Q:

Subject:  NY & MN

HI THERE GURU MAN,

I DON’T WANT TO BOTHER YOU, BUT YOU MAY HAVE AN IDEA OF WHOM I CAN ASK
(I TRIED TAXCUT/H&R BLOCK WITH MY SOFTWARE, BUT THEY SAID MY KEYCODE IS INELIGIBLE)

I am doing taxes for a friend who is a full-time resident of Minnesota, but has a New York w-2.
She has $1498 of NY state taxes withheld.
I listed her as a non-resident of NY and full-time resident of Minnesota in the personal information in the software.
Now how do I go about preparing the state taxes? Do I need to buy and download New York software?
Then what will I do next (so that it does not just show that she owes $1184 to Minnesota?)

I DON’T KNOW WHO ELSE TO ASK???

HOW IS TAX SEASON GOING FOR YOU?

A:

Multi-state tax returns are very tricky and most professional level tax programs have a hard time doing it properly.  It wasn’t until just a few years ago that the Lacerte software, which I use, was improved enough to do the multi-state returns almost automatically.  Even so, I still often have to do some manual tweaking to get everything right.

The consumer DIY programs are not designed for anything that complicated and odds are that errors will slip through, resulting in a lot of hassles with both state tax agencies.

My point is that this is case for a professional tax preparer who is experienced with multi-state tax returns and not a task that you should be trying to handle on your own.

Good luck.

Kerry Kerstetter

Follow-up:

Aren’t you just the sweetest man alive!!!

Thank you for writing back to me.

When taxes are finished, we ride our bikes!

thanks again. 

Kansas suspends income tax refunds – It’s not just the PRC pulling this scheme.

Anyone hoping to spend a California tax refund should give up on that plan, or at least be very patient. According to this news release from Spidell, they are so broke in Sacramento that they will be delaying paying out tax refunds for at least 30 days.

Of course, as always, this is a one way street. Any taxes owed to the PRC must be paid in immediately or you will be faced with serious consequences.

Reconciling the amounts to report as income on a 1040 with the 1099–G forms that State tax agencies send to IRS has frequently been a little tricky.  When the 1099–Gs are showing incorrect information, I have learned that it’s impossible get the State tax agency to correct their mistake, so it is necessary to add explanatory info to the 1040 in order to avoid a document matching error down the road.

I just received this emailed press release from the Arkansas DFA admitting to some erroneous 1099–Gs that they sent to IRS. 

Subject: FW: State 1099-G Form Issued with Incorrect Refund Amount

Please review the following press release: 

The Department of Finance and Administration announced today that 28,040 taxpayers recently received 1099-G forms indicating an incorrect amount of refund or credit received by the taxpayer.  The incorrect forms were mailed to taxpayers between December 22nd and 29th, 2008.  The Form 1099-G is a Federal form that the Internal Revenue Service requires to be sent to taxpayers to remind them of the Arkansas Income Tax refund or credit they received during the previous tax year.

This problem occurred because of a computer processing error.  When the 1099-G forms were produced, information from 2007 rather than 2008 was mistakenly used to create the forms.  The 1099-G’s are currently being recreated using the correct 2008 information.  The corrected 1099-G forms will be mailed to the affected taxpayers by January 9, 2009.

We sincerely regret this error and any inconvenience you may have experienced as a result.  We strive to provide quality service to the taxpayers of this state.  When errors do occur, we will work to correct those errors as expeditiously as possible.  If you have any questions or need additional information, please contact:  Individual Income Tax at 501-682-1100 (Inside Pulaski County or Outside of Arkansas) or
1-800-882-9275 (Inside of Arkansas, outside of Pulaski County).

Thanks,

As with most cases where an erroneous 1099 is followed up with a CORRECTED one, IRS ends up looking for both amounts on the 1040 rather than ignoring the first one.  So, be careful when working on a 1040 for someone who was lucky enough to receive the admittedly incorrect 1099–G from DFA.   

States set to impose bevy of new taxes – and the State rulers will be shocked when more and more people take steps to avoid paying all of the new taxes, including physically leaving the high tax states.

A Recommended Sales and Use Tax Proposed by Governor Schwarzenegger Will Tax Veterinary Services – People are already calling this a “Pet Tax,” courtesy of the RINO governor of the PRC.

It’s an understatement to say that those of us expecting some change in the big government mentality in Sacramento are sorely disappointed in the administration of Ted Kennedy’s nephew in law. Rush Limbaugh put it quite well in today’s show.

“Can you understand how Gray Davis is probably laughing himself silly? He was thrown out of office for stuff that made far more sense than this. I just say, wait ’til Bloomberg hears about this, the esteemed mayor of New York City.”

There is already a movement to fight this new proposal, claiming that pets are not furniture, and shouldn’t be taxed as if they were.

2008 California Tax Rates and Exemptions – FTB has just released their inflation adjusted tax brackets and other affected figures.

MySpace boast nets partiers $320K Okla. tax bill – Interesting tactic by the OK Tax Commission, trolling for possible tax cheats bragging on the internet. Remember that Big Brother is watching everything you say and checking that you paid all of the taxes on all of the income you claim to have made.