Update for New York,New Jersey, and Connecticut
Mark H. Levin
JULY 2005 - New
York, New Jersey, and Connecticut have all recently enacted
changes that will soon require tax preparers to file certain
income tax returns electronically.
New York State Budget Act of 2005, Part Q, requires certain
tax preparers to file all New York State income tax returns
electronically. This provision covers all returns covered
by the New York State Tax Law, Article 22. Included in Article
22 are personal income tax returns (Forms IT-201 and IT-203),
fiduciary income tax returns (Form IT-205), and partnership
returns (Form IT-204). Currently, the Department of Taxation
and Finance is mandating that only personal income tax returns
be filed electronically. In the future, the other types
of returns covered by Article 22 may also be covered by
the electronic filing mandate.
return preparers who prepare more than 200 original New
York personal income tax returns and prepare one or more
original returns using tax software during calendar year
2005 must file all authorized returns electronically for
2006. The 200 return threshold will be reduced to 100 for
calendar years beginning after 2005. The number of returns
is calculated at the entity level. Thus, if an entity that
is a preparer has multiple employees working on returns
at several locations, the total number of returns prepared
by all employees at all locations determines whether the
entity is required to file electronically. Preparers that
do not use tax software to prepare any New York personal
income tax returns are not required to file electronically.
original return is any personal income tax return that is
filed, without regard to extensions, during the calendar
year. An authorized return is any personal income tax return
that the Commissioner of the Department of Taxation and
Finance has authorized to be filed electronically.
Commissioner of the Department of Taxation and Finance may,
in instructions, consider the use of 2D-barcode technology
to satisfy the electronic filing requirements.
Department of Taxation and Finance has indicated that the
mandatory electronic filing requirement will apply to all
personal income tax returns, both resident income tax returns
(Form IT-201) and nonresident/part-year income tax returns
(Form IT-203). In addition, for tax year 2005 only, any
personal income tax return filed by mail that contains the
2D bar code cover sheet will be considered as being electronically
an electronically filed return cannot contain a manual signature,
the Department of Taxation and Finance is developing an
authorization form that the taxpayer must sign before the
electronic return may be transmitted. This authorization
form would constitute a digital signature and would be retained
by the preparer.
will not necessarily have to file their return electronically.
A new opt-out form is being developed that a taxpayer can
sign and that would be retained by the preparer as proof
of the opt-out election.
the department requires the electronic filing of only resident
and nonresident/part-year income tax returns, the 2005 Budget
Act authorizes the department to ultimately require the
electronic filing of all returns required under Tax Law
Article 22. This includes returns for partnerships (Form
IT-204) and for trusts and estates (Form IT-205), as well
as the aforementioned Forms IT-201 and IT-203.
required to file electronically and that use a tax software
package which does not support electronic filing must switch
to a software package that does.
are penalties for failing to file electronically if so required.
The penalty is $50 for each failure to electronically file
a return, unless it is proven that such failure was due
to reasonable cause and not willful neglect. Reasonable
cause includes, but is not limited to, a taxpayer’s
election to opt out.
Jersey continues its trend toward complete electronic filing
by requiring practitioners that filed 200 or more 2003 resident
gross income tax returns (NJ-1040) to file all NJ-1040s
electronically for tax year 2004. Practitioners that filed
less than 200 2003 NJ-1040s are not required to file the
2004 NJ-1040s electronically but are strongly encouraged
to do so.
NJ-1040 can be filed electronically through one of New Jersey’s
three electronic filing services: Fed/State E-File, NJ TeleFile,
or NJ WebFile. Practitioners must register with the IRS
as an Electronic Return Originator in order to file through
the Fed/State E-File Program, but can use either NJ TeleFile
or NJ WebFile without registering.
though electronic filing is mandatory for preparers, taxpayers
may still opt out by completing Form NJ-1040-O, which must
also be completed by the practitioner. The completed and
signed forms are not to be filed but must be retained by
fee charged for the electronic filing is not subject to
New Jersey’s sales tax if it is included in the full
invoice price for a tax filing by a tax practitioner. Practitioners
may disclose on the invoice the amount included in the fee
that is related to the electronic filing.
will require tax preparers that filed 200 or more 2004 Connecticut
income tax returns to file their 2005 Connecticut income
tax returns using the Fed/State E-File Program. Preparers
that file 100 or more 2005 returns must e-file for 2006;
preparers that file 50 or more 2006 returns must e-file
for 2007. Preparers must register with the IRS as an Electronic
Return Originator in order to participate in the program.
is no mandatory electronic filing requirement for practitioners
that filed 200 or less 2004 Connecticut income tax returns.
The Connecticut Department of Revenue Services is, however,
encouraging practitioners to try electronic filing for 2004
income tax returns in order to prepare for the mandatory
filing requirement covering 2005 income tax returns in calendar
preparers with questions regarding the electronic filing
requirements may call the Department of Revenue Services
Help Desk at 860-297-4713 or the IRS e-file Help Desk at
H. Levin, CPA, is manager, state and local taxes,
at H.J. Behrman & Company, LLP, New York, N.Y.