THE FAMOUS STATE TAX SEMINAR

Every year on the second Saturday in January I attend the NJ chapter of the National Association of Tax Professionals’ “Famous State Tax Seminar” at the hotel formerly known as the Woodbridge Hilton (now the APA Hotel Woodbridge) in Iselin NJ.  I think I have only missed it twice in the 20+ years it has been offered, and only because of excessive snow.

I have always said that this seminar is a “must attend” for any tax professional who prepares NJ state returns.

The purpose of the seminar is to familiarize NJ tax professionals with NJ, and often NY and PA, state tax issues and changes in the areas of individual and corporate income tax, sales tax, payroll tax, property tax relief programs, and, occasionally, inheritance and estate taxes.  Over the years additional topics have been thrown in, some federal, some state, and some non-tax related, but the major focus is on state taxes.

This year’s offering concentrated on NJ and NY taxes, with a brief overview of the new PATH Act added at the end.

After finding a good seat I was personally welcomed by new chapter President Tom Watkins, who is apparently a fan of my writings.   I was also greeted by fellow fan and also chapter Board member Josh Mellum.

 

As has been the custom each year, the supposed “keynote” speaker is the current Director of the NJ Division of Taxation, and this is usually the first presentation of the day.  This year we met the newly appointed, currently “Acting” while awaiting official confirmation by the State Senate, Director John J Ficara, a lawyer and a CPA with a Master’s degree in tax law.  Like his predecessor, he is a tax professional from the private sector.  However the actual “keynote” presentation was made by former Acting Director Dennis Schilling, who has returned to his prior position as Deputy Director.

While it was nice to meet the new Director, and to note his acknowledgement of the importance of tax professionals to state tax administration by his attendance, this presentation was, as has been the case for many years now, not of any true substantive value and, in my opinion, really a waste of time.  The presentation does not deal with any of the real issues of NJ state tax administration or tell us anything new that is not also covered by the state tax updates, and there is no Q+A.

The keynote presentation was followed by a good and helpful line-by-line tutorial on the NJ-1040, an abbreviated version of the chapter’s previous half-day seminar, by former chapter President and a national NATP Member of the Year Marilyn Ayers and long-time chapter Board member, and also former President, Sherril Diamond.  Some items of interest mentioned by the duo included –

ü NJ taxable wages, reported in Box 16 of Form W-2, includes employer contributions to a SIMPLE, SEP, and SARSEP pension plan.

ü There is no NJ state treatment of “statutory wages” similar to the federal treatment.  The full amount of the wages are reported as such on the NJ-1040 without any allowance for applicable deductions (the IRS permits statutory wages, and related deductions, to be reported as self-employment income on Schedule C).

ü Actually a federal issue - you should open a ROTH IRA account with something, perhaps just $500, the first year possible, i.e. the first year you have earned income, even if you do not make any subsequent contributions for a long time, to begin the start of the “5-year rule”.  The 5-year waiting period before you can take qualified distributions from a ROTH account begins on the first day of the first year for which ROTH contributions are made.

ü The federal exclusion from tax for income received from renting your personal residence for less than 15 days during the year does not apply for NJ state tax purposes.  This income is fully taxed on the NJ-1040.

Next up were 4 separate presentations by representatives of the NJ Division of Taxation’s “Taxation University” on NJ state sales tax, general updates, projects and notices, and property tax relief programs, with an excellent buffet lunch midway between the sessions.

“University” head Jake Foy, a popular former regular speaker at the annual seminars (originally part of what I called the always excellent and informative “Jim and Jake Show”), returned to the podium to start the presentations with a review of sales tax laws.  New speakers Abra Watson covered Tax Updates and Mike Kovacs covered projects and notices, and returning Alexis DeRosa talked about the property tax relief programs (the NJ Homestead Benefit and the Property Tax Reimbursement).

There was really nothing new in NJ state taxes for 2015, but the speakers did a good job explaining what little there was.  All were truly well-informed on their topics and good speakers.  I have been a consistent critic of the competence of the NJ Division of Taxation, but the “University” representatives have always been truly knowledgeable, competent, and genuinely concerned, and have successfully helped me and other NJ practitioners with individual client issues during the year.

There was a brief discussion of the delays in processing refunds on state returns, with Dennis Schilling providing an “assist” to speaker Abra.  There will continue to be some delays with 2015 refunds, as the Division continues to take additional steps to verify taxpayer identity in an attempt to avoid fraud and theft.  I personally did not experience any serious delays with my clients’ 2014 NJ refunds – the serious problems involved federal refunds and were, in my opinion, more a result of IRS budget cuts and mismanagement than additional identity verification.

Two new item – Electronically filed NJ-1040s will request the taxpayer’s driver’s license number, but this is an optional (for now) entry and returns will still be normally processed if this information is not provided.  And NJ corporate income tax returns (CBT) prepared by a tax pro must now be filed electronically (which is going to be a problem for me).

The other items worth reporting involve the Property Tax Reimbursement (aka “Senior Freeze”) program –

ü The 2015 PTR income threshold is $87,007, although there is no guarantee that this will once again drop to $70,000 at budget time.  The PTR-1 or PTR-2 applications should, nevertheless, be completed and submitted as long as 2015 income, which is different that the NJ Gross Income reported on the NJ-1040 and used for the Homestead Benefit application, is within this threshold.   

ü You can check the “base year” amount for the PTR-2 application online at the NJDOT website.

ü If a qualified NJ homeowner is already in “the system” with a base year and moves to a new residence they can file a PTR-1-C to re-establish a new base year after 2 years.

ü A qualified NJ homeowner who should have been receiving reimbursements for prior years, but never submitted an application in the past, can “retroactively” establish an initial base year by going back and filing a PTR-1, and verifying payment of real estate taxes, for every missed year (each year must be a PTR-1 and not PTR-2).  The homeowner will not receive the appropriate reimbursements for past year property tax increases, but will establish a base year from the first PTR-1 filed for use going forward.  The PTR-1 forms for past years are available on the NJDOT website.

Issues were raised about the filing process for each of the property tax relief programs by attendees. 

NJ Homestead Benefit – the application for this benefit, previously known as the Homestead Rebate, had originally, and for many years, been a part of the NJ-1040 filing, with the application eventually becoming form Page 4 of the NJ-1040 known as HR-1040.  However, for the past several years the application has become a separate filing, with the separate application package not mailed out until May.  An audience member felt, as I have for years now, that the application should be returned to a component of the NJ-1040 filing.  This would save the Division tons of money, as it would not need to do two separate mailings and processings, and would assure that all qualified homeowners properly applied, as the information, already available on the NJ-1040, would be entered at the time of the NJ-1040 filing by the preparer, paid or otherwise.  In addition, it would not require additional work for tax professionals after the end of the tax filing season.  Alexis promised to take this suggestion back to the “office”.  

Property Tax Reimbursement – the initial deadline for filing this application has always been June 1^st, but historically this deadline has consistently been extended each year to eventually October 15^th or 31^st.  While tax preparers are aware of, and expect, the annual filing deadline extension, in the back of our minds is always the possibility the the deadline will not be extended one year and many qualified homeowners will be royally screwed (something the State of NJ often does to its taxpayers).  An attendee asked why the initial deadline is not officially changed to October 31^st.  The answer is apparently that the June 1^st deadline is part of the statute that created the program (with a provision that the deadline may be extended by the Treasury Department), and the law itself must be changed to permanently change the initial filing deadline.

This suggests two actions that NJ-NATP Board should formerly undertake –

(1)  Write to the NJ Division of Taxation, or the Treasurer and/or Governor, and request, on behalf of the 1100+ members, that the application for the Homestead Benefit be reinstated as a component of the NJ-1040 filing, perhaps on an expanded NJ-1040-H.

(2)  Write to the appropriate state legislators and request, again on behalf of the 1100+ members, that the Property Tax Reimbursement statute be revised by the legislature to permanently change the initial filing deadline for the PTR-1 and PTR-2 to October 31^st.

Noticeably missing from the NJDOT line-up was a speaker who I had often referred to as the “comic relief” in my past reviews – John Kelly.  John was also a truly knowledgeable, competent, and genuinely concerned speaker, providing valuable information each year but in a somewhat comic fashion.  I learned that John had retired from the Division, but that he was present at the seminar in the audience as a participant NATP member.  It was John who told us that the PTR deadline was part of the statute, and suggested that NJ-NATP write to legislators to request the permanent change.  So, although not an official representative any more, he still contributed valuable information to the presentation.

The day ended - after the also “famous” desert break, which this year included sugar-free cookies for us diabetics (thanks, no doubt, to the efforts of Marc Standig) - with a presentation by frequent popular contributor Kathryn Keane from New York, who spoke first on NJ state tax updates and ended the seminar with the brief overview of PATH.

There was nothing much new for NY as well, except for –

ü The IT-2 and IT-1099-R filing requirement is back for paper returns.  These are separate returns that manual filers must waste time completing instead of merely attaching state copies of W-2s and 1099-Rs with state tax withholding to the returns.

ü Prior year NY returns must now be electronically filed (unless you are exempt, like me, for not using flawed and expensive tax preparation software) and amended NY returns can now electronically filed.  

ü The State of New York is going overboard on required additional due diligence and recordkeeping for Earned Income Credit applications, making tax preparers Social Worker duties even more excessive and time-wasting.

As usual the NJ-NATP “Famous State Tax Seminar” was an excellent offering, and the chapter Board and Education Committee deserve kudos for a job well done.

FYI – the NJ chapter is offering a half-day ACA Update and Review workshop on January 21^st, also at the APA Hotel Woodbridge.  The seminar is presented by former fellow tax blogger, and online buddy, John Sheeley, an excellent and knowledgeable presenter.  Click here for more information.   

TTFN