Sunday, December 31, 2006

THE 2006 NJ-1040

Guess what arrived in my mailbox yesterday? The 2006 NJ-1040 booklet! As of this morning the 2006 NJ state Gross Income Tax forms are still not available online.

With the minor exceptions listed below, there is no change to the new and improved layout of the return instituted last year, the tax rates and tables remain the same, and the mailing addresses for the return are the same as last year.

Here is what is new for 2006:

* The Earned Income Tax Credit Schedule no longer appears on the bottom of Page 3, but instead is in the Instruction Booklet. Qualifying taxpayers who asked the IRS to calculate the federal EIC will fill in an oval at Line 50 of the 2006 NJ-1040.

* Homeowners must enter the total amount of real estate taxes paid and tenants 18% of the net rent paid for the year on a new Line 36a, whether or not they are claiming a Property Tax Deduction.

* When calculating the Use Tax Due on Out of State Purchases (does anyone actually do this?) taxpayers must use the appropriate 6% or 7% rate in effect at the time of the purchase.

* Taxpayers who owned, occupied and paid property taxes on a home in New Jersey that was their principal residence on October 1, 2006, must fill in an oval at new Line 36B, indicating that they may be eligible for the NJ FAIR Rebate.

* A new credit has been added for taxpayers who employ qualified handicapped individuals in a “sheltered workshop”. The credit is calculated on Form GIT-317.

* A new “World Trade Center Scholarship Fund” is added to the list of charitable funds to which taxpayers can designate a portion of their refund.

The NJ TeleFile system that allowed certain taxpayers to file their NJ-1040 via telephone has been discontinued.

The NJ FAIR Rebate application process remains unchanged. Tenants apply via Form TR-1040 as part of the NJ-1040 filing (Page 4), while homeowners, must continue to file separately after the tax season.

For the life of me I still cannot understand why the “geniuses” in Trenton insist on having homeowners file their application later in the year, separate from the NJ-1040 filing. When the NJ Homestead Rebate was the only rebate offered both tenants and homeowners would apply for it on a Form HR-1040. Now that there is once gain only one property tax rebate why can’t we go back to the HR-1040 filing process?

As I have said before, it would be much, much more convenient and practical for taxpayers and tax preparers alike to have all New Jersey residents apply for the NJ FAIR Rebate with the filing of the NJ-1040. I know I would much rather take care of everything at the same time, instead of having to deal with homeowner client inquiries about the rebate 3 to 6 months after the end of the filing season. I also expect that it would be more convenient and practical for the NJ Division of Taxation as well to have everything done in one filing.

The separate filing for homeowners especially affects senior citizen homeowners, many of whom are confused by the process and, I suspect, as a result do not file for the rebate. This defeats one of the major purposes of the rebate – tax relief for senior citizens!

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