Thursday, January 14, 2010


Here is a comment I received from a fellow tax professional regarding my post on the IRS Return Preparer Review (Part I and Part II) -

"Hi Robert,

I strongly feel that AGAIN - Tax attorneys and CPAs were treated as being they know all, because of the ill conceived idea of the public and it looks likes the IRS also now, that they know taxes, because they have through the years built up that false reputation. Sadly I don't think it will ever change...

So do we, us lonely little know nothing tax preparers get any initials now to use, if we complete the 3 steps? LOL

As for the other parts - I am already registered and have my PTIN # - renewing it every 3 years will just mean a small hassle and probably have to pay $75 to IRS for it now instead of being free.

As for testing, I'm glad they gave 3 years to complete, but I was a little disappointed in no grandfathering for older preparers.

Take care, Tom

It seems that great minds think alike!

I am disappointed that I did not hear from other tax professionals on the issue.

This reader had a comment/question about my “ROTH IRA Conversion Trap” post -

"Agree that no one was focusing on spreading IRA basis. Is anyone focusing on NJ tax implications? What similar complexity faces NJ residents that paid taxes on their SEP-IRA or similar contributions, but did not in the years before they moved to NJ and, for example, lived in NY where as with Federal taxes, the SEP-IRA contributions were not taxed? I'll bet NJ has not even thought about this.

A. Katz"

According to the instructions for the 2009 NJ-1040 –

If you converted an existing IRA to a roll-over Roth IRA during tax year 2009, any amount from the existing IRA that would be taxable if withdrawn must be included in your gross income on Line 19.”

I assume it will be the same for 2010 conversions. So for NJ tax purposes one would need to look at the source IRA and determine its NJ state “taxability”.

If the IRA was funded by taxpayer contributions then only the earnings would be taxable. If it was funded by employee contributions or was rolled over from a pension plan then the entire amount could be taxable.

The NJ instruction book has a worksheet for determining the taxable portion of an IRA withdrawal. Note that for NJ purposes – “For multiple IRAs, the taxable portion may be determined by using a separate worksheet for each IRA, or all IRAs can be combined on one worksheet”.

I do not think that prior residence in another state would make a difference. While I do not have the time to research the issue, I would expect that all contributions would be treated as if they were made as a NJ resident. Does anyone disagree?


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