TUESDAY, AUGUST 29, 2006
I recently attended the National Association of Tax Professionals
Annual National Conference and Expo at the Marriott Copley Place in Boston, Massachusetts (August 21-24), where it had previously
been held in 1995. This was the association's 25th annual conference. I have been attending since 1988, missing
only one or two.
The hotel, adjacent to the Copley Place shopping mall (which connects
to the Back Bay train station) and connected by "skywalk" to the Shops at Prudential Center, is an excellent location
for a conference, within walking distance from the theatre district, the Boston Commons, and Boston's "Restaurant
Row" and shopping district. The subway provides a relatively easy connection to the downtown and waterfront areas.
While we drove to Boston from New Jersey, I would not recommend driving in Boston.
The food court at the Shops at Prudential Center mall offered an
excellent, and reasonable, alternative to the hotel restaurant's $19.00+ breakfast buffet.
The conference educational sessions were, as usual, on the whole
very good. I attended two sessions with new "teachers" and topics that were exceptional ("Audit
Proofing" by LG Brooks and "Tax Planning for the Elderly" by Karen Brosi). I hope NATP brings these speakers and topics back
in the future.
There was also a good session on "Taxation of Annuities",
an often confusing topic, which was, unfortunately, limited to 50 minutes (a CPE "hour"). The other sessions were 100
The annual "Current Developments" session, offered this year as a "general session" limited
to 100 minutes, was rushed due to the inclusion of the pension reform bill signed by George W the week before the conference.
More time should have been allocated to this important and extensive topic, or an additional 50 minute session should have
been added to address just the pension bill.
FYI, you can download a copy of the NATP "Summary of the Pension Protection Act of 2006" at
http://www.natptax.com. You do not have to be a NATP member to do so.
The highlight of the conference was the two "general session" presentations by IRS representatives
Kevin Brown, Commissioner of the Small Business/Self-Employed Division, and Vicki Duane, Director of the Office of Refund
Crimes. Brown announced that Schedule Cs and Sub-S corporations are among new audit targets. Duane pointed
out that 55% of all identified tax fraud involves the Earned Income Tax Credit.
My major complaint with the conference concerns the session rooms. They
were either too big or too little. In most sessions the room was more than half empty, while one
session I attended, which one would have expected to be a popular topic, had us packed in like sardines with
no "elbow room". In both cases there were, like the IRS Forums, no tables, essential for taking notes and following
the workbook and to have a place to put your coffee cup or continental breakfast plate.
Another complaint is relatively minor. When the "expo" was open (the first two days only)
one had to schlep down to the 3rd floor, where the vendors were exhibiting, for the complimentary coffee and continental breakfast
and then rush back to the 4th floor, where the conference was held, for the educational sessions.
The 2007 NATP conference will be held July 23-26 at Ceasar's Palace in Las Vegas, and
the 2008 conference will be July 7-10 in Atlanta GA.
- - - - - - - - - -
FYI, the General Services Administration has announced the new per diem rates for
travel expenses for the period October 1, 2006 through September 30, 2007. Go to http://www.gsa.gov and click on Per Diem Rates under the category Travel Resources. You want to "Find Rates for Fiscal Year 2007".
TUESDAY, AUGUST 15, 2006
The NJ Chapter of the National Association of Tax Professionals
will hold its 18th Annual Conference on Thursday, October 5th at the Woodbridge Hilton in Iselin.
While, unfortunately, the conference will not be dealing with NJ tax issues, specifically the
recent changes passed to balance the budget, if it must offer a program of federal issues it couldn't do better than providing
"A Day With David Mellem", former NATP National Research Director.
The topics will include -
- Pensions, IRAs and ROTH,
- Divorce, and
- Reading K-1s and Basis
Registration begins at 7:45am and the conference begins at 8:15am. Continental breakfast,
lunch and afternoon dessert is included. The conference will qualify for 8 CPE credits.
The cost of the conference is $165.00 for members and $185.00 for non-members if postmarked before
9/27/06 and $205.00 for both members and non-members if postmarked after 9/27/06 or at the door.
For more information call 1-800-281-NATP or 908-709-4261.
THURSDAY, JULY 27, 2006
Continuing on with the situation I discussed in the Friday, June
16, 2006 posting -
I wrote back to the New Jersey Division of Taxation:
Your have previously confirmed, as I had expected, that
a NJ taxpayer could not deduct losses from the total liquidation of all ROTH IRA accounts against "normal" capital gains because
the two items were from different "categories" of income, and a loss from one category cannot be used to reduce income from
The taxpayer who realized losses from the total liquidation
of all ROTH IRA accounts also received pension income from a 72t SEPP pay-out. As both the SEPP distribution and the
ROTH IRA losses are from the category of PENSIONS, can the losses from the ROTH liquidation be applied against the income
from the 72t SEPP pension distribution?
Thank you for your continued help!"
The NJDOT replied:
"Inasmuch as qualified distributions (including interest, dividends and other earnings) from
ROTH IRAs are not subject to tax under N.J.S.A. 54A: 6-28, neither are losses.
Thus, you may not reduce your reportable pension income amount by nontaxable ROTH IRA account
Oh well, I tried!
FRIDAY, JULY 21, 2006
Here are links to information on some upcoming educational seminars
in New York and New Jersey:
NEW YORK STATE CHAPTER OF NATP =
THE ACCOUNTING, FINANCIAL, AND TAX PROFESSIONALS OF NJ (the NJ chapter of NSA) =
As has become an annual summer ritual, the "DFBs" (clean version = Damn Fool Bureaucrats) in Trenton continue to
"nickel and dime" NJ taxpayers to balance the budget.
The sales tax has been increased from 6% to 7%, and is already in effect, and more items are now subject to the tax.
Cigarette taxes are increased by 18 cents to a total of $2.58 per pack.
Individuals who purchase a car that costs at least $45,000 or gets less than 19 mpg will pay an additional tax of
1% on the purchase or lease.
The rental car tax is increased from $2.00 to $5.00 per day.
Worst of all is the increase to the NJ Corporation "Minimum Tax". The tax is based on "New Jersey GROSS
Receipts" and not taxable income. It is possible that a NJ corporation with a "0" federal and state taxable income could
pay as much as $2,000.00 for the privilege of being a NJ corporation! It is obvious that no small business should operate
as a corporation in New Jersey. Become a LLC and operate as the "default" entity.
It is possible to switch from a corporation to a LLC. I received the following answer to my question
put to the Division of Taxation:
"The taxpayer can form the LLC and then merge the corporation and the LLC, with the LLC as the survivor.
Please visit our website for appropriate forms by clicking on the following link (www.nj.gov/njbgs). Under "I Want To" click on 'form/register a business'. For information concerning the
merger, go back to the home page and in the center column, scroll down and click on 'Mergers and Consolidations'."
I asked the NJ Chaper of NSTP to devote time during its upcoming fall seminal to a detailed review of
this process, but was told that the topic for the fall are already in place (David Mellem will return for a day of federal
For information on the new "nickel and diming" go to http://www.state.nj.us/treasury/taxation/07budgetchange.htm.
MONDAY, JULY 17, 2006
I just returned from Chicago where I attended the National Society of Tax Professionals Regional Conference (one of four)
and the IRS Nationwide Tax Forum (one of six).
was my second IRS Tax Forum, having attended the 2005 Forum in New York City. Some of my comments about the 2005 Forum also applied to the 2006 offering.
The registration process and sign in at each session was again speedy and efficient, with scanners reading the
bar code on our individual attendee identification badges. I took advantage of
pre-registration on the day before the Forums began and was in and out in less than 30 seconds.
facilities and services provided by host hotel (the Chicago Hilton and Towers on South Michigan Avenue) were excellent, the location was too far away from the downtown theatre and dining district. The hotel restaurants were expensive, and the menus were limited. There were very few acceptable dining alternatives with more reasonable prices and more extensive menus
within a comfortable walking distance.
session offered during the IRS Forum was 50 minutes long. In most cases,
this is much too short for anything other than a cursory review of the topic, and does not provide adequate time for questions,
which had to be held until after the presentation was finished.
Keynote Speech, delivered by the Acting Director of Professional Responsibility because the Commissioner was
stuck in Washington, DC coping with the flooding of the IRS building, was too brief and said basically
nothing – a waste of our time.
session of the Forum, in my opinion, was the last minute
addition of a presentation by the Government Accountability Office on their recent report to Congress #GAO-06-563 - “Paid
Return Preparers: In a Limited Study, Chain Preparers Made Serious Errors”. This
is the report that revitalized the Congressional push for licensing and testing unenrolled tax preparers.
undercover agents with two different tax scenarios, each of which included sideline income, to a total of 19 offices of 5
“fast-food” commercial tax chains in a metropolitan area. In only
2 instances was the correct refund calculated, but all 19 returns contained errors.
According to the GAO report, there were unwarranted extra refunds of up to almost $2,000 in 5 instances, while in 2 cases preparer
error cost the taxpayer over $1,500. Some of the most serious problems involved preparers not reporting business income in
10 of 19 cases; not asking about where a child lived or ignoring GAO's answer to the question and, therefore, claiming an
ineligible child for the EIC in 5 out of the 10 applicable cases; failing to take the most advantageous postsecondary education
tax benefit in 3 out of the 9 applicable cases; and failing to itemize deductions at all or failing to claim all available
deductions in 7 out of the 9 applicable cases.
agents also discovered unethical sales practices related to Refund Anticipation
Loans (RALs). The annualized interest rate for the RALs offered to the “taxpayers”
ranged from 380% to 470%.
I was surprised to find, in answer to my question to the speaker, that, while the GAO undercover agents did not bring a previous
year’s tax return with them, none of the preparers asked the new client for a copy of the previous year’s return!
study clearly finds, as I have been saying for years, that taxpayers
should not go to a “fast food” commercial chain to have their tax returns prepared.
To order download the full report go to http://www.gao.gov and search for GAO Report #GAO-06-563T.
Nationwide Tax Forum, while needing to “beef-up” and
restructure its educational sessions, remains a bargain – I paid only $129.00 for 3 full days of education using the
NSTP member discount. For more information on the remaining Forums go to http://www.taxforuminfo.com.
the National Society
of Tax Professionals Regional Conference, while I am glad that this year’s offering allowed me to make a tax deductible
visit to Chicago, I am not sure that I want this concept to permanently replace the National
Convention. Doing so will limit the locations of the conferences to cities and
hotels where a IRS Nationwide Tax Forum is being held. It will be ok if the IRS
continues to change the Forum locations and picks more centrally located hotels.
I had been concerned about the future of NSTP when Tom Cooke resigned as Executive
Director, as one of the main strengths of NSTP had been the perspective of a belt-way “insider” Tom, a law professor
at Georgetown University, brought to his presentations. However,
the new Executive Director, Beanna Whitlock, brings to the table not only 30+ years experience as a tax preparer,
but also insider experience from her brief tenure as Director of the IRS Office of National Public Liaison.
Beanna shook my hand and told me that I was the only person in the room who knew how
to prepare tax returns when I indicated that I still prepare federal income tax returns by hand and not via software.
on IRS website resources and Family Limited Partnerships
were excellent. As anticipated, the material on LLCs prepared by Paul La
Monica, and his presentation thereof, were up to his usual high standards.
The NSTP will be offering the same topics at Regional Conferences that coincide with
IRS Forums in Atlanta, Orlando and Las Vegas. For more information go to http://www.nstp.org/2006RC.html. The cost is $185.00 for members and $225.00 for non-members.
who got her "stuff" to me a few weeks ago did not remember if she had received
a NJ FAIR Rebate check in 2005.
I went to the NJ Division of Taxation website to check on the status
of her rebate but was unsuccessful as the system would not accept either her spouse's correct Social Security number or zip
I emailed her and told her to call the NJ FAIR Rebate hotline to check to see if a rebate check
was issued and cashed. She emailed back with the following report:
"I just called the
Fair rebate hotline - they said to check my return last year and see if I got one, then they would confirm. I said if
I knew I got one, I wouldn't be calling you!"
The Division of Taxation apparently has very low standards when it comes to hiring employees!
TUESDAY, JUNE 20. 2006
"After the last annual calculations of your fiscal
activity we have determined that you are eligible to receive a tax refund of $63.80. Please submit the tax refund request
and allow us 6-9 days in order to process it.
A refund can be delayed for a variety of reasons.
For example submitting invalid records or applying after the deadline.
To access the form for your tax refund, please click
here [link provided].
Internal Revenue Service"
Obviously, this email is totally bogus!
Pass the word along to your clients that this email
is a scam and if they receive it they should delete it immediately.
The first clue that this IRS email was a scam is the
statement "allow us 6-9 days in order to process it". The IRS has never processed anything, let alone a refund
request, in 6-9 days!
SATURDAY, JUNE 17. 2006
This just in from the National Society of Tax Professionals:
"If you filed a State of New York tax return for 2005
with the 'school credit' take note!
The contracted vendor
used by the State of New York to write their tax software
has acknowledged an error in the 2005 program.
Notices will be sent from
the State of New York disallowing the NYC school credit. A bill will be issued with interest and penalties.
If a refund was anticipated, then the taxpayer will have their refund lowered by the amount of the school credit.
New York State will not re-process returns
unless the taxpayer or their representative calls.
If you have prepared State
of New York tax returns for 2005 and your clients encounter
this problem; call the “protest unit” at 877-876-2077. The adjustment
can be made right over the telephone and a confirmation number will be given canceling the assessment if you ask."
Thanks to NSTP for the heads up!
FRIDAY, JUNE 16, 2006
I had a client who liguidated all his ROTH IRA investments (mutual fund shares) at a net
loss. Under federal law, this loss was deductible as a Miscellaneous Itemized Deduction on Schedule A of Form 1040.
In the same year the client had excessive capital gains from the sale of a non-IRA mutual fund,
which was reported on the federal Schedule D.
I asked the NJ Division of Taxation if the loss on the sale of the ROTH mutual funds could
be used to offset the gains on the non-IRA mutual fund on the NJ-1040. Here is the answer I received:
"The taxable portion of a ROTH IRA is calculated in the same manner as a distribution from
a traditional IRA and is reported in the "pensions" category of income on the NJ-1040.
Taxpayers may offset their losses only against other income earned in the same category and
in the same year. In other words, a net loss in one category of gross income may not be applied against gross income
in another category of gross income. N.J.S.A. 54A:5-2.
Therefore, you may not apply your net loss from a ROTH IRA liquidation with capital gains received
from a non-IRA mutual fund since they are different categories of income."
I had pretty much figured as much - but I just thought I would ask.
FRIDAY, MAY 26. 2006
As I expected, the
New Jersey Division of Taxation has announced on its website that the deadline for filing the applications for the 2005 NJ
FAIR Homeowner Rebate for seniors and the disabled and the 2005 Property Tax Reimbursement (Forms PTR-1 and
PTR-2) has been extended to August 15, 2006.
MONDAY, MAY 22, 2006
The report is of special interest to New Jersey taxpayers.
According to statistics recently released by the Congressional Research Service, New Jersey had the highest amount of AMT victims as a percentage
of all returns - 4.38% of all 2003 AMT victims were from New Jersey. New York was 2nd with 4.15%.
The statistics indicate that New Jersey has the 2nd
highest percentage of taxpayers who itemize deductions on Schedule A - 44.67%. #1 on the list is Maryland at 48.88%.
One reason is NJ's high taxes. The average amount of state and local taxes paid by a 2003 NJ filer was $10,003.00.
Only New York, at $11,098.00, and Connecticut, at $10,424.00, were higher. Under AMT, taxpayers receive no tax deduction,
and therefore no tax benefit, for these high taxes.
FRIDAY, MAY 12, 2006
THURSDAY, MAY 4, 2006
Thank God it's over!
This tax season went a bit more smoothly than prior years. I ended the season with fewer
GD extensions than usual.
As I do not file federal or state returns electronically (I do all my 400+ returns manually)
my only option for meeting the NJ Division of Taxation requirement was to use NJWebFile. While I had many problems with
the system last year, this tax season I found NJWebFile much more "user friendly". They expanded the list of taxpayers
who could use this option and most submissions were done quickly.
My only complaint is that I did have some difficulty in submitting returns in the early morning
or evening. I was at my desk at about 5:30 am most mornings, and I could not submit returns smoothly at this early hour.
As for the returns that I had to prepare manually, I liked the flow of the new 3-Page
format for the NJ-1040.
How was your tax season?
WORKING TOGETHER CONFERENCE
The IRS, working with several NJ accounting and tax preparation organizations, is sponsoring
a "Working Together Conference" at Rowan University in Glassboro on Thursday, June 8th from 7:30 am to 4:30 pm.
The schedule for the day is as follows:
7:30 - Registration
8:00 - Opening Remarks
8:15 - IRS Speaker - Christopher Wagner, Deputy, National Taxpayer Advocate
8:45 - IRS Examination Issues - National Re-engineering Program
9:45 - Break
10.00 - IRS Collection Issues - Offer in Compromise, Bankruptcy, Outsourcing
11:00 - IRS Campus Issues - Underreporter Notices, Correspondence Audits, Automated Collection
12:00 - Lunch (included)
1:00 - IRS Keynote Speaker - Stephen Whitlock, Acting Director, Office of Professional Responsibility
2:00 - Circular 230
3:00 - Break
3:15 - IRS Speaker - Robert Wilkerson, Director, Stakeholder Liason
4:15 - Closing Remarks
Representatives of the Taxpayer Advocate Office will be available throughout the day for consultation
and to assist in case resolution.
Eight (8) CPE credits in taxation will be awarded for full-day attendance.
The registration fee for the conference is $85.00.