WHAT’S NEW FOR NEW JERSEY STATE INCOME TAX FOR 2009

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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!

MY BEST WISHES FOR A "SUCCESSFUL" CHRISTMAS!

HO! HO! HO!

BOB FLACH

WHAT’S NEW FOR 2009 FOR NEW YORK STATE INCOME TAX RETURNS?

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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

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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

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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

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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 -

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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!

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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.

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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!

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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.

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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