TUESDAY, JANUARY 31, 2006
Due to the demands of the tax filing season I will not be making
any postings to this weblog until after April 17th.
Have a "successful" tax season!
THURSDAY, JANUARY 26, 2006
This morning I received a response to my letters to Robert Thompson and John Tully regarding
the separate FAIR applications for homeowners and tenants (see the December 27, 2005 posting).
The response was from Sheri B Silverstein, Chief of the Information and Publications Branch.
"As you may know, in 2004 the Homestead Rebate and NJ SAVER Rebate Programs were combined into
what is now referred to as the FAIR Rebate Program. Although the method of calculating the rebates is similar, unlike
the homestead rebate of previous years, which was based on the individual taxpayer and the property taxes they paid during
the entire year, the FAIR rebate is based on the property and property taxes assessed theron and the property ownership records
as of October 1. The property ownership records and assessed values of the properties are complied annually by each
municipality and are not available to the Division of Taxation until sometime in March of the following year, long after the
tax season has begun. Therefore, the rebate application cannot be included as part of the income tax return."
What does the fact that the NJDOT cannot access verification information
until March have to do with anything? The NJ FAIR rebate checks are not sent out until August - this gives the
Division plenty of time to do whatever verification necessary to process the rebate!
I still feel strongly that the state should be able to combine the tenant and homeowner
rebate applications on one form that can be filed as a part of the NJ-1040 filing. This would be much much more convenient
for taxpayers, tax preparers, and, I would think, the Division of Taxation.
As I said in my December 27th posting, separate filing
for homeowners especially affects senior citizen homeowners, many of whom are confused by the process and, I suspect, as a
result do not file for the rebate. This defeats one of the major purposes of the rebate - tax relief for senior citizens.
It appears from this, and the presentation made by John
Tully at the recent NJ-NATP seminar, that the attitude of the NJ Division of Taxation and NJ Division of Revenue is "We
will do what is easiset and best for the State of NJ, and if this inconveniences taxpayers and tax preparers too bad!"
MONDAY, JANUARY 16, 2005
One of National Tax Advocate Nina Olson's recommendations
to Congress is to require brokers to report the cost basis information on investment sales to both taxpayers and the IRS.
Nina wants brokers to "keep track of an investor's basis, transfer basis information to a successor broker if the investor
transfers the stock or mutual fund holding, and report basis information to the taxpayer and the IRS on Form 1099-B."
Many of the major brokerages already report the
cost basis information of investments sold on the year-end reports sent to clients. However, the problem arises when
the investment was purchased through a different brokerage account and the client does not provide the information
to the new broker.
As one would expect, broker associations are
vehemently opposed to this idea. Apparently, so are some taxpayer groups. From my point of view as a tax preparer
it would save me lots of time and solve one of the biggest problems I face during the season. My only concern is that
the brokers get the tax basis correct, adjusting for dividend reinvestment and stock splits.
What do you think about Nina's recommendation?
SATURDAY, JANUARY 14, 2006
I just (literally) returned home from the annual NJ Chapter of the
National Association of Tax Professionals' New Jersey State Tax Seminar at the Woodbridge Hilton, which I have attended almost
every year it has been offered (snow kept me away one year).
The location, just off exit 131A of the Garden State Parkway, is very convenient, and the hotel
facilities are more than adequate (this year the room configuration went back to the way it used to be - last year's set-up
was too crowded). The January 2005 seminar was very good, with both Robert Thompson (Director of NJ Division of Taxation)
and John Tully (Director of NJ Division of Revenue) as well as another NJDOT speaker and a private practice speaker covering
NJ update topics, and I was looking forward to a repeat today.
I was, however, somewhat disappointed with this year's offering. The reason I attend
this seminar is to get a detailed update on changes to New Jersey State income and payroll taxes and tax filing requirements,
and New York State resident and non-resident income tax filings, both for the upcoming "tax season" (in this year's case 2005
returns) and for the coming year (2006 returns). Unfortunately, not nearly enough time on the day's schedule was spent
on these issues - only 2 1/2 hours on New Jersey topics and 50 minutes on New York.
The first topic of the day was "Growing Old in New Jersey - Disability and Medicaid Planning"
presented by eldar law attorney John Callinan. Mr Callinan did an excellent 1 hour and 40 minute presentation on
an interesting topic, but it had nothing to do with NJ or NY taxes!
John Tully was up next. According to the seminar agenda he was allotted 50 minutes each
on two topics - "State of New Jersey Update" and "New Jersey Electronic Filing Requirements". He skipped the first topic
entirely and spent his entire time on the electronic filing requirements, of which he is a driving force behind. He did a
good job on the subject, who better to address the topic, and could have used even more time to address the questions and
concerns of the audience.
* All New Jersey sales and use tax returns and payments must be filed
and submitted electronically.
* All Annual Report forms, which corporations previously filed on Form CAR-100 as part of the
annual CBT-100 corporatation tax return filing, must be filed electronically, and the payment made
* Any NJ business that accumulated $10,000.00 in tax liability for the previous calendar year
in any one area of tax (a total of $10,000 in sales tax collected, or $10,000 in NJ gross income
tax withheld, or $10,000 in state unemployment and disability contributions - not
$10,000 accumulated among all these taxes) must file all forms
(including NJ-927 and WR-30) and make all payments (including quarterly corporate estimated taxes
and CBT-100 and NJ-1065 balance due amounts) electronically.
* All new businesses registering in NJ must file
all returns and make all payments electronically.
* If a tax professional prepared and filed 200 full-year NJ-1040s for 2004, he/she must
file all full-year 2005 NJ-1040s electronically (unless the taxpayer signs a NJ-1040-O "Opt-Out" form).
I file the sales tax returns for the two sales tax clients that I still have (a long-time client
and a personal friend), have filed the Annual Report for my own LLC and a client LLC, and have filed both the NJ-927 and WR-30
online at the NJ Division of Taxation website, making the payments via electronic check. In most cases the process has
been smooth and easy. On one occasion I attempted to file a NJ-927 online, but the contribution rates indicated on the
online form were incorrect so I prepared the return manually. I have no problem filing these returns and reports online,
as long as the process is simple and there is no additional cost to me, which I would obviously pass along to the client.
Last tax season I started out attempting to file the NJ-1040s for my clients via WebFile, the
only one of the three available options I was willing to use (I do not file my federal returns via software - I do them all
by hand - and therefore do not file federal returns electronically, and I had no intention of sitting on the phone to
NJ Telefile all day). However, not all returns could be submitted using this method, such as returns with Schedule C
or K-1 income or for taxpayers who changed their filing status, and in many cases the entering of all the required information
was much more cumbersome than filing manually (and my computer crashed at the end of February 2005!), so I ended up preparing
all remaining NJ-1040s manually, requiring clients to sign an "Opt-Out" form.
My feeling about filing NJ-1040s electronically is the same as for business returns - I have
no problem doing so as long as the process is simple and there is no additional cost to me (or my client). I will attempt
to file as many of my 2005 NJ-1040s as possible via NJ WebFile, but when not possible I will require an "Opt-Out" form.
After the lunch break, John Kelly of the NJ Division of Taxation was given 50 minutes to cover
"Recently Enacted New Jersey Legislation". The allotted time was barely enough for him to briefly list the changes,
with no time for details or questions.
The next topic on the agenda was 1 hour and 40 minutes on "Criminal Investigations and Fraud"
presented by the IRS. I belong to both the National Association of Tax Professionals and the National Society of Tax
Professionals. Both these organizations do an excellent job of presenting seminars, workshops and conferences on federal
tax issues throughout the US. The NJ Chapter of NATP should not be presenting federal issues at its State Tax Seminar.
As this subject held no interest for me (I do not do any client representation) I left the seminar early. Although
I really did want to hear the final topic for the day, a 50 minute presentation of "New York and New Jersey Crossover Topics",
I did not want to sit around on my thumbs for the almost 2 hours until it was scheduled. I suspect I missed the most
"substantive" of the presentations.
As I mentioned in my December 27th posting to this blog, I had written to Robert Thompson,
with a "cc" to John Tully, asking for an explanation of why there was two separate processes, one for tenants and
another separate one for homeowners, for applying for the NJ FAIR Rebate. My letter stated that I hoped the issue could
be addressed in the NJ Division of Taxation's or Revenue's presentation at today's seminar. There was no mention of
the NJ FAIR Rebate made whatsoever by anyone at the seminar today. And FYI, as of this writing, I have
not received any response to my letter from either Director.
In my opinion, the entire agenda for a New Jersey State Tax Seminar should be devoted
exclusively to New Jersey, and New York and perhaps Pennsylvania cross-over, tax topics, with the emphasis on NJ taxes.
At $185.00 for members, although deductible, it is an expensive day. I certainly did not get my $185.00 worth today!
TUESDAY JANUARY 10, 2006
In response to many inquiries regarding the rules for reporting
capital gains and losses, as per the new lanuage in the IRS instructions for Schedule D (see my December 29, 2005 posting),
the following statement has been posted on the IRS website:
"..taxpayers may continue to use a substitute statement to provide all of
the same information and in a similar format to lines 1 and 8 of Schedules D and D-1. They are not
required to use the official version of Schedules D and D-1 to provide the details on each transaction. However,
the details of each transaction still must be provided with the tax return and not just upon request."