N.J. Mandates E-filing for Partnership Returns—Probably
By Richard J. Koreto
Posted on 2/2/12

According to a recent announcement from the New Jersey Division of Taxation, paid tax practitioners who prepare returns for partnerships must file all partnership returns on Form NJ-1065 electronically. Payments must be made electronically as well. These requirements begin with the 2011 tax year. However, as noted below, there may be exceptions.

Up until now, noted Harold J. Reiss, a member of the NYSSCPA New York, Multistate & Local Taxation Committee, practitioners had the choice regarding whether or not to e-file New Jersey partnership returns if there were fewer than 10 partners.

Although the rule applies to all professional tax preparers, it may have a particularly strong impact on small firms that handle mostly 1040s but only the occasional Form 1065, said Jeffrey Gold, another committee member. Certain professional tax and e-filing programs may require additional license fees for the e-filing of Form 1065, above and beyond what the preparers have already purchased, and it may not be economical for a small preparer to buy an unlimited e-filing license, as it would for a firm that prepares many of these returns.

Penalties and Options

New Jersey will be imposing a penalty of $50 for each return that should be filed electronically but is not. The state does offer a free online filing service for partnerships with no more than 50 partners, but it might be time-consuming to set up for only a few returns, as a preparer would have to transfer numbers from whatever tax program is being used to the state's web system.

Questions Remain

As the notice is still new, preparers are not completely clear about the language. New Jersey notes that the partnerships affected are those subject to "the provisions of the N.J. Corporation Business Tax." Several NYSSCPA committee members are getting in touch with N.J. authorities to address whether some partnerships might not be, thus making paper returns an options for these. If the state elaborates on this topic, additional coverage will appear in this newsletter.

The N.J. Division of Taxation lists other rules regarding partnership filings as well.