WINTER 2014
NJTaxing TIMES
Happy 25th Birthday NJ NATP!
PRESIDENT’S MESSAGE
I just read an article in the Journal of
Accountancy that quoted the IRS
Commissioner John Koskinen in his keynote
address at the recent AICPA National Tax
Conference in Washington D.C . He said: “the 2015 tax filing
season will be one of the most complicated filing seasons
we’ve ever had.” I don’t think this statement is a surprise to
any of us. We are in for a rough ride this February!
Many of our past presidents joined us to celebrate 25 years for the
NJ Chapter on October 1, 2014.
2015 NJNATP Executive Board of Directors
Executive Board of
Directors: (From Left)
Mary Rose Martino,
Treasurer, Tom DeTitta,
Secretary, Linda
Giordano, Vice President,
Mario Tripaldi,
President.
Congratulations to
our newly elected
executive board.
We are looking forward
to a successful 2015!
TABLE
OF
CONTENTS
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Welcome New Members
Tax Tip of the Quarter, Winter 2014
Due Diligence
Won’t You Take this Advice
I Would Give My Brother
Foreign Income and Other Tax Issues
Perpetual Owers
Premium Tax Credit
Calendar of Events
There are dozens of temporary tax provisions that expired at
the end of 2013, including discharge of indebtedness on
principal residence, deduction of mortgage insurance
premiums, sales tax deduction, tuition deduction, and
educator expenses. We also have the complication of the new
repair & improvement regulations, the reduced “179”
deprecation limits and the ACA provisions that kick in this
year. As of today, no action has been taken to reinstating
those provisions. I just can’t imagine that electronic filing for
2014 returns will begin on time.
Our membership in NATP is more important than ever in
these changing times. The NATP held their 1040 series live
workshops throughout NJ in November. There are also
multiple webinars available through NATP to assist us in
preparing for tax season including the latest updates in
January. The NJ Chapter also has three different seminars
scheduled before tax season begins. We have an S
corporation review scheduled for Thursday December 11,
2014, our famous NJ State Tax Seminar on Saturday January
10, 2015 and finally a 4 hour ACA seminar on Thursday
January 22, 2015. Please watch Chapter Weekly from NATP
for further information.
I will be stepping down as President at the end of 2014. I will
pass the baton to a great executive board. I will still be
involved in this great chapter and look forward to keeping in
touch with all of you. The NJ Chapter Board of Directors is
a wonderful, dedicated group of individuals who work hard
to bring you timely education and updates at the local level.
It is truly been an honor to serve!
Enjoy your holidays and rest up for tax season, it will be
challenging.
Marilyn H. Ayers, CPA
NJ Chapter President
Welcome New Members
In the third quarter of 2014, the NJ Chapter welcomed 28 new members:
SYED TAHSEEN ASHRAF
Monmouth Junction
MICHAEL F BRUNO
Wyckoff
LILY BURD
Elizabeth
LUCILA M CHRISTINACARMONA
Teaneck
ANTHONY
CUCCINIELLO
Florham Park
NANCY P FABRICIUS
Marlton
ANDREW L GOLD
Hillsborough
GREG GOLD
Marlboro
JOHNNY L HALSELL
Westwood
KENNETH P HRIN
Marlton
SEVERE JACQUET
Roselle
VERNON PATRICK
JOSEPH
Plainfield
FANTA KABA
Newark
KIMBERLY D KACVINSKI
Flemington
MANJEETA
KHANCHANDANI
Monmouth Junction
SARA LAUFER
Weehawken
JOHN LILLIS
Jersey City
JULIANA MARIN
Union City
SAM K MURAYA
Monmouth Junction
LUIZ NEVES
Newark
CHARLES O'BRIEN
Egg Harbor Township
IMRAN RANA
Franklin Lakes
ROBERT RHINE
Andover
DIANE SCHULDES
Jackson
MIGUEL SHOREY
Park Ridge
DAVID STEINER
Springfield
SUSAN F VANDERMEER
Bridgewater
ANTOINETTE WADE
Newark
Please join the NJ Chapter at any or all of our many education events. If you ever have any questions,
the contact numbers of the NJ Board of Directors are on the back page of the newsletter.
DUE DILIGENCE
B Y M A R I O T R I PA L D I , E A
AS TAX PROFESSIONALS, we are bound by Circular 230. I was called in by the current
accountant to represent the client in a audit by the State of New Jersey Department of Labor.
The auditor requested information on X Company Subcontractors for the past six(6) years.
The issue being Independent Contractor v Employee under R.S. 43:21-19(i)(6)(A)(B)(C) of the
New Jersey Unemployment Compensation Law.
The client is in a Market Segment Industry operating as a Sole Proprietorship . Upon review
of the tax returns prepared by the previous non-designated preparer (no PTIN noted), the
first three (3) tax years, the Sole Proprietorship revealed expenses in the Cost of Goods
section, Cost of Labor and Contract Labor, flip flopping years. The client submitted 1099s for
all subcontractors to substantiate the labor costs to the preparer. In the subsequent three (3)
tax years, the client changed preparers, using a designated preparer (with PTIN). The new
preparer listed the subcontractors following suit of prior years’ returns, again submitting 1099s
for substantiation.
I interviewed the client, prior to the audit to determine the background of the company. The
client produced the 1099s in question, where we went over each subcontractor's duties and
time expended (Full/Part Time). At our next meeting, after my research, I advised the client
that under the law, the subcontractors were classified in err by the preparers. My research
involved under State Law, the Three (3) Tests used to determine Independent Subcontractor
Status, New Jersey Law Defining "Employee" under the Market Segment Industry the client
was operating, and a Supreme Court of New Jersey Case, involving the A, B, C Tests.
During the audit, the auditor reviewed the data presented. The auditor concluded that the
subcontractors were actually employees. I had no argument; my hands were tied, since I
knew what the decision would be. The auditor prepared the report.
In essence, in my opinion, the preparers did not do their "Due Diligence". If the preparers had
taken the time to interview their client, even though it may involve extra time, and not rush
just to put a tax return together, there would not have been an audit.
In my representation work, I have encountered other preparers who are not "Due Diligent."
Therefore, I encourage you to take the time and interview your clients annually, especially,
new ones. Educate your clients.
DO YOUR DUE DILIGENCE
TAX TIP OF
THE QUARTER
WINTER 2014
BY Marilyn H. Ayers, CPA
Special Rules for Estates
– Inherited IRA
IF YOUR IRA is left without a
designated beneficiary, then it’s paid
to your estate. When this happens,
IRS rules dictate that the account has
to be fully distributed within five
years. So, even though your heirs
ultimately share in your IRA funds,
it’s likely that a good portion of
those funds will be eaten up by
income taxes. Plus, being distributed
within five years significantly limits
the life expectancy of your IRA,
cutting short its growth – and its
benefit to your loved ones.
Each IRA custodian has its own
agreement. In this agreement, the
default language will indicate who
inherits the IRA when there is no
named beneficiary on the form or
there is no form at all.
If it defaults to the estate of the
account owner, you don’t have what
IRS calls a “designated” beneficiary.
As such, the estate cannot pay out
the MRD over a life expectancy since
an estate has no life. Instead if the
custodian will allow a trustee-totrustee transfer from the decedent
to the estate, the IRA must be
withdrawn using the 5 year rule.
That rule requires that the entire
balance be distributed before
December 31st of the fifth year of
the account owner’s death – 8/8/14
death = 12/31/19 final distribution.
Also, the MRD must be met for the
year of the account owner’s death.
Finally, if the IRA custodian will not
allow a trustee-to-trustee transfer to
the estate, then the entire balance is
paid out of the account. There is
no rollover option and the funds
become fully taxable to the estate
in the year of the distribution.
WON’T YOU TAKE THIS ADVICE I HAND YOU LIKE A BROTHER
B Y RO B E RT D. F L AC H
WHILE WONDERING WHAT TO WRITE for this issue of NJ TAXING
TIMES a fellow tax pro suggested, “How about reflections of your years
of practice and what a newcomer should know?”
The upcoming tax filing season will be my 44th. A lot has changed since
I prepared my first Form 1040 in 1972.
While during the first 1/3 of my 43 years there were more deductions
allowed, more, and higher, tax brackets, and more methods of computing
the tax (“regular tax”, Income Averaging, 10-Year Averaging, and
maximum and minimum tax), I believe the Tax Code is more
complicated, and certainly more voluminous, today.
Because of this continuing professional education (CPE) is more
important than ever. I was truly surprised when the plaintiffs in Loving
v IRS claimed that the minimal annual CPE requirements of the RTRP
regime were “prohibitive”. If a tax professional is not taking at least
15 hours of CPE in federal tax topics already he/she truly should be!
Individuals starting out in the tax profession should be prepared to
maintain, on average, at least 24 hours of CPE per year. For 2014 I
completed 39 hours, 16 of which were state specific.
A while ago I wrote a post at my The Wandering Tax Pro blog with advice
for graduates starting out in the tax profession. My advice involved a
song lyric and two advertising slogans –
• “You See You Can’t Please Everyone, So You Got to Please Yourself”
• “Only Sherwin Williams Can Cover the Earth”
• “Just Say No!”
1) Rick Nelson was spouting real wisdom in “Garden Party”. Do not
choose your career, or run your life or business, because it is what you
think your family, friends, clients, colleagues, etc. would want you to
do. Follow your own dreams, and make your own decisions, and your
own mistakes in the process, based on what you want.
2) When I first began my own practice, I thought that I should offer,
either personally or via relationships with consultants in other fields,
all kinds of financial services, not just 1040 preparation, to my clients
so that their tax business could not be stolen away by their insurance
agent or broker or another financial professional.
Then I remembered what a wise old Texan (my boss at the Summit
YWCA) once told me – “Only Sherwin Williams can cover the earth”.
You can’t be all things to all people. Don’t spread yourself too thin
and try to offer the world to your clients.
And remember that, as previously mentioned, the Tax Code is
humongous, and you cannot be an expert in all Sections. Choose the
area of tax practice that you enjoy most and are best at and limit your
practice to that area.
3) Don’t be an Ado Annie. You must learn to just say “no” to clients.
Regardless of how much you would sincerely like to help them with
matters other than that in which you are educated and experienced,
realize your limitations and learn to tell a client that, like Homie D
Clown, you “don’t play that”.
Over the years clients have brought me all kinds of forms and
applications and asked for help. I clearly state in the “finished return”
memo I give to clients –“I prepare income tax returns. I do not prepare
mortgage or loan applications, census forms, college financial aid
applications, prescription drug or utility discount program applications,
Property Tax Reimbursement applications, FBAR or FinCen filings, or any
other such forms. Please do not ask me to fill out these forms! I have no
special experience, knowledge or expertise with any of these forms - I do
not know any more about them than you do. The most I can do is provide
you with any needed income information from your tax return.”
You should also learn to “just say no” to accepting a new client. If you
feel you are already overworked during the tax season, or that the client
shows a potential for agita and aggravation, learn how to say that you are
not taking on any new clients.
Be willing to say no to a new, or even an existing, client who has a
special tax situation that you are not educated or experienced in, and
do not want to become educated or experienced in. Learn about the tax
specializations of fellow NJ-NATP members and be willing to make
a referral.
And lastly learn how to say a definitive “no” to a client when they ask
you to do something that is “shaky” or “shady” – such as to claim a
deduction that you know, or strongly suspect, is not legitimate or
appropriate or not to claim income that you know they received. It is
better to lose the client than to gain the potential problems.
Jeff Stimpson from TAXPRO TODAY recently asked me “If you had it to do
over again, what would you do differently in your tax practice and why?”
for his article “Knock on Wood” [*]. Included in my reply, quoted in the
article, is this “I also would not accept clients with certain specialized 1040 issues I would avoid DPAD, FBAR, and other more complex areas. And, because
of the relatively new excessive "due diligence" requirements I would not
accept 1040 clients with Earned Income Credit claims.”
Perhaps the biggest change in the tax preparation industry since my
beginnings is the almost universal transition to using tax preparation
software. In my early years we prepared 1040s by hand on 3-copy
carbonized pre-printed tax forms and schedules from Accountants Supply
House in Long Island. The first computer-generated returns I came across
appeared in the early 1980s prepared by CPA firms. While I expect that
everyone, or 99.9% of those, reading this article uses tax preparation
software, I still prepare all my federal income tax returns manually.
I learned how to prepare 1040s the best possible way – by preparing
1040s. Before going to work for my uncle’s tax preparer as an apprentice
I had no experience with tax returns – I had not even prepared my own
return. On my first day my boss gave me a copy of a client’s prior year
return, a folder with the client’s current year “stuff”, a 1040 instruction
booklet, and said, “Jump in and swim”! If I had questions along the way
I would ask the boss, who would take the time to explain the answer to
me. I still believe that the best way to learn how to prepare 1040s is to
prepare 1040s.
And, while I would not recommend that someone starting out today
should follow my lead and stay away from flawed and expensive tax
preparation software, I firmly believe that one should learn how to
prepare 1040s by preparing them manually. Once you have mastered the
manual 1040 you can then go on to learn how to use preparation
software.
Most important, don’t assume that just because a tax return was
generated by a software program it is correct, either mathematically or
legally. You must check and double check each computer-generated
return as carefully as you would check and double check a manually
prepared return.
So there you have it – my thoughts on “what a newcomer should know”.
[*] - http://www.accountingtoday.com/news/tax_news/knock-on-would-72634-1.html?taxpro
{Robert D. Flach has been preparing 1040s since 1972, and has been a
member of NATP since 1987. He writes the free online monthly newsletter
THE TAX PROFESSIONAL (http://thetaxprofessional.webs.com), the popular
tax blog THE WANDERING TAX PRO (http://wanderingtaxpro.blogspot.com)
and on tax planning and preparation at the www.MainStreet.com TAX CENTER.}
Y
Foreign Income and other Tax time Issues –
Musings of a Solo Tax Practitioner
B Y P R A M O D A H U J A , E . A . C E RT I F I E D F I N A N C I A L P L A N N E R
ET ANOTHER TAX SEASON is round the corner – many of
you like me are probably continuing their transition to a
paperless environment – updated reference books, computer
system replete with scanner, storage device, new workflow software
etc. – improving quality, productivity, turn-around times, volume,
profits and most of all customer satisfaction. The following summary
will be helpful to in comply with the foreign asset/income issues that
often take a lot of the Tax Preparer’s time.
1. The rules and FATCA makes it mandatory for US Citizens, Green
card holders and foreign individual with substantial presence in the
US, to disclose all of their offshore holdings on their tax returns
(via Form 8938), or on the FBAR (now known as Form FinCen
114). Due to inter-governmental agreements (IGAs), foreign
financial institutions also disclose this information to the US
government.
Children must also file the FBAR if the filing threshold
requirements are met.
2. Form 8938, Statement of Specified Foreign Assets, applies to foreign
financial accounts, private loans, investments in foreign companies
and foreign business partnerships. Real estate owned is excluded
unless it is owned through a foreign entity. FMV of the said interest
is often difficult so consistency in the methodology is important.
Inherited property transferred to taxpayer’s personal name is not
required to be reported unless the inheritance was an interest in a
corporation, partnership or a trust that held real estate.
3. Form 3520, Annual return to report certain transactions with
foreign trusts and Receipt of certain foreign gifts applies to gifts of
money or other items foreign folks back home or other non-us
persons or trusts etc. is often forgotten. Gift tax if any applicable is
paid by the donor and not be the recipient.
4. Compliance with the US Taxation of Foreign Income is extremely
onerous. Here is some guidance:
year you hold the certificate. If the foreign bank doesn’t provide
information on the amount of an accrued interest, you need to
calculate the same.
c. Foreign Retirement Plans - The IRS treats most of those as
foreign trusts, which require Form 3520 to be filed by April 15th
and Form 3520-A to be filed by March 15th (there is a personal tax
deadline that is even earlier than April 15th). This form is not
attached to your tax return, but instead are sent to a separate IRS
office. The Canadian Retirement Plans have separate reporting
requirements.
d. Foreign Life Insurance Plans - Most likely, it does not fall
under the IRS’s definition of a life insurance. Thus, according to the
IRS, you are supposed to read Sec. 7702 of the Code and
understand such terms as “net surrender value” and “mortality
charge” to compute income generated by the policy when filing a
U.S. tax return. How about excise Excise taxes; you likely need to
file and pay on Form 720 four times a year 1% of premiums paid to
your foreign life insurer.
e. Foreign Mutual Funds - Are you making investments into
foreign mutual funds, called in the Code as Passive Foreign
Investment companies (PFICs)? Form 8621 may need to be attached
to the Tax Return.
f. Capital Gains – One of my clients became a US person in 2003 –
I did his 2013 Tax Return – he had stock in an Indian Public
company that he purchased in 1981 for $ 5,000. In 2003 before he
became a US person, the stock was worth $ 135,000 and in 2013
when he sold the stock it was worth $ 150,000 – how much was
his capital gain? – IRS says $ 145,000. Should he have sold his
stock before becoming a US person?
g. Income or Loss from Foreign Corporations and Partnerships
– Filing of Form 5471 and applicable schedules are hugely time
consuming and burdensome.
a. Even though the Tax payer is the one signing the Tax Return
under penalties of perjury, the Tax preparer faces due diligence
issues. Foreign income has been seen to be have been overlooked
in many instances for the expat, visa holders, resident aliens, or the
dual citizen.
h. Kiddie Tax and children having Foreign Bank accounts –
whether opened by grandparents back in the home country or by
parents, check to see if the income is below the filing threshold or
is to be included in the Parent’s return or a separate Tax return for
the child needs to be filed.
b. The IRS looks at the whole world of financial assets through the
IRC – the code and its definitions only. Foreign rules do not apply
except where tax treaties are in place and the provisions therein
then determine the treatment e.g. a tax-free bond in India does not
mean it is tax exempt for IRS purposes. How about a long term CD
in a foreign bank - that will mature sometimes in the next few
years- do you wait to pay tax when it matures - according to the
U.S. rules, interest income is taxable on a year-by-year accrual
basis. This means that a portion of the interest income you are
expecting to get in the future would go onto a U.S. tax return every
i. Rental income from rental property held abroad is reported
on Schedule E. The allowable expenses are the same as if the
property was in the US except the depreciation must be taken
straight-line over 40 years. Upon disposition, capital gains tax
applies as if the property was in the US. Taxpayer may be eligible
for a foreign tax credit subject to a DTATT (double taxation
avoidance tax treaty).
j. Sale of a foreign primary home or personal residence is
eligible to the same exclusion amounts as if in the US and is subject
to the same 2 out of previous 5 years and other rules.
PERPERTUAL OWERS
B Y M A R C S TA N D I G
WE HAVE ALL SEEN THE SITUATION where there are taxpayers,
you know the people who pay you to prepare their tax returns, who
always owe money. No matter what you do or tell them there is
always some excuse as to why they cannot have enough money
withheld or why they failed to make the estimated payments.
Something both the New Jersey Division of Taxation and the
Internal Revenue Service are prohibited from doing is “profiling”.
As a private business person one should not necessarily “profile”
the taxpayers, but one can always refer to some characteristics that
seem to repeat themselves across the population. One that seems to
occur with some regularity is the perpetual tax debtor. This is that
person or couple when married who always owes. They are never
happy about seeing their tax preparer. These people will go
shopping for a new preparer from time to time with the aspiration
of finding someone to get the magical and mythical refund at the
end of the rainbow! These are the people who claim sixteen
exemptions; win a small lottery; withdraw money from their
retirement plans to pay off some credit cards and still expect to hit
pay dirt with a mega-dollar refund!
The tax preparer needs to know when people retire from the State
of New Jersey and start to receive pension benefits the default W-4P
is with three (count’em three) exemptions. The pension pay stubs
will contain a message when a corrective W-4P has not been filed.
The perpetual tax debtor knows how to ignore the pay stub
memorandum. Sometimes these same people start to get Social
Security Benefits. There may be a working spouse. There is an
instant shortfall of money withheld toward the payment of any tax.
There may also be some part-time work after the retirement from
the State, municipality, state college, board of education or other
state pension participating employer. Wait, was there anything
withheld to cover State taxes? Okay, there is that three year rule that
will exclude the retiree’s contributions to the pension. After the
three years elapse there could be a problem. GET THE RETIREE TO
START WITHHOLDING NOW, WHEN HE OR SHE RETIRES. When
that person enrolls with Social Security he or she will most likely
call the last person he or she used to prepare their tax returns. GET
THE RETIREE TO HAVE MONEY WITHHELD FROM THE SOCIAL
SECURITY benefit toward their federal income tax. When any
person retires, get them used to having income tax withheld at their
most recent tax rate from Social Security. Not only is it easier to
deliver a tax return that has a refund coming back to the taxpayer,
but there is less anger directed toward the messenger.
The example you are about to read is true. The facts are composed
of several different taxpayers to protect the identities… Around
Thanksgiving each year this writer receives a call from a long time
tax customer. The conversation more or less goes like this. First
there is the ominous phone message: “Marc, this is “X” please be
kind enough to return my call.” The call is returned and “X”, a
person who retired from the public sector and has almost nothing
withheld and then moved somewhere outside of New Jersey, says, ”I
would like to get a refund this year. Why can’t I get a refund like
everyone else?” Remember, almost nothing is withheld and “X” has
pension, employment and Social Security income. With the
disclosure of some W-2G’s over the years this writer figured out the
withholding went toward the gaming hobby. Then there are a few
well wishes for the Holidays and an abrupt disconnect when “X” is
asked whether or not he has had some money withheld for taxes.
One of these years “X” will take his business elsewhere. Someone
will figure a way to generate a refund for “X” and the return might
even be “self-prepared” with retail software.
Recently another of this writer’s perpetual tax debtor clients moved
out of the Garden State. Actually a lot of people have moved out of
state. In this particular scenario there is the public sector pension.
YES! The W-4P will have zero exemptions. The 1099-G for the
Unemployment will only have a withholding rate of ten percent.
Still, ten percent is better than nothing. “I am tired of owing” said
the taxpayer at the other end of the phone conversation. YES! The
taxpayer is going to have more than ten percent taken out of the
Social Security benefits to cover the anticipated tax liability. But
wait, “The real estate agent said I would get a refund because I
bought a house!” declared the tax debtor. I have been through this
several times before. There is the unqualified opinion of a person
who had contact with the taxpayer, the perpetual tax debtor, and
promised a refund! “We cashed out the IRA to get the down
payment.” OMG!!!! No one told the perpetual tax debtor to call the
tax preparer. That would have killed the deal. Money that did not
have any cost basis magically appears from the Individual
Retirement Account, or a qualified plan in some cases, is going to
be used as a down payment for the purchase of a house. The
taxpayers are going to use up most if not all of their current
liquidity. “We had taxes taken out. So, this shouldn’t be a problem.”
There is a wave of relief that passes through the stratosphere. A
thousand multicolor balloons are released and doves fly overhead.
Maybe the fire and brimstone that spew from angry perpetual tax
debtors who owe the government money will pass by this tax
preparer. “The bank said they will take out ten percent.” No such
luck, the marginal tax rate, especially with the withdrawal from the
IRA will exceed the ten percent rate of withholding. “We are very
happy in our new home, but we are just getting by.” It will not be
for long before the lonely tax preparer is going to once again be the
bearer of bad news.
As a tax professional, try to get the taxpaying public to plan ahead.
If the tax preparer can be kept in the decision trees of the taxpayers’
lives, there are better chances of successful outcomes. The
successful outcome is where the taxpayer does not owe additional
tax or that the amount that is owed is manageable. When third
parties make the decisions for the taxpayers, problems can and do
occur. The critical issue is that some of these third parties have little
or no knowledge of the tax system and the individual taxpayers’
financial lives. Since the third parties may be employed by a
financial institution or are in the position of assisting in a financial
transaction, these individuals are perceived as credible by the
taxpayers. Only the tax preparer who possesses both the requisite
tax law knowledge and the familiarity with his or her client base
can help the taxpayers avoid a state of perpetual tax indebtedness.
PREMIUM TAX CREDIT
B Y J E S S L . M A R S H A L L , M B A , RT R P
T
HE AFFORDABLE CARE ACT (ACA),
or health care law requires most U.S. citizens and legal
U.S. residents to have minimum health insurance
coverage or pay a penalty. The ACA contains health
insurance coverage and financial assistance options for
individuals and families. This article serves to introduce
the Premium tax Credit and to provide access to
additional ACA resources.
FEDERAL POVERTY LEVEL
Under the Affordable Care Act, low and middle income
Americans will receive tax credits to help pay for health
insurance.
The Premium Tax Credit is a refundable tax credit that
helps eligible taxpayers with moderate incomes purchase
health insurance when that health insurance is purchased
through the Health Insurance Marketplace.
This subsidy can be realized as either advance payments
to a taxpayer’s insurance company or as a tax credit. In
either case, the taxpayer must file a tax return.
Who is Eligible?
Who is Eligible
A taxpayer may be eligible for the PTC if they meet ALL
of the following requirements:
1. They purchase health insurance through the Health
Insurance Marketplace.
2. They are ineligible for coverage through an employer or
government plan.
3. They cannot be claimed as a dependent by another
person.
4. Household income is within certain limits. That is,
Household income cannot be less than 100 %, or more
than 400 % of the Federal Poverty Level (FPL) for their
family size (See Table below). Household Income is the
MAGI of the taxpayer and spouse plus the sum of the
MAGI for all other individuals in the taxpayer’s tax
family who are required to file a tax return. Household
income does not include the MAGI of the individual’s
tax family who are filing only to secure a refund of
taxes withheld or estimated taxes. Modified AGI is
the AGI on the taxpayers return plus certain income
not subject to tax (foreign earned income, tax exempt
interest and social security benefits not included
in income).
5. They do not file a Married Filing Separately return
unless, (A) they are living apart from their spouse at
the time they file their tax return, and (B) they are
unable to file a joint return because they are victims
of domestic abuse or abandonment, and (C)
indicates on their 2014 income tax return in
accordance with the relevant instructions that they
meet the criteria under
A and B above.
Regarding item # 5 above the exceptions to not filing
separately are allowed because they are believed to
create obstacles to filing a joint return. It is expected
that the instructions for the tax form taxpayers will
use to compute the PTC (form 8962) will provide
further guidance on claiming this relief, including
that a taxpayer must certify that the taxpayer meets
the criteria for the relief. It should also be noted
that taxpayers may not qualify for relief from the
joint filing requirement for a period that exceeds
three consecutive years.
If a taxpayer qualifies for the PTC they must be
aware of the requirement that the Marketplace be
notified about any changes in circumstances so that
they receive the correct amount of subsidy.
continued on page 11
PREMIUM TAX CREDIT
continued from page 5
What changes in circumstances must be reported
events
NJ NATP
FAMOUS STATE SEMINAR
Woodbridge Hilton
Iselin, NJ • January 10, 2015
Birth or adoption
Marriage or divorce
Moving to a different state
Changes in household income
Incarceration or release from incarceration
Gaining or losing health care or eligibility
Other changes affecting income and household size
AFFORDABLE HEALTH CARE ACT
Hotel Woodbridge at Metro Park
Iselin, NJ • January 22, 2015
These changes in circumstances must be reported in order to insure that the
taxpayer get the right amount of subsidy and not get hit with additional taxes
due because their advance payment was too high given the current
circumstances.
For a complete discussion on the subject of the Premium Tax Credit (PTC) see
the following:
n
n
n
n
CALENDAR OF
www.hhs.gov
Form 8962: Reconciliation of the premium Tax Credit
Form 8965: Exemption from the Affordable Care Act
TAXPRO Monthly November 2014 Issue
Website: www.njnatp.com or call 732-477-2281
JERSEY
trivia KNOW ...
did
you
Highlands, New Jersey has the highest
elevation along the entire eastern
seaboard, from Maine to Florida.
New Jersey has the most stringent
testing along our coastline for water
quality control than any other
seaboard state in the entire country.
NJ-NATP BOARD OF DIRECTORS 2014
PRESIDENT
Marilyn H. Ayers
OFFICERS
VICE PRESIDENT
SECRETARY
Mario Tripaldi
Linda Giordano
DIRECTORS
2 YR.
TERM
1 YR.
Region I
Pramod Ahuja
Princeton
(609) 945-4998
Region II
Linda Giordano
Pitman
(856) 553-6425
Mario Tripaldi
W. Milford
(551) 404-3453
TREASURER
Joyce Skerlanitz
3 YR.
Thomas DeTitta
Madison
(973) 845-2470
Gwen Radloff
Rutherford
(201) 438-5162
Region III
Marc Standig
Monroe Township
(609) 655-1313
Joyce Skerlanitz
Piscataway
(848) 467-3990
Anthony J. Manziano
Woodbridge
(732) 610-3159
Region IV
Julie Robinson
Brick
(732) 477-2281
Jess Marshall
Piscataway
(732) 968-7500
Marilyn H. Ayers
Brick
(732) 477-2281
Region V
Colette Taylor
Haddonfield
(856) 546-7201
Sherril F. Diamond
Cherry Hill
(856) 779-1714
Jaimee Hammer
Cherry Hill
(856) 656-0508
Members
at Large
Mary Rose Martino
Cherry Hill
(856) 428-3079
Surekha Vaidya
Parlin
(732) 727-5009
TELEPHONE DIRECTORY
Tom Watkins
Totowa
(973) 812-2870
NEW JERSEY HOTLINE
609-633-6657 for Personal Income Tax
609-633-6905 for Business Tax
FEDERAL TAX HOTLINE
For practitioners with POA on file to call
about a specific client problem:
866-860-4259
Tax Law Questions: 800-829-1040
NJ-NATP CHAPTER OFFICE
TEL 732-477-2281
FAX 732-477-3555
[email protected]
INTERNET ADDRESS
NJ CHAPTER
www.njnatp.com
www.natptax.com
Directory of National Members
www.taxprofessionals.com
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