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Taxes

NJ Tax Refund for Madoff Victims’ Phantom Income

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A New Jersey Tax court has ruled that investors in Bernard
Madoff’s Ponzi scheme are entitled to refunds on state taxes paid for gains
that never existed. John and Cathy Dalton, a Middletown couple who invested
nearly $700,000 with Madoff, filed amended New Jersey returns for 2005, 2006
and 2007. They had paid taxes on more than $206,000 in capital gains and almost
$37,000 in dividends that proved to be fictitious. They recalculated the taxes
payable, and requested a $5,026 refund. On October 1, 2009, the Division of
Taxation denied the refund, despite the fact that the capital gains and
dividends were non-existent.  Their argument was that since the Daltons had withdrawn a portion of their investment in [Read more…] about NJ Tax Refund for Madoff Victims’ Phantom Income

Owe NJ or NY taxes? ? It Could Cost You Your Driving Privileges

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Ignoring a tax debt could cost you more than you might think. Traditionally, states have made use of  liens and wage garnishments as the primary method for collecting delinquent taxes. However, the reeling nature of the economy has emboldened states to employ a much more aggressive tactic.  On October 4, California passed a law mandating that state’s motor vehicle department to suspend the driver licenses of the top 1,000 tax debtors. Moreover, all their names are to be published online. At least 19 states, including New Jersey and New York, have followed California’s lead and are likewise listing the names of tax delinquents online. While they have not yet suspended driver licenses, these states are desperate for additional tax revenue. It would be wise to take care of your tax liability to ensure not having to move over to the passenger’s side.

Deadline to Convert Roth IRAs to Traditional IRA is Oct 17th

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In 2010, the law permitted you to convert your traditional IRA to a Roth and defer recognizing income on the amount converted until future years. For example, if your account was $100,000 you would declare no income on your 2010 return and $50,000 of taxable income in both 2011 and 2012. As a result of the volatility in the stock market, that $100,000 you converted might only be worth $60,000. Here’s where the problem arises: the tax you pay in 2011 and 2012 on the Roth conversion is NOT based on the current value of the account, but rather on the value at the time of conversion. In our example, assuming a tax bracket of 33%, you would end up with just $27,000 of your original $100,000 investment! ($100,000 investment – $40,000 loss of market value – $33,000 Uncle Sam’s portion = $27,000). There is a solution to this problem, but the deadline is October 17, 2011. [Read more…] about Deadline to Convert Roth IRAs to Traditional IRA is Oct 17th

IRS INTRODUCES COMPLIANCE PROGRAM FOR EMPLOYEE CLASSIFICATION

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As part of the “Fresh start” initiative by the IRS to encourage more corporate and individual tax compliance, a new voluntary program has been announced to encourage employers to properly classify employees as such, rather than as independent contractors. Under the program, employers can obtain substantial relief from federal payroll taxes they would have owed in the past, if they prospectively classify their hires as employees. To be eligible, an applicant must: [Read more…] about IRS INTRODUCES COMPLIANCE PROGRAM FOR EMPLOYEE CLASSIFICATION

Hurricane Irene Damages are Tax Deductable

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Are you among the thousands with property damage caused by Hurricane Irene? Casualty losses relating to your home, household items and vehicles may be deducted on your Federal income tax return, less the amount reimbursed by insurance. If the property was not completely destroyed, the amount deductable is the lesser of: [Read more…] about Hurricane Irene Damages are Tax Deductable