NATP FEELS OUR PAIN

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While the National Association of Tax Professionals “feels our pain” with regard to the New York State requirement that “non-resident” tax professionals who prepare NYS income tax returns must register and pay a fee, this empathy seems to be the extent of its involvement in the issue.

A little history from the NATP government relations office -

“The New York Chapter of NATP informed its membership of the bill to regulate tax return preparers. Thereafter, the state Chapter’s government relations volunteers interacted with the New York legislature concerning its position with regard to this law. It came as a surprise to all that the bill was going to affect non-resident tax preparers. None of the professional organizations, to our knowledge, were focused on the non-resident implications of this legislation. They were more focused on the implications for New York preparers and, in some cases, on credentials not recognized in the legislation. We were not a little surprised to note, a good while after passage, that the state was going to interpret this legislation as applying to non-resident preparers as well. We received this information from our New York Chapter volunteers.”

New York is not the only state that requires the registration of tax preparers, but it is apparently the only one that extends this requirement to “non-resident” preparers. NATP told me –

“Oregon, by comparison, has a law requiring everyone who prepares an individual income tax return to be licensed in the state of Oregon. The state, however, does not interpret the legislation to apply to non-resident preparers unless they either have a physical presence or are actively soliciting business in the state.”

California also regulates its tax preparers, but I am not aware of any requirements for “non-resident” tax pros who happen to prepare California state income tax returns.

As for any legal action on behalf of affected members, NATP said -

“The likelihood of a successful suit on behalf of non-resident preparers is low because of the impracticality of incurring significant legal costs to mount such an attack over a $100 fee. I’ve read your blogs, and I know you’re upset over the principle of this thing. So are we. But we are also constrained with proper stewardship of membership dollars. This couldn’t be more frustrating from that standpoint.”

I do agree that an extensive legal campaign would be expensive, and prohibitive for one organization. But perhaps in conjunction with other organizations with affected members? I told NATP that I would be willing to contribute $10-$20 toward a “legal defense fund” to fight this unfair, and perhaps illegal, requirement

The bottom line advice from NATP was to simply, “pass it on to the consumer”.

“Let your clients know where it has come from. Even though the $100 charge comes to you for the rest of your practicing life, it will be levied on the “tolerant” taxpayer each year. Your $100 annually spread over 12 returns will wind up as a $8.50 surcharge.”

It should be pointed out that this fight is not simply over $100 – but $100 (and possibly more in the future) per year over the tenure of one’s tax practice. And, as I told NATP in my email, “if NYS can get away with it - and add $3.6 Million to the state coffers - you can be sure there will be more states to follow suit.”

Just curious – are they any lawyers reading this post? What is your take on the legality of a state imposing registration and fee requirements on individuals with absolutely no physical presence in that state?

As a point of information, I first learned of this nonsense via a “tweet” from a fellow tax blogger who is an Enrolled Agent practicing in New York State and not from NATP.

TAFN

A "NO PROGRESS" REPORT

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No progress to report on the repeal of the New York State law that requires tax preparers, regardless of where they live and work, who prepared TEN (10) 2008 NYS income tax returns and will prepare only one (1) 2009 NYS return to register and pay a fee of $100.00, unless they are CPAs or attorneys licensed to practice in the State of New York.

See my post “INCOME TAX PREPARER REGISTRATION - AN UPDATE” for information on the actions taken by the NY State Society of Enrolled Agents to repeal the law.

NYS Assemblyman David McDonough has introduced legislation in NYS will exempt Enrolled Agents from registering and paying the same as CPA's and attorneys but does not repeal the law, as it is expected to raise $3.6 Million.

I expect that if this bill passes the NYSSEA will be happy and will not continue with its legal action to repeal the requirement altogether. After all the NYSSEA is only concerned about Enrolled Agents who live and work in New York.

I hope that NATP, NSA, AICPA and NSTP would join forces to fight the application of these new requirements to tax preparers who live and work in states other than New York and have no physical presence in New York.

What would happen if the various membership organizations joined forces to acquire a legal opinion on this issue that stated New York does not have the authority to regulate "non-resident" tax preparers, and it asked all its non-New York members who would be subject to the new law to send a letter to New York that said the following -

Dear State of New York:

I am a professional tax preparer with absolutely no physical presence in the State of New York who happens to prepare New York State tax returns for some clients. Under your new law I am required to register with the State of New York and pay a $100.00 fee.

As I have absolutely no physical presence in New York State I sincerely believe that the State of New York does not have the authority to require me to register and pay a fee in order to continue to prepare New York state income tax returns for my clients.

{Cite legal argument here}

Therefore I refuse to register of to pay the fee.

Very truly yours,

John Q Taxpro

If the State of New York received 5,000 of the above letters would it spend the time and money to go after each and every one?

Just a thought.

I would agree that New York can register and require a fee from tax preparers who work in New York – actually preparing New York State tax returns in an office located within the physical boundaries of the state. But they have no right to make "non-resident" preparers register or pay. I like the following analogy in discussing this ridiculous requirement –

If I open a barber shop in White Plains, New York I am required, I expect, to register the business with the State of New York and pay for a commercial license.

But if I open a barber shop in Weehawken, New Jersey and I just happen to cut the hair of several individuals who live in New York State I would follow the rules and regulations concerning barber shops that exist in New Jersey, but I would have no obligation to register with and pay a fee to the State of New York.

TAFN

INCOME TAX PREPARER REGISTRATION - AN UPDATE

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This just in on the New York State registration issue -

The NY State Society of Enrolled Agents sponsored a bill to recall the registration requirement (A09028) that passed in the Assembly.

A Senate version of the recall bill (S6117) was scheduled to go to the floor for a vote, but due to some political FU the bill was never acted on. It is doubtful that the NY Senate will meet again before the end of the year – so it may not be addressed until early 2010. NYSSEA reports that S6117 has the backing of the governor, the NYS Department of Taxation and Finance, the Chairman of the Senate Finance Committee and the Senate Majority Leader.

NYSSEA also has a lawsuit pending in the Supreme Court, New York County to have the registration law declared unconstitutional based on the U.S. Supreme Court Sperry case which mandates that no state can hinder a federal license granted by an Act of Congress.

The final legal brief is due to be served on the NYS Attorney General by October 16th. The next step is the oral argument before the judge. That might not take place until November with a decision hopefully sometime in December.

Of course the NYSSEA is, I expect, only interested in the fact that Enrolled Agents are not exempt from the registration and fee, as are CPAs and lawyers licensed to practice in the State of New York. I do not know if they are also interested in the non-resident issue.

Thanks to fellow tax blogger, and NYS EA, John Sheeley for keeping me abreast of new developments on the issue.

TAFN

IT'S THE PRINCIPAL OF THE THING

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You may think me petty to complain about having to pay $100.00 to the State of New York in order to be able to prepare NYS tax returns for clients, even though I have absolutely no physical presence in the State of New York. Hey, it’s just another cost of doing business – fully deductible and eventually paid for by the client.
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It is the principal of the thing. Why should a state in which I neither live nor work require me to register and pay a fee to help a client prepare a required state form? If I were representing 1040 clients in matters before the New York Department of Taxation and Finance on audit or other related issues it would be one thing. But all I am doing is preparing a state tax return in my home office in New Jersey, most times for residents of the State of New Jersey who just happen to work in New York.

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Hey, if I were a barber with a shop in New Jersey will NYS require me to register and pay a fee if I cut the hair of NYS residents?

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But perhaps more important, let me quote from a comment in an email response I received from a representative of a tax preparation membership organization –

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“I fear that, if they’re successful with this, other states will take up the practice. Most states today are in budget strife and they’re looking for easy revenue sources.”
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When clients move out of New Jersey and to another state many will continue to send me their 1040, and new state return, to prepare each year. Plus I have a few clients with business or investment interests in other states. As a result I do resident and non-resident state tax returns for Kansas, Maryland, North and South Carolina, Pennsylvania, Rhode Island, and Virginia. What if I had to pay a $100.00 fee to each state for which I prepare a tax return!

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Luckily, in my case, I do not do more than 2 or 3 for each of these states per year, so I expect I would not be required to register and pay if the New York State idea becomes popular.
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The State of New York is not doing this to upgrade the level of competence among those who prepare its state income tax returns or in an attempt to increase compliance – like the IRS is considering with its recent review of the issue of registering and licensing federal tax preparers. There is no initial testing or other requirement to prove competence, or ongoing continuing education requirements to maintain registration. The only reason this is being done is because it is an easy way for New York State to raise money!

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The email I mentioned above also included the following statement -
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“I’ve heard some say ‘this is not good for the industry’. That’s true. But you know who it’s REALLY not good for? The taxpayer, that’s who. The taxpayer will wind up footing this as he usually does.”
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TAFN

JUST A REMINDER

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Just a reminder – the NJ chapter of NATP has a breakfast seminar scheduled for Thursday, October 29th from 9:00–11:00 AM at the Holiday Inn of Tinton Falls (actually in Tinton Falls, unlike Woodbridge Hilton). A full hot breakfast is included!

Attorney Michael K Feinberg will discuss tips for preparing NJ inheritance and estate tax returns. Registrants will earn 3 CPE credits.

The cost is $50.00 for members and $65.00 for nonmembers if your registration is postmarked before 10/23/09. It is $85.00 for both members and nonmembers if postmarked on or after 10/23/09 or at the door.

Click here to download a registration form.

TAFN

DIRTY ROTTEN SCOUNDRELS!

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I guess we are screwed. Regardless of the physical location of your tax preparation practice, if you meet the requirements of a “commercial preparer” under the law you must pay the GDMFBs in Albany $100.00 if you want to prepare 2009 NYS tax returns for your clients.

According to this item from the latest issue of NATP’s weekly online newsletter you are required whether your office is in Buffalo, New York, Jersey City, New Jersey, or Nome, Alaska!

“New York State Requires Preparer Registration

Normally, NATP does not report on state issues. We made an exception in this case because of the far-reaching implications this new law may have on anyone in the nation who prepares New York state income tax returns.

The State of New York passed a registration law earlier in the year that applies to everyone who prepares New York State income tax returns…that means out-of-state preparers too! This is an annual requirement.

You must register if you do one of the following:

* Prepare New York State income tax returns in 2010 as a tax return preparer.

* Help to issue or administer a refund anticipation loan or refund anticipation check.

You must pay a $100 registration fee if:

* You were paid to prepare 10 or more New York State tax returns in 2009, and will prepare at least one personal income tax return in 2010; or

* You will be paid to prepare 10 or more tax returns for 2010.

With regard to Circular 230 preparers, only CPAs and attorneys licensed in the state of New York are exempt from this requirement. EAs are not exempt. No one is exempt if they are not licensed in the state of New York whether CPAs, attorneys, or EAs.

The law provides for some fairly stiff penalties for not registering (beginning at $250) or not signing prepared returns ($250 for each return not signed), or filing returns without the unique ID# assigned at registration ($100 for each failure), or for employing a tax return preparer who is not registered ($500 per occurrence). There’s also a penalty for failing to pay the fee ($50 for each return). Those who haven’t registered or paid the fee (if required) will not be permitted to represent their clients before the Division of Taxes or the Division of Appeals.

There is a list of prohibited acts that carry a $500 penalty for each violation in addition to the above listed penalties. There are ways to abate these penalties as well.

For a more detailed description of this far-reaching law, click here.

To access the New York State informational web page, click here.

To see a discussion of this in the New York Chapter newsletter, click here.

To see the slides the New York Department of Taxation and Finance is using to educate tax return preparers, click here.

If you need to talk to someone in the New York Department of Taxation and Finance about this, you may contact Suzanne Reusch at 716.855.5302.”

A fellow tax blogger has informed me that a similar notice was sent to ALL franchisees of a national tax preparation chain.

I am curious to know if any of the tax preparation membership organizations are planning to seek a Court ruling on New York State’s authority to force preparers with absolutely no physical presence in New York State to pay this fee.

TAFN

NY NATP NEWSLETTER

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The September issue of the New York chapter of NATP is now available. Click here to download.
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Included is information on the new New York Tax Preparer Registration Program that took me by surprise last week.

This issue also includes information on the dates, location and content of the chapter’s 2009 seminars and includes a registration form.

The chapter has a new seminar offered at a few locations in early December – a basic, but complete IT-201 course. According to the newsletter, “The course begins with the federal return and takes ti to the New York personal income tax return and through the New York adjustments (additions/subtractions), credits, taxes and all attachments. Nonresident (IT-203) issues will also be addressed.” A registration form is included in the newsletter.

This new seminar sounds great. And it is only $99.00 ( you must register by November 1st)! I may just sign up myself.

TAFN

HAVE YOU HEARD?

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Have you heard what the DFBs (clean version = “damned fool bureaucrats”) in Albany are trying to get away with?

According to the New York State Department of Taxation and Finance website (highlight is mine) –

“A new law requires the individuals described below to register each year with this department. Some must also pay a registration fee. If you are required to participate, you can register online starting in early November.”

Who must register and pay (again the highlight is mine)?

”Generally, you must register if you do one or both of the following:

• prepare New York State income tax returns in 2010 as a tax return preparer

• help to issue or administer a refund anticipation loan or refund anticipation check

You must pay a $100 registration fee if:

• you were paid to prepare 10 or more New York State tax returns in 2009, and will prepare at least one personal income tax return in 2010; or

• you will be paid to prepare 10 or more tax returns for 2010.”

They are not talking about those who prepare 100 or 50 or 25 NYS returns during the season – but 10. And if you prepared 10 this year you must pay $100 this year if you plan to prepare only 1 2009 NYS return! So I can’t even count my NYS returns and when I come to #9 stop.

I can just imagine the reaction of the client of the preparer who did 11 NYS returns this year but will only do 1 2009 NYS return when he gets his bill and discovers that his fee has been increased by $100.00!

Exempt from registration and paying are (I am sure you can guess what tops the list) –

• Certified Public Accountants (CPA) or Public Accountants (PA) currently licensed in New York State
• Attorneys currently licensed to practice in New York State
• Employees who are preparing tax returns under the direct supervision of a CPA, PA, or attorney licensed by New York State
• Employees of a business who prepare that business’ return or report
• Clerical employees
• Volunteer tax preparers

But not Enrolled Agents.

I have found nothing in the website announcement quoted above (click here) or the Office of Tax Policy Analysis Taxpayer Guidance Division memo (click here) that says that this law applies only to tax preparers who have a physical location in New York State.

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It appears that NJ tax preparers who prepare NYS returns, and what preparer living or working in northern NJ does not do at least a few, and meet or will meet the 10 or more in 2009 (2008 returns) or 10 or more in 2010 (2009 returns) requirement must also register and pay!

Upon registration a preparer will be given a unique identification number assigned by the Tax Department that must be included on any New York tax return or report that requires the preparer’s signature. This will be, I expect, a different number from the preparer’s federal PTIN. Another number to remember!

The first I heard of this nonsense was Friday late afternoon when I was asked if I thought it was Constitutional in a DM Tweet from a NYS tax preparer. Nothing was mentioned about this at the NJ NATP Annual Conference I attended on Thursday.

The NYS preparer’s reaction to the requirement was - “It will just drive more ‘kitchen table’ people to not sign returns. A pain in the ass for sole practices like you and me”

While NYS certainly has the right to register its resident tax preparers (those with a physical presence in New York) and charge a nominal registration fee (I hardly think $100 is nominal), what gives it the right to govern non-resident preparers? This sounds illegal to me.

Does NYS require doctors living and working in New Jersey to register and pay a fee if they treat patients who live in New York?

I have contacted Board members of both the NJ and NY chapters of NATP for guidance. I want to know what I, and the chapters, can do to fight this ridiculous new requirement.

If New York State gets away with this you can be damned sure that New Jersey will promptly follow suit. The Garden State will take advantage of any possible way to continue to soak those who live and work here to provide pork to its politicians.

Why is it that when any government entity - federal, state, county, or municipal - runs into financial trouble the solution is always to raise existing or create new taxes and fees? It is never to reduce spending. And if they do propose to reduce spending it is always in programs that actually benefit the entity’s constituency and never in pork or entitlements.

I will keep you up-to-date on this issue here at NJTPB.

TAFN

NJ NATP ANNUAL CONFERENCE

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Yesterday I attended the New Jersey chapter of the National Association of Tax Professionals Annual Meeting (21st) and Conference at the Woodbridge Hilton in Iselin, NJ (no, the Woodbridge Hilton is not in Woodbridge).

As it turned out the person who sat next to me for the day, arriving a few minutes after I did, was a former colleague whom I had not seen in perhaps 20 years! He was one of the college students who had worked for my mentor, James P Gill, during the tax season. I started with Jim in February of 1972 and he joined “the firm” a couple of years later. He stayed with us for several seasons, and had come back on occasion to visit and help out after settling in to full time employment elsewhere.

He recognized my trademark meticulous handwriting, and the fact that I used a ruler to write so straight, as I was making notes on the presentation!

We had a good time reminiscing about the “good old days” of the tax profession and mentor Jim Gill, who has since gone to his final audit, during the breaks and lunch.

This year’s conference consisted of a full day of federal tax topics presented by one speaker, triple threat Alice Orzechowski, a CPA, CMA (Certified Management Account) and EA. Over the course of the day Alice covered the dreaded Alternative Minimum Tax, the Minimum Tax Credit, Form 1041, Settlement (Closing) Statements, and Real Estate Transactions.

Alice is a good and knowledgeable speaker with whom I was familiar from national NATP seminars I had attended in the past. She provided case studies for us to work when dealing with the AMT, and used questions to cover Deductible or Not on the Form 1041 and also for the Real Estate Transactions topic. She provided useful tax planning and preparation tips and strategies in each of her topics.

As I look back on the day, while, again, Alice was a good speaker and covered some good topics, I think I prefer the format that was used last year, and that is used for the January conference, which is several separate presentations by different and differing individuals. I also like having part of the program given by representatives of the IRS and NJ divisions or departments – to get the government perspective and insight on certain issues and concerns.

The room was once again set up with multiple circular tables throughout. While I still prefer the traditional long rectangular table format, the seating was better than last year as chairs were set around only the back-half of the table, allowing for “more better” and less obstructed viewing of the speaker and presentation.

I was truly pleased as punch that, with the exception of a few truly brief mentions in the course of the other presentations, the word “ethics” was not on the agenda! We did not lose two hours of actual tax education by having to listen to the usually obligatory ethics presentation. Kudos to the chapter Education Committee! I wonder if they did this in response to my comments on last year’s program.

The chapter’s Annual Meeting was held immediately following the satisfactory hot and cold buffet lunch held in the same room. The various reports were given via handout and not read. The Presidents report mentioned that the chapter was fast approaching its goal of 1000 members and mentioned the various awards received at the NATP National Conference, held in 2009 in Reno (next year is Austin, Texas – and I plan to attend).

As is the case each year the Annual Meeting included the election of officers, based on geographic “regions”. I had told the Board members I knew that I would be interested in running and had submitted a “resume” to the Nomination Committee for consideration last month, but did not realize that the election would be so soon. In a few of the “regions” a candidate ran “unopposed” – but there was a contest in two of them. As it happened I had “opposition” in my region – and I lost (I knew I should have voted for myself). Several Board members offered condolences and hoped that I would return my hat to the ring next year. I expect I will so do.

The meeting included a brief presentation by Kathy Stanek, Executive Director of NATP, who was billed in prior publicity as the “keynote speaker”. Kathy touched on NJ-NATP history and statistics, touted membership in NATP, and gave out some prizes. There were three admitted non-members in the audience, including my former J P Gill colleague (this was his first NATP or NJ-NATP event), who had, upon my recommendation, decided to join earlier in the day and was given a token gift by Kathy as the “newest member” of NATP.

The Education Committee once again did an excellent job and deserves a “well done”.

To read a more about the day check out my post “This Was A Real Nice Conference” at THE WANDERING TAX PRO.

I truly look forward to the chapter’s excellent New Jersey State Tax Seminar held every year at the same place (Woodbridge Hilton) in January. And I might even attend the December breakfast meeting.

As I said at the end of my TWTP post – “if you are not already a member of the National Association of Tax Professionals you should be! If you decide to join please mention my name as a “referral” and I will get a gift from NATP.”

TAFN