1. Why do you think people need Federal Income Tax Advice?
Albert Einstein said, “The hardest thing in the world to understand is the income tax.” And, if I may be allowed another quote, former Treasury Secretary Paul O’Neill observed that, "Our tax code is so complicated, we've made it nearly impossible for even the Internal Revenue Service to understand."
You cannot know the right moves to make in your daily financial life without a basic knowledge of the tax implications of your actions.
Even if you use a tax professional to prepare your return, the more informed you are on tax matters, the more prepared you will be when you go to your annual tax appointment.
2. How important is it for people to seek updated Federal Income Tax information?
Federal and State tax law is constantly changing. While it has been quite active in passing tax legislation in the new millennium, with multiple tax acts each year, Congress is not the only source of change. New Tax Court decisions and IRS regulations and pronouncements, such as Chief Counsel Memorandum, appear regularly.
3. Apart from professionals like you, where else can people get State Income Tax help?
The website of your local state Department of Revenue or Department of Taxation provides a wealth of information. While I often find fault with the NJ Division of Taxation, its website is an excellent resource which I consult regularly.
4. What important advice can you give people to be free from income tax issues?
I am often asked by friends, family, clients and readers, “What is your best tax advice?” I have given it much thought and perhaps the best piece of tax advice I can give anyone is, “Don’t accept tax advice from anyone other than a professional tax preparer.”
Don’t listen to a broker, a banker, an insurance salesman, or your Uncle Charlie! You wouldn’t ask your butcher for a medical opinion, so why would you listen to tax advice from your MD?
Over the years clients have come to me wanting to claim the strangest things – telling me “my neighbor” or “a guy I ride in to work with on the train” said it was deductible. And it seems that just about every workplace has a resident self-proclaimed “tax pro.”
If you are given any tax information by any non-tax person, be sure to check it out with your own tax professional before taking any action.
5. How should people get information on New Jersey property tax rebate programs?
Let me again tout the New Jersey Division of Taxation’s website (http://www.state.nj.us/treasury/taxation). It provides detailed information on the NJ Homestead Rebate and the Property Tax Reimbursement programs. You can even find out the amount of your NJ Homestead Rebate check, which is information you may need when preparing your 2009 federal tax return.
6. What special tips can you offer people for income tax season?
Don’t rely on a tax preparation software package or an online filing service to prepare a correct and accurate tax return if you don’t have sufficient knowledge of the Tax Code. No software package or online filing service is a substitute for knowledge of the Tax Code. And no tax software package or online filing service is a substitute for a competent, experienced tax professional.
When the IRS comes after you for errors on your tax return you can’t blame it on the software. The US Tax Court has on two separate occasions rejected the "Turbo-Tax Defense" when a taxpayer attempted to blame tax preparation software for a negligent tax return. This only works if you are being nominated as Secretary of the Treasury.
When preparing your tax return you are often given choices on how to treat a certain situation or item. If you find yourself faced with choices, you should review each option and do separate tax calculations to see which one will result in the lowest tax.
You should also consider how the federal option will affect your resident and non-resident state and local tax returns. Choosing an option may save you $50.00 in Federal taxes but cost you $100.00 in State income taxes. Your goal is to choose the options that will allow you to pay the absolute least amount of combined overall Federal, State and local income taxes.
Review carefully your finished tax returns before sending them in, paying special attention that all Social Security numbers on all pages are correct. This is true even if you pay someone to prepare your return. You are responsible for every item on the return. If you find something on a return from a paid preparer that you do not understand, ask the preparer about it.
For more specific tax tips you can check out my daily column at MainStreet.com (pardon the plug).
7. What do you think of the Obama Administration’s tax policy?
While I am pleased that President Obama has appointed a committee to review the Tax Code and provide recommendations for simplification and improvement, the committee’s instructions are a bit restricted. And it appears that this committee has been forgotten about.
One of the few things that George W. Bush did right while in office was to appoint the President's Advisory Panel for Tax Reform. However, when the panel’s report did not recommend what W. wanted it to, or because W. lost interest in the issue, the recommendations of the panel were ignored.
In his favor, Obama avoided the costly error of sending out “stimulus” rebate checks and used reduced withholding and resulting increased take home pay to distribute his Making Work Pay credit, although in the process he sort of mucked up the withholding tables and caused unintended problems.
I am against the use of “refundable” tax credits, something it seems Obama has taken a liking to. I am also against the concept of raising taxes on the wealthy just because they can afford it. I have talked about these issues at length in my blog THE WANDERING TAX PRO.