The name “Watson”–the IBM supercomputer that beat human Jeopardy champions handily–has become a fixture in today’s lexicon.  So much so that the New York State Department of Taxation has partnered with IBM and is using the same technology developed for Watson to review tax returns.  Thomas H. Mattox, the tax commissioner explained that their new systems incorporates the use of “business analytics” to determine the merit of tax returns.  In other words, Watson is helping NY to catch cheaters.

It is not surprising that the IRS & States are employing this type of technology given that most tax returns are required to be filed electronically.  These returns can be analyzed in seconds–what would normally take humans days.  Furthermore, EVERY return can now be analyzed instead of randomly selecting returns for audit.  Over the last couple of years, NY taxpayers started receiving “pre-refund” letters as soon as 7-10 days after tax returns were filed. It’s hard to see how these letters–which requested additional documentation before a return would be processed–could be sent out so fast without the help of computers.

So, it is quite evident that NY State has gotten their act together and entered the 21st century.  Unfortunately, many NY taxpayer’s refunds are being delayed even though they have legitimate deductions and credits.  Our advice is to make sure NY taxpayers keep all of their documentation organized and on hand in the event NY sends a letter requesting more documentation.  The worst thing one can do is to not reply to these letters even if their proposed adjustment is marginal.  Not only will you get less of a refund you deserve, but your next year’s tax return is almost guaranteed to be flagged for a “pre-refund” letter again.

Contact R&G Brenner for more information on this subject and to speak with a tax professional today.

Source: The Street

The New York State Department of Taxation wants all tax returns filed electronically this year.   In years past, they have assessed penalties to Paid Income Tax Preparers as an “incentive” to file returns they prepare electronically.  This year, they have gone one step further. New York is now assessing penalties directly to the tax payer as well as the tax preparer:

New penalties apply for failure to e-file. If a preparer doesn’t e-file a required return, the Tax Department may impose a penalty on the preparer and the taxpayer.

Client penalties	Amount
Failure to e-file	$25 penalty per tax document for individual taxpayers $50 penalty per tax document for all other taxpayers
Failure to e-pay	$25 penalty per payment for individual taxpayers $50 penalty per payment for all other taxpayers

In addition:

• A paper document is subject to the penalty imposed for that tax type for failure to file a return or report. (This doesn’t apply to income tax returns.)
• Any overpayment claimed on a paper tax document that was required to be electronically filed will not be eligible to receive interest until the document is filed electronically

Please contact an R&G Brenner representative if you are accustomed to filing your tax returns without electronic filing.  We offer free electronic filing and many other money saving promotions.

Source: NY State Department of Taxation

This past June, New York became the 6th state to legalize same sex marriage.  Regardless of ones individual beliefs concerning same-sex marriage, this much is clear:  Tax laws–which are already complex & confusing–are that much more baffling for same-sex couples. This is mainly due to the fact that the Federal Government does not recognize same-sex unions.  Same-sex couples must file separate federal returns, however they can file jointly in New York State and some other states that recognize these unions.

“What was supposed to be this way of expressing our love was going to seriously confuse our taxes, investments, estate planning, really all our finances,” says [Maggy] Porter, a registered nurse. “Our CPA is great, but even he seems pretty bewildered”

While marriage can save heterosexual couples a bundle, it could cost same-sex couples thousands of dollars in extra taxes and professional advice…

“Filing taxes for same-sex spouses is much more complicated, more expensive and time-consuming, and there is very little guidance from the IRS or elsewhere,” says Pan Haskins, a certified public accountant in San Francisco.

While the makers of popular do-it-yourself tax programs like Turbotax & H&R Block are modifying their programs to navigate these complex rules, financial planners are recommending that same-sex couples hire a tax professional to navigate these tax labyrinths:

New York State advises couples do two sets of federal returns — official individual returns for each partner, and a dummy return as if the pair were filing jointly. The joint return is “not to submit but to use it as a work sheet so that you are bringing the correct income information onto a joint state return,” says Ed Walsh, spokesman for the state Department of Taxation and Finance.

Some same-sex spouses are fed up enough to submit that joint federal return. Haskins reports, in her experience, the IRS has so far not challenged same-sex married returns. (IRS forms don’t ask for gender identification.) But she warns couples who file federal returns jointly that they risk financial penalties and a potential audit. “This,” she says, “is still the Wild West of financial planning.

If you would like more information regarding same-sex tax implications, contact an R&G Brenner representative today.  The following are some tax tips to consider for same-sex tax filers:

CONSIDER HOLDING ASSETS JOINTLY:  Income or expenses from joint assets can be allocated all or in part to either owner’s return.

INCOME: (e.g. interest, dividends, capital gains) may be shifted to the partner with the lower income, while deductions (e.g. mortgage interest, real estate taxes, capital losses) may be claimed by the partner in the higher income tax bracket. This could lead to tax savings for both partners.

TAXES ON HEALTH INSURANCE:  Unlike heterosexual marriages, employer-based health coverage for same-sex spouses is not tax-exempt, and employers must report it as income to the IRS.

Source: Newsday

Thanks to the efforts of Mr. Charles Freret, the following fax was sent by the Vice President of TurboTax.  If you are a taxpayer that has used Turbotax and filed with a 1099R for tax years 2007, 2008 or 2009, you should contact Mr. Meighan via fax at 858-408-2714

Last week, I did a blog post about Mr. Charles Freret who went on a one-man crusade to expose a flaw in the popular do-it-yourself tax program: Intuit’s TurboTax.  You can read that article & post here.   After Mr. Freret read the aforementioned post, he contacted R&G Brenner and agreed to sit down for an exclusive interview.  Mr. Freret’s story of persistence to discover the truth is incredible.  What he uncovered along his journey is TurboTax is miscalculating tax returns on a large scale.  And upon further investigation, the TurboTax flaw was present not only in the current tax year program, but tax years 2008 & 2007 as well.  Coverups, Lies & Government disinterest all will eventually lead to more money out of TurboTax users pockets.  Here is his story:

R&G Brenner (RGB): How long have you been preparing your own taxes?

Charles Freret (CF):…over 40 years

RGB: So you’re pretty well versed in preparing your own taxes, and you have been doing them by hand!?

CF: Yes

RGB: Was 2010 the first year you used TurboTax?

CF: No, I used it once before in 2004

RGB: But this tax year, you discovered a problem with the calculation of your taxes using TurboTax?

CF: That’s correct, and the only reason I used it this year…was because I had a free [e-file] submission

RGB: In order to get your refund a little faster?

CF: Yes

RGB: Ok…and you discovered that there was a problem with TurboTax increasing your refund.

CF: Yes, by [giving] a deduction twice.

Continue reading »

The income tax refund checks will be in the mail, but with a two-and-a-half week delay.

Gov. David Paterson has temporarily halted income tax refund checks, with the last batch going out March 12 and no more scheduled to be sent until April 1.

“We paid all the way up until we hit $1.25 billion (in refunds)” Budget Director Robert Megna said Tuesday, explaining approximately $500 million is being delayed in order to get the state through the cash flow crunch that comes every March and is particularly bad this year.

About 1.35 million New Yorkers already have their income tax refunds in hand. Those who file from about now on should get their checks in about a month, Megna said.

But those who filed in late February and early March will likely have to wait about six weeks rather than the usual four weeks.

Paterson earlier warned the checks might be delayed due to the state budget crisis, which includes a drop in tax revenue and a budget deficit projected at more than $9 billion through the next fiscal year, which starts on April 1.

A number of large payments to localities for expenses such as schools and Medicaid are due in March, spurring the need for a delay.

“We know that’s an inconvenience to people,” said Megna. “We didn’t want to do it, but because we were put in this cash flow position we had to do it.”

Typically, more than 5 million of the 9 million New Yorkers who file get refunds, averaging about $1,000 each, Megna said.

The budget director downplayed the delay, noting that last year, $1.75 billion was paid before April 1, as compared to the $1.25 this year.

“We’ve always set a threshold,” he said.

Paterson earlier said some of the blame should rest with the Legislature which failed to make cut as deeply as the governor wanted during a special session late last year.

Lawmakers, though, noted the budget problems go back farther than that.

“This is not new,” said Sen. Roy McDonald, R-Saratoga.

Assemblyman Jack McEneny, D-Albany, said other states have been forced to adopt similar delays. He said he hasn’t heard complaints from the public about the refund delays.

“They need the money,” said Assemblyman Tim Gordon, of Bethlehem, who is in the Independence Party but caucuses with the Democrats. Gordon said he’s heard a few complaints from constituents waiting for their refunds.

Democratic and Republican lawmakers alike said they were frustrated with the lack of progress in completing the 2010-11 budget, due April 1 but which most observers say will be late.

Over the weekend, Democrats who control both the Assembly and Senate said they would set up bipartisan joint committees to work on the budget but as of early Tuesday evening that hadn’t happened.

Republicans, meanwhile, complained they were shut out of a meeting Paterson held with Democratic leaders Assembly Speaker Sheldon Silver and Senate Majority Conference Leader John Sampson.

Who pays

New Yorkers who file state income taxes: 9 million

Number of refunds due: 5 million

Average refund: Approximately $1,000

Source: The Times Union

In an effort to shame those that owe the state taxes, New York has taken the extraordinary (and desperate) measure to name the 500 biggest tax delinquents (individuals & businesses) on their website www.nystax.gov.

The move by the state Department of Taxation and Finance is part of a more aggressive effort to recoup some of the more than $14 billion owed to New York. Officials estimate at least $4.2 billion is recoverable and could help close next year’s projected $9.1-billion budget deficit.

Of the 250 individuals owing the most in back taxes, 33 are from Nassauand 21 from Suffolk. Among the 250 businesses owing the most in back taxes, 22 are from Nassau and 30 from Suffolk.

The site is going to be updated each month, eventually listing ALL tax delinquents regardless of how much they owe.  However, only those with at least one tax warrant out will be listed on NY’s site.

The site will be updated at the beginning of each month, according to department spokesman Brad Maione. He said information about all tax delinquents, regardless of how much they owe, will eventually be available online through a searchable database.

It remains to be seen how much the shame of being listed as a tax delinquent on nystax.gov will have on recouping actual fees.  However, in this day an age many businesses and individuals perform simple google searches on their potential business partners.  I am guessing that having the stain of “tax delinquent” on your name can not help your business prospects.

If you are listed on NY’s website as a tax delinquent, or you believe you are about to be listed, contact R&G Brenner as we can help you get your name removed.

Source: NY Newsday

In an effort to slash over $700,000 from their budget, NY State has eliminated the mailing of form 1099-G (Statement for Recipients of State Income Tax Refunds) to New York taxpayers.  1099-G’s are issued to taxpayers that receive NY State refunds–which are considered taxable income on the following year’s income tax return.

In the absence of this form, taxpayers (especially those that self-prepare their returns) run the risk of neglecting to include their previous state refund on their 2009 tax return this year, which could result in a delayed refund and potential penalties and/or interest as it could take years for the IRS to notify taxpayers of errors. Furthermore, NY State has delayed many refunds over the last year and a lot of NY taxpayers have yet to receive their 2008 refunds.  In this case, one would NOT have to claim their 2008 NY refund on their 2009 tax return.  Very confusing, I know.

All returning R&G Brenner clients will not have any problems relating to this as our tax software was specifically programmed to carry over the necessary information to your 2009 tax returns.  However, for non-clients that would like to obtain 1099-G information, you can do so by:

1. Getting it online by CLICKING HERE
2. Calling (866) 698-2946

Source: NY Department of Taxation and Finance