NEW JERSEY TAX RETURN COPIES

For New Jersey taxpayers and tax professionals – here is some information from a fellow member of the New Jersey chapter of the National Association of Tax Professionals (although I now live in PA I still consider myself a member of the NJ chapter) that was new, and a pleasant surprise, to me -

“Did you know that you can order copies of filed NJ tax returns? Well you do now!

You can obtain a copy of a previously filed New Jersey income tax return by completing Form DCC-1. There is a fee of $1.00 per side of the return. Mail the completed form, with payment, to: New Jersey Division of Taxation, Document Control Center, P.O. Box 269, Trenton, NJ 08695-0269.

Copies of previously filed New Jersey income tax returns (Form NJ-1040, NJ-1040NR, or NJ-1041) may also be obtained by delivering a completed Form DCC-1 with the appropriate payment to a Division of Taxation Regional Office. Regional Offices can provide copies of previously filed New Jersey income tax returns only to the person(s) who signed the requested tax return or to the authorized representative of the taxpayer(s) who provides a Form M-5008-R, Appointment of Taxpayer Representative, that covers the return(s) being requested. A photo ID of the taxpayer (or the taxpayer’s authorized representative) is required.

Note: Payment for copies of tax returns can only be made by check or money order; payment cannot be made in cash or by credit card.”

ONE REASON YOU SHOULD KEEP COPIES OF YOUR TAX RETURNS FOREVER

One of the most frequently asked questions I get from clients and readers is “How long should I keep my tax returns?”.

I have always said you should keep the paper copy of your tax returns (Form 1040 or 1040A, and corresponding state returns, plus all supporting Schedules, Forms, and worksheets) forever. This provides a permanent record of your financial history. You never know when the information on a prior year’s tax return will come in handy for a variety of tax or financial reasons, or just to satisfy personal curiosity. 

You should also keep copies of all W-2s forever, and, as fellow tax blogger Russ Fox of TAXABLE TALK has suggested, copies of proof of filing and proof of mailing returns.

This advice applies to tax professionals as well.  As a tax preparer I am required by law to keep on file copies of tax returns I have prepared for 3 years.  But I keep copies of every return I have prepared for all current clients.  For some clients I have copies of their returns going back to the early 1970s.

I recently came across an excellent example of the benefit of keeping copies forever.

A long-time client inherited from my mentor, a lifelong NJ resident, is beginning to take annual Required Minimum Distributions from his IRA accounts.  The source of the monies in his IRA accounts includes deductible contributions to Keogh and SEP accounts, eventually rolled over into IRAs, deductible IRA contributions (during the 5 years in the 1980s when everyone with earned income could contribute to an IRA regardless of the amount of their Adjusted Gross Income) and rollovers of employer pension plans partially funded by pre-tax employee contributions.

The RMDs will be fully taxable on the federal Form 1040, as all of his contributions to the various sources were either deductible or “pre-tax”.  However his federally deductible contributions to Keogh, SEP and IRA accounts were not deductible on the NJ-1040, and are “after-tax” for NJ state income tax purposes.  So he has a “basis” in his current IRA accounts for NJ state tax, and part of his RMDs will be non-taxable return of after-tax contributions on the NJ-1040.  The greater the total of employee after-tax contributions the greater the amount of the RMD that will be tax-free to NJ. 

I have copies of this client’s tax returns going back to 1984, so I can add up the amount of his federally deductible contributions to Keogh, SEP, and IRA accounts from 1984 through his retirement in the late 2000s.  However he was making contributions to these accounts in years before 1984. 

I can guess the deductible IRA contributions (everyone with earned income could make IRA contributions from 1982-1986 – so I can assume he made the maximum contribution in 1982 and 1983 based on the fact that he did so in 1984-1986).  But Keogh contributions are based on the amount of net self-employment income, and I would need the actual returns from before 1984 to get the correct numbers.

If the client had kept copies of all his federal tax returns forever I could get the needed information from him.

So, in this case, information from tax returns going back to the late 1970s would help reduce the tax liability on current state tax returns.

TTFN