of NATP – join today! And please give my name – Robert D Flach – as a referral so I can get some goodies. If you like you can email me at rdftaxpro@yahoo.com and I will have NATP contact you directly about membership.

TAFN

OOPS - THEY DID IT AGAIN!

2010-08-01T08:12:00.001-04:00

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The NJ Division of Taxation announced that the deadline for filing the application for the Property Tax Reimbursement has been extended again, from August 2nd to November 1st. Click here to read the press release.

This happens every year. The initial deadline is June 1st, which is extended to August, and again extended to October 31st. While the first extension was expected, I was not sure if the second extension would take place this year.

As reported earlier – only qualified taxpayers who received a PTR check in 2009 will receive one in 2010. If you did not get a check last year you will not get one this year. However, those who did not qualify last year should still file an application this year, if they now qualify, to establish a “base year” for future reimbursements.

Applications for the NJ Homestead Rebate will be sent out in the fall.

TAFN

NJ-NATP EDUCATION

2010-07-26T07:00:00.002-04:00

I am back from the National Association of Tax Professionals annual conference in Austin, Texas. Click here to read my trip narrative, and click here to read my discussion of the conference (contiued on Tuesday).

Speaking of NATP – at the luncheon for NJ-NATP members held on the first day the information for the Thursday, September 30th “2010 ANNUAL MEETING AND CONFERENCE” were announced.

Held, as usual, at the Hilton Woodbridge in Iselin NJ from 8:00 AM to 5:00 PM (registration begins at 7:30 AM), the conference will feature IRS speakers discussing (among other topics) -

• Preparer Registration
• Health Insurance Credits
• The HIRE Act
• Criminal Investigation

And lawyer Jay Soled will discuss “Mitigating Professional Liability for Tax Return Preparation Mistakes”.

The cost, which includes continental breakfast, lunch and afternoon dessert, is $200.00 for members, $250.00 for non-members, and $357.00 for new members for registrations postmarked before September 15th, and $260.00 for both members and non-members and $367.00 for new members for registrations postmarked on or after the 15th or at the door.

Click here to download the registration form.

Breakfast workshops (9:00 to 11:40 AM) will be held at the Holiday Inn of Tinton Falls on Thursday, October 28 (Estate and Inheritance Taxes discussed by attorney Michael K Feinberg – click here for the registration form) and at the Marriott Newark Liberty Airport on Thursday, December 9 (New Federal and State Tax Preparer Requirements discussed by Kathryn Keane – click here for the registration form).

NJ-NATP will be collecting for TOYS FOR TOTS at all three events – so bring an unwrapped toy.

And don’t forget the annual “NJ STATE TAX SEMINAR”, again at the Woodbridge Hilton, on Saturday, January 8, 2011.

OOPS! I almost forgot to report - the NJ chapter of NATP won the CHAPTER OF THE YEAR award at conference! Congratulations to Marilyn et al.

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TAFN

YE-HA - OFF TO TEXAS!

2010-07-18T05:00:00.000-04:00

I leave the heat of New Jersey for the heat (but apparently less humidity) of Austin, Texas this afternoon (Sunday) – to attend the annual conference of the National Association of Tax Professionals. This will be my first conference, and my first flight, in a couple of years. I return Friday (July 23rd) late afternoon.

When I return I will post about the trip itself (this will be my first visit to Austin, though I have previously been to San Antonio, Corpus Christi, and Houston in Texas) and let you know what I learned at the conference over at THE WANDERING TAX PRO.

I will not have, as hoped, finished all of the GD extensions in the “to be done” box (as usual my “eyes were bigger than my stomach” so to speak) before boarding the plane – and I expect those remaining will still be in the box when I return.

TAFAW

THE CHECK IS IN THE MAIL!

2010-07-15T11:50:00.000-04:00

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The NJ Division of Taxation began to mail out Property Tax Reimbursement (aka Senior Freeze) checks to qualified NJ senior and disabled homeowners yesterday (July 14th) – or so they have said.

About 109,000 checks were mailed out to qualified homeowners who submitted their application by the original June 1st deadline. Those who submitted applications after the deadline was extended to August 2nd will get their check as their form is processed.

Only those who received a reimbursement check last year will get one in 2010.

However, qualified seniors and disabled homeowners who did not get a check last year, either because they did not file an application or because their application was not accepted, should still submit a current application by the August 2nd deadline - even though they will not receive a check. The reason to do so is to establish 2008 as the “base year” for real estate taxes.

For more information on the program click here.

TAFN

NEW DIRECTOR FOR NJ DIVISION OF TAXATION

2010-07-14T11:42:00.004-04:00

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Michael Bryan (no, not Marie Osmond's son) has been sworn in as the new Director of the NJ Division of Taxation.

The new Director is described in the official press release as a “tax and accounting professional with more than 20 years of public and private sector experience”.

According to a news item, "Bryan began his tax career in 1987 as a revenue agent conducting field examinations for the Internal Revenue Service in Philadelphia. He then joined Coopers & Lybrand as an associate and assisted clients with tax and audit matters. He joined Comcast {where he served as senior director for tax audits and international tax -rdf} in 1994."

A resident of Haddonfield NJ, Bryan is a CPA with a BS in Accounting from Drexel University and a Masters in Taxation from Temple University.

Bryan replaces Acting Director Cheryl Fulmer.

On the plus side - Fulmer did actually promptly and personally respond to an email I sent her a while back concerning a systemic problem with NJWebFile. But on the minus side – she refused to attend and address the NJ chapter of NATP’s annual State Tax Seminar. Both of her predecessors had addressed the annual NJ-NATP seminar.

I look forward to possibly seeing and hearing from new Director Michael Bryan next January.

TAFN

STILL SKEPTICAL

2010-07-05T13:31:00.001-04:00

I just came across the following – which sheds some light on my previous post on claiming a refund for excess FLI contributions:

“On January 11, 2010, Senate bill number 3065 passed both houses of the legislature and was signed into law on January 14, 2010. This bill provides for annual adjustments in family temporary disability contribution rates commencing in calendar year 2011 and provides the worker, who was employed by two or more employers subject to the New Jersey Unemployment Compensation and Temporary Disability laws, the right to claim a credit for excess Family Leave Insurance (FLI) worker contributions. Unfortunately, the passage of this bill was beyond the deadline to include worker contributions for Family Leave Insurance (FLI) on form NJ-2450, ‘Employee s Claim for Credit’, for 2009.”

It still sounds a bit “fishy”. The law creating the Family Leave Insurance program, and authorizing employee contributions, was passed more than a year earlier. Why were provisions for annual adjustments and the right to claim a refund for excess contributions included in the original legislation?

I still think screwing NJ workers out of refunds for excess contributions was on the minds of the crooks in Trenton all along.

It will be interesting to see if a refund of excess FLI contributions is included on the 2010 Form 2450.

NJ SCREWS TAXPAYERS AGAIN! (SO WHAT ELSE IS NEW?)

2010-07-05T05:00:00.003-04:00

For 2009 the State of New Jersey added a new employee benefit for which required employee contributions were withheld. In addition to making required contributions via payroll deduction for Unemployment Insurance and Disability Insurance employees now must also make contributions for Family Leave Insurance. This mandatory withholding began in January of 2009.

Just like SUI and SDI contributions, there is a per employee maximum contribution for FLI. For 2009 the maximum was .09% of the first $28,900 of wages – or $26.01. And, as with SUI and SDI, if an employee had more than the maximum $26.01 withheld from multiple employers in 2009 he/she is entitled to a refund of the excess withholding.

For many years now taxpayers could request a refund of excess SUI and SDI contribution withholding from multiple employers as part of the Form NJ-1040 filing. A Form NJ-2450 would be included in the filing of the NJ-1040, and the excess withholding would be added NJGIT withholding and estimated tax payments – and would increase one’s refund or reduce one’s balance due. For 2009 employees can still claim a refund of excess SUI and SDI withholding on form NJ-2450.

However, employees could not request a refund of excess FLI contributions on the 2009 Form NJ-2450! Taxpayers who paid too much FLI had to file a separate request to get their money back.

As per the NJDOT notice which I quoted back in February of 2010 –

“Excess family leave insurance (FLI) contributions cannot be claimed as a credit on the 2009 New Jersey income tax return. A worker who received wages from two or more employers subject to the New Jersey Unemployment Compensation and Temporary Disability laws, and contributed more than the maximum of $26.01 for FLI during the calendar year 2009, must file a UC-9A to receive a refund of the excess FLI contributions. If form 2450 has been filed for excess UI, DI and WF contributions for 2009, then do not include the contributions for UI, DI and WF on form UC-9A.

1. Download and complete form UC-9A (2009)

2. Make copies of W-2 wage statements. In the absence of W-2 wage statements, form UC-52 (2009), Employer Certification of Wages and Deductions must be submitted

3. Mail completed UC-9A and supporting documentation to:

Division of Employer Accounts
Worker Refund Unit 2009
PO Box 910
Trenton NJ 08625-0910”

You can click here to download the UC-9A and UC-52.

While in certain circumstances one could be entitled to a refund of more than $26.01, I expect that in more than half, if not more than two-thirds, of the cases the FLI refund would be less than $25.00 – and in many less than $10.00. It would cost more to pay a tax professional to prepare the additional paperwork than the actual refund itself. And many employees will consider the potential refund too small to waste their time on the application.

Since the FLI law was in effect for all of 2009 the State of NJ had plenty of time to revise the NJ-2450 and NJ-1040 to allow for the processing of the additional refund. So how come the DFBs (in this case I do not mean Damned Food Bureaucrats) in Trenton did not permit the refund to be requested on the NJ-2450?

Why else but the fact that, as I stated above, they knew damned well that the refund would be too small by itself for employees to either pay a professional to prepare the paperwork or spend the time to file the refund request themselves – and the State of NJ would keep the money, money which rightfully and legally belongs to the contributing employees, to further fatten its corrupt elected officials and their cronies and supporters.

I do not expect the 2010 NJ-2450 or NJ-1040 to reflect the 2010 FLI overpayments. The bastards in Trenton who run the legislature are not going to give up a source of easy money.

Don't just bend over every time an elected official asks you to. If you were screwed out of a legitimate refund of excess FLI contributions please write or call your “representatives” at the State House and tell them what dirty f---ing bastards they are!

TAFN

NEW MEMBER BENEFIT AT NATP

2010-07-02T11:19:00.001-04:00

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Here is another reason why membership in the National Association of Tax Professionals is a must for all serious tax preparers – a new “social networking community” called “Member to Member” which is set to begin later this summer.

Member to Member will allow NATP members to network with other members more effectively. With this new member benefit you can -

• Ask colleagues to be your friend,
• Join groups with topics that interest you,
• Network with other Chapter members,
• Get a sneak peek of the “You Make the Call” for the Week, and
• Download audio recordings or podcasts on different tax topics.

As I have posted at TWTP –

“I have absolutely no use for FACEBOOK or MY SPACE, and cannot understand why anyone who is not a high school or college student would have any. I certainly have no intention of making personal information available to the great unwashed masses. If I want to share information or pictures with family and friends I can always send them an email.”

So I am not looking to use this new feature as a “social” network to find new friends. I have plenty of friends as it is, thank you. But I do see its value as a way of connecting with other tax professionals on federal and state tax issues – looking for answers and/or guidance on tax issues that are new or confusing to me, verifying that my thinking or tax law interpretation is valid, and both discovering and spreading the word on new tax-related resources.

NATP has asked me to be a “leader” of this new service and to preview the new site before it is open to the general membership. I will be previewing M2M next week – and will let you know what I think.

BTW – if you are interested in becoming a member of NATP, or in receiving info on NATP membership, email me at rdftaxpro@yahoo.com with “NATP Membership” in the “subject line”.

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TAFN

NO NJ HOMESTEAD REBATE CHECKS FOR 2010

2010-07-01T12:27:00.002-04:00

According to “N.J. Budget 2011: Property Tax Rebates for Summer 2010 Cut $848.2M” at NJ.COM, the recently passed NJ State budget “eliminated rebates for nearly 103,700 renters and cut rebates for everybody else by 75 percent”.

The article explains that -

“The rebates will no longer be sent in the summer as checks, but rather deducted from local property tax bills, starting in May 2011. The state has had to figure out technical details to make it work — including how to protect residents' private IRS information.”

This new procedure, which, to be fair, was also initially proposed by Corzine at the beginning of his career (before he decided to spend his tenure sitting on his arse and doing nothing but support the selfish actions of the State’s corrupt Democratic Party), is much “more better” than the current one of sending out checks. And I expect that the new procedure will provide a substantial savings to the budget via reduced administration costs.

I have always said that a rebate check, whether issued by the State of NJ or the federal government, is nothing but a political gimmick. A taxpayer receives a check in the mail and it is expected that he/she will feel obligated to the party that provided the check and run out and vote for the candidates of that party. I do seem to recall that in the early years of the NJ Homestead Rebate program the checks would arrive on November 1st - just in time for the election.

Receiving a rebate check “after the fact” – a refund of the previous year’s property tax payments – can also FU one’s 1040 filing by artificially and incorrectly increasing one’s AGI - and therefore reducing many tax benefits and possibly increasing taxable Social Security and Railroad Retirement benefits. Reducing one’s actual current real estate tax payment via a direct credit would have no affect on AGI - it would simply provide a smaller deduction on Schedule A.

If this change in procedure does go through properly I, as a tax preparer, will no longer need to waste valuable time during the season contacting the taxpayer, or doing an online inquiry, when he/she forgets to tell me the amount of the rebate check received. I will not need to know the amount of the rebate anymore – just the amount of net real estate tax paid.

TAFN

OOPS - THEY DID IT AGAIN!

2010-05-28T09:52:00.001-04:00

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As happens every year, the June 1st deadline for submitting the 2009 PTR-1 and PTR-2 Property Tax Reimbursement (“Senior Freeze”) applications has been extended – this time to August 2, 2010.

In the past teach year he deadline has been extended eventually to October, and each year we expected that this would happen. This year I was a bit concerned because of the new governor and the fiscal mucking fess.

I worked away to get all my GD PTRs in the mail to clients by May 24th – and was successful – and hope not to see another PTR form this year. However I am pleased at the extension – as giving my clients only one week to get the application completed (which often required going to City Hall and getting a certification from the Tax Department) and in the mail was cutting it a bit close.

According to the press release - checks for senior and disabled homeowners who did submit applications by June 1st are “scheduled to be mailed on or about July 15, 2010”.

NJ Treasurer Andrew Sidamon-Eristoff states that (highlight is mine) - “While new applicants will not receive benefits this year, they should apply to establish their eligibility for benefits in future years”.

The press release also says (again highlight mine) –

“Homestead rebate applications are not being distributed this summer and fall because of the shift to a payment via credits on property tax bills. Taxpayers will not begin receiving those credits until May 2011. Applications will be distributed nearer to the May 2011 deadline.”

These statements assume that Governor Christie’s proposed budget will be passed by the end of June - and do not reflect current law.

I will be pleased as punch if the rebate check is replaced by a credit against the actual property tax payment. Instead of paying $10,000 in property tax and getting a check for $600 after the fact a homeowner would actually pay to his township or municipality $9,400 in property taxes for the year. This is much “more better” – and will avoid possible federal income tax problems resulting from a refund received in one year for a payment deducted in full on Schedule A in the previous year.

The rebate check is a political trick. When a taxpayer gets a check in his/her hands he thinks he is getting something – and is expected to feel obligated to the political party that provided the check. This was the thinking behind Dubya’s two disastrous sets of rebate checks (which were often preceded by a letter from one’s Congressperson saying that a check was on its way). I seem to recall that initially the homestead rebate checks were mailed out on November 1st, so voters would received them just before election day and in gratitude run out and vote Democrat.

I certainly hope that the rebate check will be replaced with a direct credit. I liked the idea when Corzine first proposed it. However upon taking office Corzine discovered that he was not running the State of NJ – the Democratic Party machine was – and all he was expected to do (and actually did) was to bow to their wishes.

TAFN

STUFF AND SUCH - RECENT EMAILS

2010-05-25T07:56:00.003-04:00

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+ Here is an email I received this morning about the current Philadelphia Tax Amnesty Program -

“I work with the marketing agency that is helping promote Philadelphia Tax Amnesty, which started on May 3 and runs until June 25. I stumbled across your blog the other day and noticed that you’ve written on regional tax amnesty programs in the past. Since New Jersey residents and businesses owe more than $8 million to the City of Philadelphia, I wanted to check if you’d be interested sharing some information about the City’s Tax Amnesty program with your readers.

More information is available at www.phillytaxamnesty.com, but the following are some important fast facts about the program.

Philadelphia Tax Amnesty Quick Facts -

* This is the City’s first amnesty program in over two decades.

* This is an opportunity to “make good” on back taxes. It is open to Philadelphia residents, workers, property owners and business owners.

* This is not a free pass, but rather a demonstration that the City realizes some people have faced challenges that have prevented them from keeping up on their city taxes.

* Eligible individuals and businesses have this one-time only opportunity to settle with the City with no penalties and only half the interest.

We’re trying to get the word out to as many people as possible before the program ends on June 25th.”

+ Wonder of wonders, miracle of miracles!

Over the week-end, as I was working on the damned PTR forms, I submitted a question to the NJ Division of Taxation online about pension and annuity income. I expected that I would not get an answer for at least two weeks, so I also emailed the question to a fellow NJ tax professional.

Imagine my surprise when on Monday my email inbox included an answer from NJDOT. Will wonders never cease?

A retired client received a distribution from the PSE+G Savings Plan. The gross dividend was $29,000+. This distribution included a $20,000+ return of employee contributions. I asked whether I had to include the “gross” distribution (Box 1 of the Form 1099-R) in the calculation of income for PTR purposes or if I could report only the net amount after deducting the return of employee contributions. The $20,000+ was really not “income” to the taxpayer – but just like selling a stock for $29,000 that had cost $20,000, which would result in capital gain income of only $9,000.

Here is the answer that came from the NJ Division of Taxation –

“To: Robert D Flach

All income that you received during the year, including income, which you are not required to report on your New Jersey income tax return, is taken into account to determine whether you are eligible for the Property Tax Reimbursement.

The gross distribution reported on form 1099-R must be reported as income for Property Tax Reimbursement purposes.

Additional information on New Jersey's Property Tax Reimbursement Income Standards is available on the Division's website at -

http://www.state.nj.us/treasury/taxation/income.shtml

and further PTR information at -

http://www.state.nj.us/treasury/taxation/propfrez.shtml“

While not the answer I wanted, it was what I had expected. As a result the client’s income for the year was in excess of the PTR maximum.

Because of the example I used with capital gain income I believe this is grossly unfair.

TAFN

NEWS ON THE PROPERTY TAX REIMBURSEMENT PROGRAM

2010-05-24T05:00:00.002-04:00

I hate doing PTR-1s and PTR-2s.

FYI, these are the application forms for New Jersey’s “Property Tax Reimbursement Program”, aka the “Senior Freeze”.

While I am pleased that such a program exists and that it provides property tax relief to my senior and disabled clients – just as I am pleased that similar relief exists via the NJ Homestead Rebate program – and I want to be sure my clients take full advantage of all the federal and state benefit programs to which they are entitled, to be totally honest I do not want to be bothered with having to keep up with another form.

It is not that I do not want to help my clients if I can. It is just that I am not an expert, nor do I have any interest in becoming one, in the PTR, or Homestead Rebate, or Senior Gold, or PAAD, or applying for student financial aid, or any of the other programs whose forms I am often asked to fill out. Just because I can fill out one set of government forms (the federal and state 1040 series) does not mean that I can fill out all government forms. In most cases I do not know any more about the programs, and sometimes less, than the client.

I am a tax expert and want to limit my services to preparing tax returns only. I spend lots of time keeping up-to-date on federal and state income tax. I do not want to also have to keep up-to-date with non-income tax benefit programs.

However, as I commented to a colleague recently, I guess it “comes with the territory”. And I have reluctantly agreed to help some clients with these application forms (just as I will also file NJ Homestead Rebate applications online for those who ask). I set aside this past Saturday to get these damned things out of the way.

I had a question about what income needed to be included in the calculation and emailed a fellow NJ tax preparer, who led me to the NJ Division of Taxation website and some interesting news on the PTR program.

Here is the word from NJDOT from its website (highlights are mine) -

“The proposed State Budget for FY 2011 contains modifications to the Property Tax Reimbursement Program (also known as the “Senior Freeze”). Under the proposal, only those applicants who received a reimbursement for tax year 2008, and whose income for 2009 does not exceed last year’s income limit of $70,000, would be eligible to receive a reimbursement for 2009 provided they met all the other program requirements. For eligible applicants, reimbursements for tax year 2009 (to be paid in 2010) cannot exceed the 2008 reimbursement amount approved for payment.

Under the proposal, residents who were not in the program last year (that is, they were not approved for a 2008 reimbursement) because they did not meet the age, income or other eligibility requirements cannot receive a reimbursement this year even if they meet all the eligibility requirements for tax year 2009.

The Division of Taxation will continue to accept 2009 applications from residents who either did not file a 2008 application or who filed an application for 2008 that was not approved for payment. However, if enacted, the proposed budgetary changes would limit 2009 reimbursements to those who filed a 2008 application that was approved for a reimbursement and whose 2009 income was $70,000 or less.”

When asked I have always said that I thought the rebate and reimbursements for seniors would always continue - because if they were taken away the seniors would march to Trenton and burn down the State House. But I don't know any more.
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I have completed, as much as I can, PTR-1 applications for homeowners new to the program and sent them to my clients for filing just in case. We will really not know the story until the budget is passed at the end of June.

In the past, while the initial statutory deadline for filing PTR applications is June 1st, this deadline has consistently been extended, and extended again, until October. In prior years I anticipated this and did not worry if I did not get to a PTR in time for a June 1st filing. However this year, with new “Uncle Chris” and the mucking financial fess that his predecessor left him, I am not at all confident that the deadline will be extended.

While if I am honest I must say that I will be pleased as punch if I do not have to deal with PTRs or Homestead Rebate applications anymore, it bothers me that programs that help seniors and the disabled must be cut instead of getting rid of the tons of pork, entitlements and graft that benefit politicians and their cronies.

TAFN

A LITTLE THIS-A AND A LITTLE THAT-A – WITH THE EMPHASIS ON THE LATTA

2010-05-05T13:50:00.001-04:00

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+ Monday’s post at THE WANDERING TAX PRO discussed “Some New Jersey Items” of interest.

+ The NJ chapter of NATP will hold a Thursday Breakfast Seminar on Delaware Tax Topics, presented by Delaware Division of Revenue, from 8:30 to 11:15 AM on May 20, 2010 at the Marriott on Route 73 in Mt Laurel, NJ. Participants will earn 3 CPE credits.
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Click here to download the registration form.

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+ Another “systemic” problem?

During the tax season a client received a Notice of “Intended Federal Offset” from the NJ Division of Taxation. I came across a few of these notices during the season.

The notice told the client that the $1,675.85 was owed to the NJ Division of Taxation on the 2001 Form NJ-1040, and that if the client did not pay this amount with 60 days of the date on the notice, which was February 10th, the debt would be submitted to the Federal Offset of Individual Liability Program, the US Treasury Offset Program, and the Multistate Personal Income Tax Refund Set-Off Program. This would mean that future federal and non-NJ refunds would be withheld until the debt, including continuing interest and penalties, was satisfied.

This was the first that the client or I had heard that anything was owed on the 2001 NJ-1040.

I recently emailed a contact in the NJ Division of Taxation regarding this notice, asking WTF it was all about, and received a prompt response.

According to my contact –

“Based on a review of our records, I have determined that no further tax amount is due for your clients 2001 NJ-1040.

A systemic error caused a recalculation of the 2001 tax. The adjustment made at the time was inaccurate and should have been eliminated. No notice was sent to your client as the division had not been pursuing the balance.”

The email went on –

“I have adjusted the 2001 return and the division now shows a $0.00 balance due in this matter. No further underpayment notices will be issued to your client. Additionally, no offset of federal refunds should occur as we have inactivated our claim.”

Thank the Lord that there are a few competent employees at the NJDOT like my contact.

The same contact had helped me correct another “systemic” error with the NJWebFIle process last year. Every client whose balance due 2008 NJ-1040 had been submitted via NJWebFile received a bill from the NJ Division of Taxation about 6 months after the returns were submitted for the balance due on the return, plus penalty and interest – even though the balance due had been timely paid in full in April. It appears that the payment was applied to tax year 2007 and not 2008. This exact same thing had happened in 2005.

The moral of the story – if you receive any kind of notice from the NJ Division of Taxation it is more likely than not that it is erroneous. Do not be scared or intimidated by the notice and automatically pay the balance requested. Check it out. Send a copy of the notice to your tax professional immediately.

In my email of thanks to my NJDOT contact I said that I expect he is getting tired of having to apologize for the many FUs made by the Division.

TAFN

STUFF AND SUCH

2010-02-08T06:39:00.003-05:00

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+ The Spring 2010 issue of NEW JERSEY TAXING TIMES, the newsletter of the NJ chapter of NATP, is now available. Click here to download. It includes an article by me on Schedule C and the NJ-1040.

+ The DFBs! Here is the word from the NJ Division of Taxation –

“While tax booklets and forms were mailed to every New Jersey household that filed paper returns last year, among the actions taken by the Division was to print significantly smaller quantities of the 2009 State income tax return booklets for general distribution. In addition, to better manage our limited supplies, we did not send supplies of income tax forms to public sites such as libraries and post offices as we have done in prior years. We took these actions both to reduce our costs for printing, mailing, and storing the forms, and in response to the reduced demand for paper forms.”

Now that the NJWebFile system will not accept returns with Gross Income of over $150,000 (apparently they were too lazy to rewrite the program for the reduction in the property tax deduction) I will need paper NJ-1040s more than before!

+ More word from NJDOT -

“INSTRUCTIONS: FILING A 2009 REFUND REQUEST FOR EXCESS FLI CONTRIBUTIONS

Excess family leave insurance (FLI) contributions cannot be claimed as a credit on the 2009 New Jersey income tax return. A worker who received wages from two or more employers subject to the New Jersey Unemployment Compensation and Temporary Disability laws, and contributed more than the maximum of $26.01 for FLI during the calendar year 2009, must file a UC-9A to receive a refund of the excess FLI contributions. If form 2450 has been filed for excess UI, DI and WF contributions for 2009, then do not include the contributions for UI, DI and WF on form UC-9A.

1. Download and complete form UC-9A (2009)

2. Make copies of W-2 wage statements. In the absence of W-2 wage statements, form UC-52 (2009), Employer Certification of Wages and Deductions must be submitted

3. Mail completed UC-9A and supporting documentation to:

Division of Employer Accounts
Worker Refund Unit 2009
PO Box 910
Trenton NJ 08625-0910”

God only knows why excess FLI was not included on the same form as excess SUI and SDI in the NJ-1040 package. I expect that because the amount is so low, making it inconvenient to claim a refund for excess withholdings will mean most employees will not bother to file for a refund and the DFBs in Trenton can keep the money to support their pork.

TAFN

SO LONG, FAREWELL, AUF WIEDERSEHEN, GOOD NIGHT!

2010-01-29T05:00:00.000-05:00

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Thought I would end posting for a while (due to tax season hiatus) with this email comment from a reader.

“THANK YOU!

I am not a tax professional. I came across your site while searching a question about FLI.

I have always rated any pleasure that I could find in trying to understand taxes as something between eating Haggis and emergency root canal surgery. (Not to unfairly disparage root canal surgery).

Your blog was a pleasure to find. It is interesting and encouraging to me, not because of specific information, but because your frank and sane assessments of a range of information and issues gave me a window into the quality of your beliefs.

I am a small business owner, medical staffing and homecare. My usual window into tax advice is in a mailing envelope.

Thank you.”

And thanks to you, reader, for the kind words. I am glad you have found my blog interesting and encouraging.

This will be my last post until after the end of the tax filing season – although I may do a token post every 20 days just so I do not lose my spot on the Taxes page at alltop.com.

Be sure to check out my annual February 1st posting of “The Twelve Days of Tax Season” over at THE WANDERING TAX PRO.

TAFA

IRS TAX FORUM UPDATE

2010-01-26T07:51:00.000-05:00

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The hotel information for the 2010 IRS Nationwide Tax Forums is now available at www.irstaxforum.com.

No surprises here. While I have not had any problems with the actual facilities used by the Forums in the past, other than that some rooms were overcrowded and that not having tables made it somewhat inconvenient to take notes, I must say that the IRS seems to pick the most expensive hotel, and often the most inconveniently located for local attendees, it can find to host the event. They apparently have little concern for the tax professional community.

The least expensive hotel rate is, as one would expect, in Las Vegas – but that is $129.00 per night (plus, of course, taxes) at the Mandalay Bay Resort and Casino. In the past I have paid as little as $49.00 per night in Vegas for excellent accommodations when attending tax seminars.

NYC is once again in the mid-50s at the Hilton New York, with a “discount” room rate of $245.00 per night.

TAFN

THE IRS ANSWERS QUESTIONS ON TAX PREPARER REGULATION

2010-01-23T09:55:00.001-05:00

The IRS has posted a page on “Proposed New Requirements for Tax Return Preparers: Frequently Asked Questions” at its website.

Here are some of the Q+As that interested me -

“What is the best estimate for when the new regulations will be implemented?

Sept. 1, 2010, is the current target date for an on-line registration system and Jan. 1, 2011, is the current target date for requiring all paid signing preparers to be registered and to use a Preparer Tax Identification Number (PTIN). Final determination of these dates is dependent on many factors and will be widely publicized as soon as available.

Testing will not be implemented until after registration and mandatory PTIN usage are in place.

Will there be a new designation for preparers who pass the competency test?

Yes, more information regarding this new designation will be made available at a future date.

Will the testing be done by the same firm that administers the enrolled agent exam? Or will IRS be doing the testing?

The testing likely will be done by an external vendor(s). The vendor(s) is unknown at this time.

Will the tests be open book or resource assisted?

This has not been determined.

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The two competency tests are described as covering: 1) Wage & non business 1040 and 2) Wage and Small Business 1040. What does small business include? And how would this impact those who prepare other business returns?

For competency testing purposes, small business will include Form 1040 Schedules C, E, and F and various other 1040 related forms. Appendix I of the Return Preparer Review report contains a detailed list.

Even if they do not prepare 1040 returns, preparers of business returns who are not attorneys, certified public accountants, or enrolled agents will be required to pass the Wage and Small Business 1040 test.

What is the required percentage to pass the competency test?

This has not been determined.”

TAFN

NJ TREATMENT OF 2010 ROTH CONVERSION

2010-01-18T18:06:00.000-05:00

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The NJ Division of Taxation has just released the word that New Jersey “conforms to the Federal Tax Increase Prevention and Reconciliation Act of 2005 provision regarding the Federal Income Tax reporting of a distribution from an IRA which the taxpayer converts into a Roth IRA in 2010. If a taxpayer chooses to defer the income resulting from a Roth IRA for Federal purposes to 2011 and 2012, the same deferral will be honored for New Jersey gross income tax purposes. However, if a taxpayer chooses to report the entire income resulting from a Roth IRA conversion in 2010, the taxpayer will also be required to report the income for New Jersey gross income tax purposes in 2010.”

TAFN

COMMENTS FROM THE EMAILBAG

2010-01-15T10:06:00.001-05:00

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I received the following email question from a fellow tax professional -

“Hi Mr. Flach,

I saw your NJ tax practice blog and thought I might ask you what you plan to do, if anything, with the NJ FLI withholding, which is conspicuous on all NJ W-2’s for 2009.

Thanks.”

It would seem to me that family leave insurance contributions withheld from employees wages, and reported on the W-2, would be treated the same as SUI and SDI for federal income tax purposes. It is a required contribution to a state benefit fund. I have not seen anything to the contrary. The issue is not discussed on the DOL’s FAQ Page. Does anyone out there have a different opinion?

According to the NJ Department of Labor, “beginning January 1, 2009, employers are required to withhold 0.0009 from employees’ taxable wages as defined in the Unemployment Compensation Law”. But, unlike SUI and SDI, “employers do not contribute to the program”.

FYI, “the withholding rate increases to 0.0012 beginning in 2010”.

I was surprised to learn that excess FLI withheld due to more than one employer is not claimed on Form NJ-2450 and included in payments on the NJ-1040.

According to the NJ-1040 instruction booklet –

“If you contributed more than the maximum amount {of FLI – rdf}, write to Division of Employer Accounts, Worker Refund Unit ‘2009’, PO Box 910, Trenton NJ 08625-0910 or call the Department of Labor and Workforce Development at 609-633-6400.”

I also received an email concerning the New York Department of Taxation and Finance from a colleague in NYC who tells me “This came to me indirectly from a reliable, source” –

“As we gear up for the opening of e-file, please be aware that there may be delays for some taxpayers with their NYS refunds.

Refunds for wage earners will be held until all their employers have filed their NYS-45 year end wage report. They are not sending refunds to them until they are able to verify their wages and withholding. If you have a taxpayer with several w-2s, this could take time for them to match all w-2 info on their return."

I had previously reported that New York State is already going to delay the processing of all returns that do not request direct deposit for refunds. And now this!

TAFN.

THIS JUST IN - SPREAD THE WORD!

2010-01-14T13:24:00.001-05:00

I just found out that my new column at THE STREET began yesterday!

It is a column of “Tax Tips” that will run every week day from now through the end of the tax filing season.

The first two columns are “Who Should You Listen To” and “Finances Come First”.

You can check out each day’s entry by going to THE STREET home page and checking out the “Main Street News” index for “Tax Tips”.

So tell all your friends. And if you like what you read please leave a comment.

TAFN

I'M MAD AS HELL - AND I'M NOT GOING TO TAKE IT ANYMORE!

2010-01-14T09:57:00.001-05:00

I have been using mail.com as my main email address for just about as long as I have been using the internet. For the most part it functioned satisfactorily, and I was pleased with it.

A few months ago mail.com decided to “upgrade” to become “new and improved”. What it did was become a GDMFPOS (I am sure that you can figure out the initials).

The system is totally unusable – it runs slow as molasses. It takes me a half-hour to do what should be done in less than 2 minutes!

The “new and improved” mail.com is a bigger failure than the tenure of NJ Governor Corzine and Rosie O’Donnell’s miserable attempt at a prime time variety show combined – and that is saying a lot.

You would think that Congress had a hand in the “new and improved” mail.com – as it is so FU-ed!

Needless to say I will be taking my business elsewhere ASAP. For now I am using rdftaxpro@comcast.net as my main address.

My advice to you is to avoid mail.com like the plague. It is a total POS.

Thank you for allowing me to rant. This is cheaper than throwing my computer monitor out the window or smashing the wall with my hand.

2010 IRS NATIONWIDE TAX FORUMS

2010-01-13T14:45:00.001-05:00

The IRS has finally issued the dates and location of the 2010 Nationwide Tax Forums. The hotel information will be released shortly, and I will post it as soon as it is available.

Atlanta, Georgia = June 22 – 24
Chicago, Illinois = July 13 – 15
Orlando, Florida = July 27 – 29
New York City = August 10 -12
Las Vegas, Nevada = August 24 – 26
San Diego, California = August 31 - September 2

I expect I will attend the NYC offering again – although Chicago is tempting. I may be able to tie it into my trip to Austin for the NATP annual conference,

TAFN

NJ-NATP ANNUAL STATE TAX SEMINAR

2010-01-11T05:00:00.002-05:00

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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

WHAT’S NEW FOR NEW JERSEY STATE INCOME TAX FOR 2009

2009-12-28T05:00:00.000-05:00

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The NJ Division of Taxation website has an excellent “2009 Income Tax Info” page with links to all kinds of resources. I will say this for the NJDOT – however incompetent it may be in other areas, it has a great, and extremely useful, website.

Here is a review of the changes to NJ tax law for 2009, as reported on the website (any highlights are mine) -

+ The New Jersey gross income tax rates for tax year 2009 increased to 8% on income over $400,000 but not over $500,000, 10.25% on income over $500,000 but not over $1,000,000, and 10.75% for income over $1,000,000. This is a one-year increase. Tax rates are expected to revert to 2008 rates on January 1, 2010. However, considering the mucking fess the state finances are in, don’t count on it.

+ Homeowners under 65 years of age and not blind or disabled whose New Jersey gross income is more than $250,000 are not eligible for the property tax deduction. In addition, for homeowners under 65 years of age and not blind or disabled whose New Jersey gross income is over $150,000 but not over $250,000, the maximum deduction is limited to $5,000.

+ New Jersey Lottery winnings from prize amounts exceeding $10,000 are taxable for New Jersey gross income tax purposes. The individual prize amount, not the total amount of New Jersey Lottery winnings over the year, determines taxability. So if you had three separate NJ Lottery wins in 2009 - $5,000, $4,000, and $1,700 - that totalled $10,700 you do not have to claim the $10,700 as NJ taxable income. But if you had three wins of $10,500, $100, and $100 you would have to claim $10,500 as income. As usual, taxpayers may deduct gambling losses from their winnings that occurred during the same year; however NJ Lottery losses can now be used to offset other gambling winnings.

+ The amount of the NJ Earned Income Tax Credit will be equal to 25% of the applicant’s Federal earned income tax credit.

There is no major change to the format, layout or content of the 2009 NJ-1040, with the following minor exceptions.

+ Taxpayers must indicate at Line 36b, Form NJ-1040, if they were a homeowner, tenant, or both homeowner and tenant during the year.

+ Spouses/CU partners who file separate tax returns using the filing status “Married/CU Partner, filing separate return” must fill in the oval at Line 37, Form NJ-1040, if they both occupy the same principal residence.

+ Two new charts have been added to the tax return instructions to help taxpayers complete Schedule 1.

As usual, tenants apply for the NJ Homestead Rebate on Form TR-1040, which is a part of the NJ-1040 filing. As we know, under the terms of the NJ State budget, no rebates were issued to tenants who were under age 65 and not disabled on December 31, 2008. While we will not know for sure until the budget is passed by the end of June (hopefully), I expect this will be the same for those under age 65 and not disabled on December 31, 2009. But we tenants still have to complete the application - just in case.

Again, homeowners must wait for a separate application to be mailed out in May. God, and the cafones in Trenton, only knows why homeowners cannot also file an application as part of the NJ-1040 filing.

There does not appear to be any changes to the NJWebFile system. Once again first time filers will be required to use direct deposit if due a refund. Taxpayers with net profits (or loss) from business, distributive share of partnership income (or loss), and/or pro rata share of S corporation income still cannot use NJWebFile and the number of “transactions” that can be entered in certain categories of income remains limited.

Considering the FUs on 2008 balance due NJ-1040s submitted via NJWebFile, I will file all my 2009 NJ-1040s with a balance due manually, requesting clients to sign OPT-OUT forms.

FYI - The Philadelphia nonresident wage tax rate for 2009 is .035 from January 1 to June 30, 2009, and .034997 from July 1 to December 31, 2009.

TAFN

HAVE YOURSELF A MERRY LITTLE CHRISTMAS!

2009-12-25T05:00:00.000-05:00

MY BEST WISHES FOR A "SUCCESSFUL" CHRISTMAS!

HO! HO! HO!

BOB FLACH

WHAT’S NEW FOR 2009 FOR NEW YORK STATE INCOME TAX RETURNS?

2009-12-21T05:00:00.000-05:00

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I have just briefly reviewed the 2009 Forms IT-201 and IT-203 and their instructions on the New York State Department of Taxation and Finance website.

The actual forms appear to be unchanged from the last couple of years – the same “more better” 4-page format.

The biggest change for NJ state income tax filing is the ridiculous, and, I believe, illegal requirement that all tax preparers who prepare New York State income tax returns, with the exception of attorneys and certified and uncertified public accountants licensed to practice in New York, must register and pay a fee regardless of where there are located and even if they have absolutely no physical presence in New York State.

The New York State personal income tax rates have been increased, adding 7.85% and 8.97% brackets. The 8.97% applies to all categories of filer with incomes over $500,000. The former top 6.85% rate ends at $200,000 for single filers (and married filing separately), $250,000 for head of household, and $300,000 for married couples filing jointly.

So a high income taxpayer could be paying an additional $47.618 in federal, state and local income taxes on every additional $100.00 of income. If you add in the Medicare Tax that becomes $49.068 on every additional $100.00 of wages. Almost equal partners!

The New York State itemized deduction for the wealthy is also reduced. The itemized deduction for taxpayers with a New York Adjusted Gross Income of more than $1 Million will be limited to 50% of the federal deduction for charitable contributions – Period! All other federal itemized deductions will be reduced to “0”.

There are now two separate mailing addresses for sending paper New York State income tax returns. Returns that include a payment are now sent to POB 15555, ALBANY NY 12212-5555.

The maximum New York City School Tax Credit, available to taxpayers with incomes of $250,000 and less, is reduced to $125.00 for Married Filing Joint and Qualifying Widow(er) and $62.50 for all other filers.

And the “Fuel Cell Electronic Generating Equipment Credit” has been repealed for tax years beginning on or after January 1, 2009. Unused credits from prior years can continue to be carried forward for 5 years. Never claimed, or actually heard of, that credit before.

A new law permits New York to charge a $50.00 fee when a check, money order, or electronic payment is returned by a bank for nonpayment. If an electronic payment is returned due to an error by the bank of the NYS DOTAF there will be no fee.

There is a new tax for self-employed individuals doing business within the “Metropolitan Commuter Transportation District”, but that does not affect anyone I do or know.

There have been some changes to the definition of New York source income of a nonresident and the definition of a resident. To see if the changes apply to your clients check out the NYS DOTAF website.

TAFN

NEW COMMENT POLICY

2009-12-14T11:18:00.002-05:00

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I am getting tired wasting valuable time deleting the multitude of spam posts that are constantly being submitted to both THE WANDERING TAX PRO and the NJ TAX PRACTICE BLOG.

I have disabled the COMMENT process on these two blogs.

If you want to make a legitimate comment on a post you can do so by sending an email to rdftaxpro@mail.com with “THE WANDERING TAX PRO COMMENT” or ‘NJ TAX PRACTICE BLOG COMMENT” in the “Subject Line”.

I will periodically publish a “mailbag” post with all legitimate and appropriate comments.

Please do not abuse my email address by sending me specific tax questions that should be addressed to your tax professional. I do not provide free tax consultations via email. And, so that you know, I am not accepting new clients.

The criteria for “legitimate” and “appropriate” comments have not changed. To refresh your memory reread the following –

UPDATED COMMENTS ON COMMENTS

Thank you for your patience and cooperation.

TAFN

NEW YORK STATE APPROVES AMNESTY PROGRAM

2009-12-10T09:11:00.002-05:00

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New York State has passed the PAID (Penalty and Interest Discount) Amnesty Program. PAID will give taxpayers with older unpaid bills the chance to save up to 80% of the penalty and interest they owe. Outstanding tax debts that are less than three years old are not eligible under this program.

The Amnesty Program will begin January 15, 2010. To take advantage of the program’s savings, eligible taxpayers must make all payments by the program’s expiration date, March 15, 2010. If they don’t pay in full by that date the opportunity for these savings will be lost forever and any unpaid tax debts will continue to accrue interest at the full statutory rate.

Those who take advantage of this program save 80% of accrued penalty and interest on unpaid bills issued on or before December 31, 2003 and 50% of accrued penalty and interest on unpaid bills issued after December 31, 2003 and on or before December 31, 2006.

New York State will be increasing efforts to collect unpaid bills. Those who act now and pay qualified outstanding balances will avoid collection actions.

In January 2010 the State will be mailing letters to taxpayers who qualify for the PAID discounts, inviting them to participate in the program. Taxpayers will be able to go online to check to see if they have qualified outstanding balances and for more information on how to pay beginning January 15, 2010.

TAFN

STATE LICENSING AND REGISTRATION UPDATE

2009-12-07T05:00:00.003-05:00

A fellow tax blogger, and New York State Enrolled Agent, has sent me the following information he received from the National Association of Enrolled Agents (NAEA) on state licensing and registration of tax preparers -

(1) New Jersey -

New Jersey State Senator Barbara Buono of Edison is expected to introduce a bill calling for the licensure of paid tax return preparers throughout the state. This bill establishes licensing requirements for tax preparers that prepare only individual income tax returns (i.e. NJ-1040 and NJ-1040NR). It exempts Circular 230 practitioners, presumably CPAs, EAs and lawyers, requires 60 hours of up-front education, passing an exam, a high-school diploma or equivalent (first time I have heard of this as a requirement for licensure), but, unlike other recently-introduced state licensing bills, does not allow for “grandfathering” of long-time preparers.

The bill describes "tax preparation services" as services provided for a fee or other consideration to a client “to assist with preparing or filing State or federal individual income tax returns; or assume final responsibility for completed work on an individual tax return on which preliminary work has been completed by another”. A "tax preparer" is “an individual, corporation, partnership, limited liability company association, trustee or other entity who is licensed as a tax preparer pursuant to the provisions of this bill”.

The NJ legislature is currently out of session. The proposed bill will not be forwarded to the appropriate committee until it reconvenes in 2010.

We must write to our representatives in Trenton and demand that a “grandfather” provision be included!

The IRS is at present seriously considering licensing and registering all tax preparers on a national level. If this becomes law then it will most certainly supercede and make redundant and unnecessary any state licensing. Why doesn't NJ just wait to see what the IRS comes up with before taking any action to create a new state bureaucracy with lots of patronage jobs available?

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(2) New York

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The New York State Assembly and Senate sent a budget bill to Governor Paterson that included an exemption to the registration requirement for out-of-state certified public accountants and attorneys but not for enrolled agents, despite the fact that NYSSEA was assured non-NY based EAs would also be exempt. Legal action by NYSSEA is still pending.

Hey, why doesn't NJ pass a law that requires all tax preparers who live or work in New York State, and have no physical presence in the State of New Jersey, to register with NJ and pay a $100 fee if they plan to prepare at least 1 NJ-1040 r NJ-1040NR?

TAFN

THE WINTER 2009 ISSUE OF "NJ TAXING TIMES" IS HERE!

2009-12-05T15:12:00.003-05:00

I have just returned from the annual NATP year-end tax update seminars held at CAESAR’S in Atlantic City. More on the seminars in upcoming posts.

Speaking of NATP, the new issue (Winter 2009) of the New Jersey Chapter’s newsletter is now available. It includes state tax information, education opportunities and more news of interest to NJ tax professionals.

While I had begun to write an item for the issue, other personal and business matters arose that did not permit me to finish it in time, so I am not represented.

The newsletter’s “Joke Du Jour” column points out that –

“There is only one thing worse then the flu season – the tax season. You can recover from the flu.”

Click here to read or print the newsletter.

The newsletter also includes a registration form for the annual NJNATP 2010 FAMOUS STATE TAX SEMINAR, held, as it is every year, at the Hilton Woodbridge in Iselin from 7:30 am to 4:45 pm on Saturday, January 9, 2010. I hope the room set-up is done right this year.

This is truly a “do not miss” event for those who prepare NJ personal and business tax returns.

Featured speakers include “usual suspects” Jacob Foy, Jim Gordon (always giving excellent and important presentations) and John Kelly (a truly colorful character) from the NJ Division of Taxation and Kathryn Keane from the New York chapter of NATP.

Topics for the day include NJ individual, corporate, sale and use and estate and inheritance tax updates, property tax relief, independent contractor classification, and NY and NJ “cross-over” issues.

Those who attend will earn 8 CPE credits – credits which may be important if all tax preparers are to be regulated by the IRS.

The cost for registrations postmarked before January 4, 2010 is $200 for members, $250 for non-members, and $349 for new members (includes NATP membership fee). Continental breakfast, lunch and afternoon dessert are included.

I must say that the continental breakfast and afternoon dessert provided by the Hilton have always been far superior to the meager offering from CAESAR’S at the Atlantic City seminars!

Hope to see you on January 9th!

TAFN

TAX ACT SUMMARIES

2009-11-13T12:27:00.001-05:00

The National Association of Tax Professionals' has prepared a “Summary of the Worker, Homeownership, and Business Assistance Act of 2009”, which is now available at the association’s website.

Click here to download.

CCH also has a “Tax Briefing” report on the Act. Click here to download the CCH Tax Briefing.