NJ Real Estate Tax Rebate

I hope you meant 1099-G, as W-2G is for gambling winnings, not government payments.

(Whether there's a covert feeling about property tax refunds being a crap-shoot, I leave to the reader to decide) ;-)

A NJ tax pro told me to treat just like a state income tax refund, except if it resulted in a benefit for the year in question, report income on line 21 not line 10.

Release No: NJ-2006-03 IRS Continues to Remind New Jerseyans How to Report Property Tax Rebates

SPRINGFIELD - To help New Jersey taxpayers understand and meet their tax responsibilities; the Internal Revenue Service today explained the reporting requirements for the Homestead and New Jersey Saver Rebate Programs.

"Taxpayers that claimed itemized deductions, including all of their property taxes, on last year's federal income tax return, will need to report the rebate as income for 2005. Residents will not receive a Form 1099 from the State of New Jersey since this is not an income tax refund," said IRS Spokesperson Gregg Semanick. "Rebates of this type are called 'recoveries'," Semanick said. "A recovery is a return of an amount you deducted or took credit for in an earlier year. In this case, it is the deduction you took for your property taxes on your

2004 tax return. Taxpayers who itemized last year may have enjoyed the benefit of taking a deduction for the entire amount of their property tax payment. However, since they received part of that deduction back in the form of a property tax rebate, after they filed their return, these taxpayers will have to report that rebate on this year's return."

New Jersey taxpayers can report the rebate on Line 21 of Form 1040. Line 21 is designated for reporting "Other Income" and has a space for describing the income. Taxpayers can enter "Property Tax Rebate" in the space provided on the return. Alternatively, taxpayers can offset the rebate on their 2005 property tax deduction on line 6 of Schedule A - Itemized Deductions. Line 6 is designated for reporting a deduction for "Real Estate Taxes."

Taxpayers who used the standard deduction, or who did not claim their property tax as an itemized deduction on their 2004 tax return, do not have to report the rebate as income. By not claiming an itemized deduction for property taxes, these taxpayers did not receive a special tax benefit and therefore there is no taxable recovery. The IRS suggests that taxpayers review the explanation of Other Income in their Form 1040 Instruction booklet. Taxpayers can find a more detailed explanation of Recoveries in IRS Publication 525, Taxable & Nontaxable Income, for further details on the property tax offset. Taxpayers are also encouraged to discuss their specific tax situation with the tax professional that prepares their return.

The computation they want puts it in a different tax year than the one you put it in. As I recall, the effect is to undo the previous year's state tax deduction, including the effects of tax bracket and reduction of deductions over a certain amount of income.

It's unlikely they'd allow a choice in this, because people would take the choice most favorable to themselves.

There has been a IRS notice on the NJ Department of Revenue that indicates that the treatment that you have used is an allowable alternative to reporting the rebate on line 21 of Form 1040.

Putting the rebate on line 21 of Form 1040 can subject you to fraudulent IRS instuctions that can result in the taxable income attributable to the refund being more than twice the amount of the refund.

Explained here:

`06 Cheers,

WDK

This is the second year for wide-spread school tax refunds in NY. These differ from income tax refunds in that the checks we are receiving in 2007 are refunds of our 2007 school taxes. And we will not be getting 1099-G for these refunds. There are three cases to consider:

A taxpayer who does not itemize, and whose refund is less than the school tax actually paid, reports nothing.

A taxpayer who does itemize, and whose refund is less than the school tax actually paid, reports his net school tax on Schedule A.

A taxpayer whose refund is more than the school tax actually paid reports the excess on line 21.

See

for NY State tax Q&A on the so-called 'STAR' (School TAx Relief program) rebate.Gee, we should have done this for t/y 2006 Don? It wasn't until I saw the this thread about NJ this AM that I started to wonder if my brother, who itemizes (I looked over his return, but didn't actually "do" it since I'm not qualified for my own, never mind his!), did this. As he's away for the holiday, I'll have to ask him. 1040x time if he neglected to deduct on Sch "A", I assume?

"Andrew" wrote in news:6mJ1j.1292$ snipped-for-privacy@newsfe08.lga:

NJ has reminded taxpayers at least since 2005 or that tax reporting has to include the home owners rebate. I don't remember how I did it (I could look it up), just that I did. This year (2007) the rebate was a much larger amount than in 2006.

Han - I think Don was pointing out what NEW YORK reporting was. I beleive from what I've read in this thread there are differences in the two states. As my both me and my brother are NY State residents, that's why I was explicitly addressing the NY State post he made. (PS: Nice to see you over here from Q!)

------------------------------------------- Regards -

- Andrew

"Andrew" wrote in news:w7M1j.1298$ snipped-for-privacy@newsfe08.lga:

Hi Andrew! Yes I lurk in here too. Sorry about confusing NY and NJ tax issues. I think the OP had been referring to NJ, hence my confusion.

I presume you have, and will now provide, a citation to a (federal) court case that supports your assertion that the IRS has published "fraudulent ... instructions" on this issue.

I also presume you have, and will now provide, a link to the "IRS notice on the NJ Department of Revnue" web site.

Sure Bill,

Here is the link to the notice on the NJ Department of Revenue website that you requested.

Now here is a question for you. Why would IRS publish a notice the indicates that a taxpayer can deviate from the instructions contained in Form1040 instructions and Publication 525? Could it be that the deviation works around the problem with the standard instructions?

Now, can you cite a court case that specifically sustains IRS interpretation of section 111(a) of the Internal Revenue Code which results in the gross income attributable to an itemized deduction recovery exceeding the amount of the recovery? I am confident that you will have no trouble finding multiple cases where the courts have so ruled.

Why?

Because IRS sent me a letter* dated Ddecember (sic) 14, 2004, that contained the following statement:

"Federal courts have consistently ruled against the arguments you have made."

Less than a month later, I received a refund based on the arguments that the "[f]ederal courts have consistently ruled against".

Letter 3175 (SC) (Rev. 2-1999) Cat. No. 26859J

BTW, North Carolina has dropped that MFS requirement where only one spouse of a non-resident couple has North Carolina Income. You can search this news group for more information on that issue.

Cheers,

WDK