NJ EIC letter

[Kea]

New client retired and moved to TX from NJ in 2011. Return included W2 wages from NJ self-employed babysitting from TX, 1099R and 1099B (big loss). They were eligible for EIC on the federal return and NJ calculated their credit as a % of federal.

Client just got a letter from NJ requesting the following info:

1. SSN cards of yourself and spouse (if filed combined return)

2. SSN cards for your children

3. Your 2011 IRS Account Transcript (Contact IRS at 1800-908-9946)

4. Your federal schedule C or Schedule C-EZ (if you were self-employed)

5. Your 2011 W-2s and 1099s (if you were paid by an employer or were self employed)

6. Statement listing the addresses where you lived in 2011 and the dates you lived at each address

7. Birth certificates for your children

Questions:

2 & 7. They aren't claiming any children, so they just attach a note stating that?

4. I put the babysitting on line 21, but also used Sch SE. Should I create a substitue Sch C (for info purposes only) to send to NJ? Or, again, just a note stating it is on line 21?

5. Babysitting income is not on a 1099Misc. I know this is the kind of thing they are looking for. In this case it wasn't earned in NJ but since they just use a straight % of the fed credit, that becomes a moot point. What should I ask them to submit? I'm not sure what documentation - if any - they would have.

Thanks

[kcjenkins]

Sounds like it's a 'form letter' request. I'm not familiar with NJ returns, hopefully someone who is will chime in. But for what it's worth, I'd agree, just a statement "No children" should take care of 2 & 7. I'd do a Sch C-ez proforma for #4. #5 I'd just give the what they asked for, the W-2s and "No 1099's received". I would not give them anything more, if that does not satisfy them, they will ask for specific additions, but odds are very strong that this form letter will never need more.

[Pacun]

Why did you report it on line 21? A lot of times line 21 is not earned income and maybe that's why you are getting the letter. Another mistake on the return could be that your client lived in Texas (hence the babbysitting income) and the tax software did NOT prorate the NJ EIC. This is the formula for part year EIC for NJ: FedEIC*20%/12*monthslivedinDC.

[jainen]

>>They aren't claiming any children<<

I don't understand the original question or the responses so far. It was not a form letter and you can't ignore what they are asking for. NJ did not misinterpret Line 21 and the suggested formula is irrelevant.

Read the instructions! According to Pub TSB-300, one of the requirements for the New Jersey Earned Income Credit is, "You file a Federal Schedule EIC on which you list at least one 'qualifying child.'"

[kcjenkins]

Ah, that explains the reason for the letter.

[Pacun]

Nice info Jainen. Just out of curiosity, what year are the instructions for? Did you find the ones for 2012? They seem old and I think NJ tax preparers should report issues like this to ATX so that the formula "IfNotEIClistingdependents then NJEIC = 0" should be entered on the software.

[Pacun]

>>They aren't claiming any children<<

I don't understand the original question or the responses so far. It was not a form letter and you can't ignore what they are asking for. NJ did not misinterpret Line 21 and the suggested formula is irrelevant.

Read the instructions! According to Pub TSB-300, one of the requirements for the New Jersey Earned Income Credit is, "You file a Federal Schedule EIC on which you list at least one 'qualifying child.'"

Where are the NJ preparers? It seems that Jainen was reading OLD info. If that info were correct, I doubt that the software was not updated for so long. I read something more recent and it reads:

9. New Jersey Earned Income Tax Credit

(Line 50). If you are eligible and file for a

Federal earned income credit, you can also

receive a New Jersey credit in the amount

equal to 20% of your Federal benefit. Complete

the Earned Income Tax Credit Schedule

to calculate the amount for Line 50,

Form NJ-1040. However, you must prorate

your credit based on the number of months

you were a New Jersey resident. For this calculation

15 days or more is a month.

You must file Form NJ-1040 to receive a

New Jersey earned income tax credit, even if

you are not required to file a return because

your gross income is below the minimum

income threshold

[Kea]

Pacun -- I agree if the rules change, the software should be updated. FWIW, I'm using TaxWorks -- but it should still be updated! And, yes, the software did at least pro-rate for the time they lived in NJ. So, at this point we're talking a whopping $20 NJ credit! (But, hey, 20 bucks is 20 bucks.)

When I read the NJ publications (general instructions and GIT 6 for part-year residents), I did not see anything about having dependents. I've tried searching for the TSB 300 on the NJ site and a general Google search and I'm not finding it. If they aren't eligible for the credit due to no kids, I'll amend it. But I haven't found anything yet to substantiate Jainen's claim.

I'll research more tomorrow.

[jainen]

>>They seem old<<

Yes, I was wrong--this Internet thing is not reliable! The NJ law was amended in 2007, removing the requirement for a qualifying child. Kea should answer the letter the way KC explained. Don't forget to charge the client a hundred dollars to defend that $20 credit.