2011 Volunteer Tax Preparation

2011Volunteer Tax Preparation

NJ Division of Taxationwww.njtaxation.org

Important Contact Information• Regional Information Centers

• Customer Service Center– 609/292-6400

• Division of Revenue E-File Unit– 609/633-1132

• Training & Outreach– [email protected]

www.njtaxation.org

New for 2011

• Emancipation Day!!!– Returns due April 17th, 2012

• Charitable Contributions– One new charity

• New Jersey Lung Cancer Research Fund

Reminders

• Roth IRA Conversions done in 2010– 2011/2012 Tax Reporting

• Form NJ-1040-H – Property Tax Credit

• No Tenant Rebate Application– Suspended by the State Budget

• Form 1099-G no longer mailed

Important Processing Information

• Do not staple, clip or otherwise attach pages together

• Place only 1 return for each envelope

• You may not report a loss on Form NJ-1040

• Leave unused lines ‘Blank’

Form NJ-1040

Identifying InformationPage 1

Civil Union / Domestic Partner• Civil Union Couples – Filing Status

– “Married” under NJ Law– IRS does not recognize CU’s

• Domestic Partner – Exemption – Not Married– Line 6 Exemption may apply

• If partner does not file NJ-1040

Line 11: Dependents Attending College

• Must be a dependent– Line 9 or 10

• Full-time College Student– Defined by Institution

• Under age 22– For Entire Tax Year

Form NJ-1040

Reportable IncomePage 2

Tax-Exempt Income• Social Security

• Unemployment Compensation

• Debt Cancellation – Form 1099-C

• Military PensionsRefer to page 21

Wages (Line 14)• Use W-2 Box 16, ‘State Wages’

• State wages often differ from Federal wages (Box 1)

• All W-2s received must be included with the NJ-1040

W-2 Sample

Tax-Exempt Interest (Line 15b)• Obligations of the State of New Jersey

and/or any of its political subdivisions

• Direct Federal Obligations

• Pub GIT-5, Exempt Obligations

Refer to page 23

Must enclose an itemized schedule if line 15b is over $10,000

Net Profits from Business (Line 17)

• Federal Schedule C– Use Federal Expenses and Deduction

– 100% Meal/Entertainment Deduction

– Line 17 ‘Blank’ if Net Loss

– See page 23, NJ Instruction Booklet

Reporting Pension, Annuity, and IRA Income

Line 19

Retirement Plans

Contributory Non-Contributory

fully taxable

Three-Year Rule / General Rule• NJ accounting methods

– No ‘Simplified’ Method

• Client needs Contribution Records

• Often varies from Federal Treatment

Three-Year Rule• If employee contributions recovered within

36 months of date of first pension payment

• Pension income is not reported until contributions are recovered

IRS no longer allows three year rule

General Rule • Percentage is used based on

proportionate share of Contributions to Total Value of the Pension

• This is applied each year to the Pension amount received

Use Worksheet A, pg 24, to determine which pension method to use

2010 Conversions to Roth

• NJ Following the IRS• Deferred until 2011-2012

• NJ/Fed reporting must be the same

IRA Withdrawals• Use Worksheet C, Page 26

• Client Record Keeping– IRA Contributions– Prior Year Worksheet C

• Roth Distributions– Exempt if ‘Qualified’ – page 27

Taxable Pension (Line 19)• Line 19 is for the total of:

– Taxable Pensions (after reduction by Three-year or General Rule)

– Taxable Annuities

– Taxable IRAs

Gambling Winnings (Line 23)• Include Casino and Track Betting

• Include NJ Lottery Winnings– Only with prizes exceeding $10,000

• Substantiated Losses– Can be used to Net total winnings

Record Keeping - LossesSubstantiated through:• Daily log

• Journal

• Canceled check

• Losing race track pari-mutuel tickets

• Losing Lottery Tickets

Pension Exclusion (Line 27a)

• Eligibility:– Age 62/older or Disabled – Total income of $100,000 or less

• Amounts Based on Filing Status– $20,000 – MFJ/HOH/Widow

– $15,000 – Single

– $10,000 - MFS

Retirement Exclusion (Line 27b)

Taxpayer may deduct unused Pension

Exclusion from Line 27a if:

Line 14 ___

Line 17 ___

Line 20 ___

Line 21 ___

Total less than $3,000

Earned Income

Gross Income (Line 28)

No Filing Required if:

• $10,000 or less– Single– Married/CU - Filing Separate

• $20,000 or less– Married/CU Filing Joint– Head of Household– Qualifying widower

Medical Expenses (Line 30)• Unreimbursed medical expenses

– Include MSA Contributions (Archer)

• Expenses in excess of 2% of line 28 Gross Income

Worksheet E, Page 31

Property Tax Deduction/Credit• Enter total property taxes paid (or 18% rent) on

line 36a

• Include Homestead Benefit received as a credit

• PTR applicants – use base year amount

• Residency Status – Line 36b– Homeowner/Tenant

Property Tax Deduction/Credit• Worksheet F

– determines the greater benefit

• Deduction Limited to $10,000– $5,000 MFS

• Enter Property Taxes Paid on Line 36c or a flat $50 credit on Line 48

Tax (Line 38)• Show NJ Tax amount based on taxable

income

• Tax Tables (Pg 53)

• Tax Rates (Pg 62)

Form NJ-1040

Calculating Tax and PaymentsPage 3

Credit for Taxes Paid (Line 40)• Used for NJ Residents who have income

subject to tax out of the state

• Schedule A must be completed

Note: Income must be reported on the NJ-1040

Use Tax (Line 44)• Purchases out of state

– No NJ Sales Tax

• Estimated Use Tax Chart (pg 39)– Absent of Purchase Records

Enter 0.00 if no Use Tax is due

NJ Income Tax Withheld (Line 47)

• Form W-2, Box 17 (State Income Tax Withheld)

• Form 1099-R (Pensions, etc)

• Include amounts from all W-2s & 1099s received

Note: Be sure W-2, Box 15 Shows ‘NJ’

Earned Income Tax Credit (Line 50)

• Eligibility– All NJ Residents who qualify for Federal EITC

are eligible to apply – subject to review

• Calculated Amount – 20% of Federal EIC amount

Excess UI/DI/FLI (Lines 51 - 53)• For people with:

– Multiple employers– Multiple W-2s– With excess UI/DI/FLI contributions

• Must complete and include Form NJ-2450 with NJ-1040

Underpaid or Overpaid• Compare Total Payments (Line 54) to

Total Tax (Line 46)

• If Line 54 is greater than line 46, the difference is an overpayment

• If Line 54 is less than line 46, the difference is due to the state

Refund Amount (Line 65)

Overpayments can be:– Left as a credit for next year;

– Donated (all or in part) to various charitable designations; or

– Refunded to the Taxpayer

Be sure to include requested refund amount on Line 65

Part-Year Residents• Resident only Part of the Tax Year

• Complete ‘Residency Status’– Page 1, Form NJ-1040

• Allocate Income– Just NJ Residency Period

• Pro-Rate Exemptions and Deductions– by Number of Months in NJ

Property Tax Relief Programs• Form NJ-1040-H

– Certain filers only

• Homestead Benefit– Only Homeowners

• Property Tax Reimbursement– Homeowners/Mobile Home Owners

Form NJ-1040-H• Property Tax Credit ($50)

– Age 65/Ovr or Disabled

– No NJ Income Tax Return Filed• Under Filing Threshold

– Did not own Residence on 10/1/11

Homestead Benefit• Owned/Occupied Residence

– On 10/1/11

• Gross Income Under – regardless of filing status– $150,000 – 65/Ovr or Disabled– $75,000 – Everyone else

• Paid as Direct Property Tax Credit

• No Tenant Rebate Application– Suspended by the State Budget

PTR - Eligibility

• Must be Age 65/ovr or Disabled by 12/31/2010

• NJ Resident for at least 10yrs

• Owned and lived in the home for at least 3 years

• Have fully paid property taxes due– by June 1st of following year

Property Tax Reimbursement

Income Eligibility Limits

• 2010– Single/Married $80,000

• 2011– Single/Married $80,000

PTR – Income Limits• Virtually all gross income is included for

PTR eligibility– Social Security– Unemployment– Military Pension– NJ Lottery Winnings

This will often vary from the income tax form

PTR – First Time Filers• Form PTR-1 – available online

– Establishes 2010 and 2011 Eligibility

• Reserves Base Year at 2010 Level

• Difference of 2011 & 2010 Taxes

Proof of Property Taxes must be included with all PTR applications

PTR – 2nd and Later Years• File Form PTR-2

– Comes Pre-Printed with Base Year

• Verifies 2011 Eligibility

• Difference of 2011 and Base Year

Proof of Property Taxes must be included with all PTR applications

Budgetary Approval• All Property Tax Relief Benefits are

Subject to Change

• NJ FY 2013 Budget– Passed by June 30th, 2012

Property Tax Relief Assistance…

• Homestead Benefit– 1-888-238-1233

• Property Tax Reimbursement– 1-800-882-6597

• NJ Tax Hotline– 609-292-6400

www.njtaxation.org

Thanks to our volunteers!