Have You Received An Information Request From NY or NJ ?

Many states are scrutinizing tax returns!

— particularly ones with large refunds — and are asking taxpayers for copies of their Form W-2 Wage and Tax statements in order to verify state and local tax withholdings.

Employers must submit employee Wage and Tax statements to the Social Security Administration on or before February 28th each year. The Social Security Administration then transmits this data electronically to the Internal Revenue Service. Wage and tax withholding information is then shared by the IRS with the various states. This process can take several months to complete. As a result, many states are forced to process e-filed tax returns before they have any wage and tax withholding information.

Recently some states have been reluctant to pay large tax refunds before this wage and tax withholding data has been made available to them. As a result, many states are asking for this information directly from the taxpayer. Of course, this holds up the taxpayer’s refund by several weeks or more. Some believe that this is an attempt by cash-strapped states to defer the payment of tax refunds. Others argue that the delay is a legitimate tactic to avoid paying on fraudulent tax returns.

Whatever the reason, a taxpayer has little choice but to comply with the information request and respond accordingly. In the future a taxpayer might want to consider adjusting his or her federal and state tax withholdings to minimize income tax refunds, electing instead to receive a larger take-home paycheck.

Given the nature of the times, it might be more prudent to make use of an employer-sponsored payroll savings plan, or open your own money-market account, then to give the IRS or state governments what is in essence an interest-free loan. Adjusting your federal and state withholding taxes requires careful planning. We at VB&T can assist you in maximizing your take-home pay while minimizing the risk of underpaying your federal and state income taxes. The earlier in the year you adjust your income tax withholdings, the better. Let’s get started. Give us a call at 212-448-0010.