Income Tax Highlights For 2011 (The Sequel To The Federal Highlights)

TELLING TIPS: Telling Tips is a series of articles from local experts to help you save money, make better decisions and plan for a better future.

‘New York State’

Following the lead of Congress, the New York State Legislature also accomplished little this year. To their credit, though, the business ranking of New York in the area of the ‘cost of doing business,’ went from the bottom at number 50 in 2010 to number 48 in 2011, and in the area of business friendliness, went from number 45 in 2010 to number 36 in 2011. The quality of the workforce, however, remained at number 49, with Ohio the only worst state. To add insult to injury, New Jersey beat out New York in all these categories, according to CNBC. But this post is concerning the personal tax area.

General Changes For 2011:

Same-Sex Married Couples – Tax Return Filing Obligations

The biggest change for 2011 was the passage of the Marriage Equality Act, which took effect on July 24, 2011. Although not recognized for federal income tax purposes, same-sex married couples, whether married in New York or any other state,

file the state tax return as married-filing-jointly or married-filing-separately. In the past, they filed as single or head of household, so they each only had one federal and one state return. Now, firstly, they will have to prepare a federal return as singles, as before; second, they will have to prepare a federal married-filing-joint return, as this is the jumping off point for the state return; thirdly, they will need to prepare a joint state return, and fourth and fifth, they will need to prepare a married-filing-separate state return for each to determine whether there will be a tax savings by filing separately. The tax preparation fees for these couples will be at least triple. Will New York State now check county marriage certificates to make sure these couples are filing properly?

Three Ways To Get Your Refund

If you have a refund coming, in addition to a direct deposit, which is the fastest and most secure way to receive your refund, or paper check, you can now also have a debit card. The points that haven’t been advertised are, firstly, after your first withdrawal, there may be a fee of $1 for

subsequent withdrawal, and secondly, these cards expire after one year. A good thing to be mindful of.

Form IT-150 (Short Form) Discontinued

Form IT-150, “Resident Income Tax Return” (short form), has been discontinued. All full-year New York State residents must now use Form IT-201 to file and pay their taxes. The expansion of the tax form from the two-page IT-150, to the four-page IT-201 will not only add to the preparation fee and complexity, but will definitely inconvenience a rather large number of electrons in the e-filing process.

Date Of Birth Required On Income Tax Return

Taxpayers must now enter their date of birth (and their spouse’s date of birth, if applicable) on their primary returns.

Yonkers Resident Income Tax Surcharge Increased

The Yonkers resident income tax surcharge has been increased from 10 percent to 15 percent of the net state tax.

E-File Requirement For Individual Taxpayers

Individual taxpayers who prepare their personal income tax returns using tax software are generally required to file electronically. A taxpayer who is required to e-file and fails to do so will be subject to a penalty and will not be eligible to receive interest on any overpayment until the return is filed electronically. In addition, if you need an extension, and use tax software, you can no longer pay by check or credit card. You must pay with a direct debit from your bank account at the time you file your extension. For additional information, see “E-file Mandate For Individuals.”

Federal Extension Forms No Longer Accepted

If you need a state extension, and will not owe any additional tax, you must file the NY form IT-370 “Application for Automatic Six-Month Extension of Time to File for Individuals.” A copy of federal Form 4868, “Application for Automatic Extension of Time to File U.S. Individual Income Tax Return” will no longer be accepted in place of the IT-370. Important Notice, N-11-16.

E-file Mandate For Tax Return Preparers Revised

The threshold for determining if tax return preparers are required to e-file their clients’ tax documents has been reduced to five original tax documents. In addition, if a tax return preparer is required to e-file a client’s tax document and fails to do so, both the preparer and the client may be subject to a penalty, and the client will not be eligible to receive interest on any overpayment until the tax document is filed electronically. For additional information, see “E-file Mandate For Tax Preparers.”

Online Account Summary

New York State is now offering new online services. This allows you to:

• Receive e-mail alerts and reminders about your tax account, including notification of your refund
• View a comprehensive, customized summary of your account
• Respond to department notices
• Update account information

It’s easy to set up, and I recommend it.

Don’t forget that New York State is saving paper and postage by not sending the 1099-G form. Before filing, check to see if your refund or overpayment of 2010 is taxable. See: 1099-G Information

Lottery Prizes May Be Applied Against Tax Liabilities

If you win a lottery prize of more than $600, it may now be applied against any outstanding New York tax liabilities.

New York State Non-Resident?

New Ruling: An individual who has a property right in a dwelling will be deemed to maintain a permanent place of abode even if the individual never stays there.

Eligible Long-Term Care Premiums

Premiums for long-term care are treated the same as health care premiums and are deductible on your NY State taxes subject to certain limitations. You also have the option of claiming a 20 percent credit of the premium you paid. A credit is generally worth more than a deduction, so be sure to compute this benefit both ways.

Are You An Employer Or An Employee?

As of February 1,

workers — whether hourly or salaried, including union members, executives, and administrators — must be notified about their rate of pay,

sign an acknowledgement of pay rate and payday, which must be kept for

years by the employer, and must be given a wage statement or pay stub each payday. This is the new “Wage Theft Prevention” act. Questions or Forms. The penalties are stiff, so make sure your employer is aware of this new law.

There are some other changes, but this covers most of us.

Have a good week.

(Did you hear that it has been suggested that we have a new postage stamp bearing the picture of a weeping taxpayer?)