Archive for the ‘New York’ Category

New York Extends Tax Deadlines Because of Sandy; Expect the IRS, New Jersey, Pennsylvania and Others to Follow

Monday, October 29th, 2012

The New York State Department of Taxation and Finance announced that they have extended all tax deadlines falling from October 26 to November 14 to November 14th because of Hurricane Sandy. I expect similar actions to be taken by the IRS, New Jersey, Pennsylvania and other impacted areas.

The New York extension directly effects MCTMT tax returns on extension that would be due on October 31st; those are now due on November 14th. Also, third quarter MCTMT estimated payments for 2012 are now due on November 14th. This will likely also impact payroll tax filings.

Tax Foundation Releases State & Local Tax Burdens

Wednesday, October 24th, 2012

The Tax Foundation released its annual State-Local Tax Burden Ranking. In what won’t be shocking to most readers, New York came in first…and that’s not a good thing. Here are the ten worst states:

1. New York 12.8%
2. New Jersey 12.4%
3. Connecticut 12.3%
4. California 11.2%
5. Wisconsin 11.1%
6. Rhode Island 10.9%
7. Minnesota 10.8%
8. Massachusetts 10.4%
9. Maine 10.3%
10. Pennsylvania 10.2%

The ten best states (those with the lowest tax burdens):

41. South Carolina 8.4%
42. Nevada 8.2%
43. Alabama 8.2%
44. New Hampshire 8.1%
45. Texas 7.9%
46. Wyoming 7.8%
47. Louisiana 7.8%
48. Tennessee 7.7%
49. South Dakota 7.6%
50. Alaska 7.0%

One observation that the Tax Foundation made is that most states have similar burdens. Note that the burden being measured is on taxes residents pay and not taxes on tourists (such as hotel excise taxes). Numerous states fall between 8.7% and 9.7%.

One interesting observation I have is that almost all of the low-tax states are “Red” states (they tend to vote Republican) while almost all of the high-tax states are “Blue” states (they tend to vote Democratic). I suspect that this is not a coincidence.

Bad States for Gamblers

Monday, October 22nd, 2012

It’s been a while since I’ve listed out the bad states for gamblers. Here’s an updated list. Make sure you read the notes because while all of these states have tax systems that are problematic for gamblers, some impact amateurs while others impact professionals. Note that I do not cover the laws that impact gambling here (such as Washington State’s law that makes online gambling a Class C felony).

Connecticut [1]
Hawaii [2]
Illinois [1]
Indiana [1]
Massachusetts [1]
Michigan [1]
Minnesota [3]
Mississippi [4]
New York [5]
Ohio [6]
Washington [7]
West Virginia [1]
Wisconsin [1]

NOTES:

1. CT, IL, IN, MA, MI, WV, and WI do not allow gambling losses as an itemized deduction. These states’ income taxes are written so that taxpayers pay based (generally) on their federal Adjusted Gross Income (AGI). AGI includes gambling winnings but does not include gambling losses. Thus, a taxpayer who has (say) $100,000 of gambling winnings and $100,000 of gambling losses will owe state income tax on the phantom gambling winnings. (Michigan does exempt the first $300 of gambling winnings from state income tax.)

2. Hawaii has an excise tax (the General Excise and Use Tax) that’s thought of as a sales tax. It is, but it is also a tax on various professions. A professional gambler is subject to this 4% tax (an amateur gambler is not).

3. Minnesota’s state Alternative Minimum Tax (AMT) negatively impacts amateur gamblers. Because of the design of the Minnesota AMT, amateur gamblers with significant losses effectively cannot deduct those losses.

4. Mississippi only allows Mississippi gambling losses as an itemized deduction.

5. New York has a limitation on itemized deductions. If your AGI is over $500,000, you lose 50% of your itemized deductions (including gambling losses). You begin to lose itemized deductions at an AGI of $100,000.

6. Ohio currently does not allow gambling losses as an itemized deduction. However, effective January 1, 2013, gambling losses will be allowed as a deduction on state income tax returns. Unfortunately, those gambling losses will not be deductible on city or school district income tax returns, so Ohio will remain a bad state for amateur gamblers.

7. Washington state has no state income tax. However, the state does have a Business & Occupations Tax (B&O Tax). The B&O Tax has not been applied toward professional gamblers, but my reading of the law says that it could be at any time.

Why I’m Happy to be in Nevada and Not in California

Tuesday, October 9th, 2012

The Tax Foundation released its 2013 State Business Tax Climate Index today. Last year, I was a California resident; in the 2012 Index, California ranked 48th out of 50 states. I now reside in Nevada, which ranks 3rd out of the 50 states. In this case, 3rd is third best. Here are the top ten:

1. Wyoming
2. South Dakota
3. Nevada
4. Alaska
5. Florida
6. Washington
7. New Hampshire
8. Montana
9. Texas
10. Utah

And the bottom ten:
41. Maryland
42. Iowa
43. Wisconsin
44. North Carolina
45. Minnesota
46. Rhode Island
47. Vermont
48. California
49. New Jersey
50. New York

This just a listing based on taxes. If we added in regulations, California might even fall to 49. (Based on what I know of New York, it would be difficult for the Bronze Golden State to hit bottom.) States showing the best improvement were Michigan (which went from 18 to 12) and Maine (from 37 to 30). Michigan is especially notable because its corporate ranking went from 49th to 7th!

Taxes and regulations matter. On Monday, the Tax Foundation released a map showing annual income lost and gained due to interstate migration in 2009:

Annual Income Gained or Lost due to Interstate Migration

Shock of shocks, New York and New Jersey are in the top ten of loss of income back in 2009. Michigan was worst off (remember, Michigan’s tax system was horrible); Montana was best followed by South Carolina. Low tax states generally did quite well, with Florida #3, Wyoming #4, and Arizona #5.

Returning to the state business tax climate, taxes matter. Kudos to the Tax Foundation for their vital work. As the Tax Foundation stated in their report,

Taxes matter to business. Business taxes affect business decisions, job creation and retention, plant location, competitiveness, the transparency of the tax system, and the long-term health of a state’s economy. Most importantly, taxes diminish profits…

States do not enact tax changes (increases or cuts) in a vacuum. Every tax law will in some way change a state’s competitive position relative
to its immediate neighbors, its geographic region, and even globally…Entrepreneurial states can take advantage of the tax increases of their neighbors to lure businesses out of high-tax states

MTA (MCTMT) Tax Ruled Unconstitutional; Appeal Certain

Sunday, August 26th, 2012

I prepare a number of New York tax returns for self-employed individuals. One of the more annoying tax returns is the Metropolitan Commuter Transportation Mobility Tax in the New York City metropolitan area. It’s not a large tax by any means, but it is additional paperwork that must be filed by my New York clients. However, that may be a thing of the past. The MCTMT represents about 15% of the revenue of the Metropolitan Transportation Authority (MTA).

This week a New York state court judge ruled that tax unconstitutional. “The bill [authorizing the tax] is unconstitutional because it appropriates public monies for a local purpose…And that it is unconstitutional for imposing liability onto political subdivisions for the debt of a public corporation.” The court also found that the MTA must be self-sustaining.

There have been four previous lawsuits alleging that the MCTMT was unconstitutional. All of those failed. It will likely be many months before the ultimate fate of this lawsuit is known.

Indians Win One Against New York

Sunday, June 24th, 2012

No, it’s not the Cleveland Indians beating the Yankees; rather, the St. Regis Mohawk Tribe beat the New York Tax Department. After the New York cigarette tax on name-brand cigarettes sold on Indian lands some tribes decided to make their own cigarettes. The Mohawk tribe sold some of their cigarettes to a Nebraska tribe; New York seized the cigarettes because they didn’t pay the tax. A New York judge ruled that the state couldn’t do that.

Taxdood has more.

Another Survey, Another Bad Result for California

Wednesday, May 30th, 2012

Yet another survey puts California among the worst three states from a tax perspective. Alvarez & Marsal Taxand, a consulting and tax advisory firm, surveyed 800 financial executives (302 responded). Among the questions asked was Which states do you view as most competitive from a tax perspective? The usual suspects finished on the bottom: California, New York, and New Jersey. As Alvarez & Marsal Taxand noted, “…the states generally viewed as having complex tax systems and high tax rates are the three states listed (by a wide margin) as the least competitive states.” Alvaraz & Marsal Taxand Managing Director Don Roverto told the the Orange County Register, “The feedback from clients who do business in California is that it has one of the highest combinations of high rates and complex systems and that’s why it’s at the bottom.”

It’s also not a surprise which states finished at the top: Texas, Florida, and Nevada. These states all feature a tax exclusion or non-income tax based system.

Perhaps California will consider tax simplification, lowering rates, and making businesses feel wanted. Of course not–the Bronze Golden State will have one or two tax hike proposals on the November ballot.

Mailbag Update

Tuesday, March 13th, 2012

We get mail:

I got married last June and my wife says we need to file as single because we weren’t married for the whole year. Can you set her straight?

Your marital status on December 31st is your marital status for the year (with a few exceptions). If you are married on the last day of the year, you are married for the entire year. You and your wife need to file a Married Filing Jointly return or a Married Filing Separate return.

The exceptions include spouses who do not live together for the entire year and where a spouse dies during the year.

I won a €20,000 jackpot at a casino while traveling in Europe last year. My accountant told me I have to claim that income. That can’t be right, right?

It’s correct. The US taxes you on your worldwide income, even money won in a casino in Europe. You need to convert the Euros to Dollars and include the gambling income as part of line 21, Other Income. The good news is that you get to deduct your gambling losses (up to the amount of your winnings) as an itemized deduction on Schedule A.

I spent a month working in New York last year for my business. My W-2 has New York withholding along with withholding for my home state, California. It appears that both states taxed the same income and that can’t be right! Or can it?

Well, you were working in New York, so you have New York source income, and New York definitely has the right to tax you for that time (and any other New York source income you might have). You’re a resident of California, so you owe California tax on all of your income.

That said, you do get to take a tax credit for the double-taxed income. In this manner you effectively end up paying the higher of the two states’ income tax rates.

I’m looking for a tax professional in the Philadelphia area familiar with the Adult Entertainment Industry.

That can be read in so many different ways….

Clubhouse Manager Strikes Out

Tuesday, February 21st, 2012

Well, that headline was easy to write. From Queens, New York, comes the story of Charlie Samuels. Mr. Samuels was the clubhouse manager of the New York Mets. He also had itchy fingers: Mr. Samuels stole memorabilia from the Mets, including a complete set of 1986 World Series jerseys. He also padded his expense accounts. Finally, along the way he forgot to pay income tax on his ill-gotten gains. After being arrested last May he pleaded guilty today in a plea bargain deal to possession of stolen property and state tax fraud.

Mr. Samuels is expected to receive probation. He was also ordered to make restitution: $21,000 to the New York State Tax Department, $15,000 to the New York City Finance Department, $15,000 to the Queens District Attorney, and $24,955 to the Mets. Mr. Samuels’ attorney noted that in the end he was “only” in possession of $50,000 of stolen memorabilia, not the $2.3 million he was originally accused of having. Still, that was $50,000 too much.

New York State Street Addresses

Thursday, February 9th, 2012

Earlier, I published a list of IRS Service Center Addresses. New York State has just published its list of street addresses to be used for FedEx, UPS, and DHL. The New York list is by form, and has 15 different addresses! You can find the list on Publication 55.