Effective November 15, 2018, the New Jersey tax amnesty program went into effect and will last for only two months until January 15, 2019. During that period, individuals, businesses, and other taxpayers may pay their outstanding New Jersey state tax obligations through the amnesty program and receive amnesty from late payment penalties, late filing penalties, recovery fees, accrued costs of collection, and one-half of accrued interest. Taxpayers who make full payment of outstanding taxes and one-half of outstanding interest should be able to waive outstanding penalties. All payments under the amnesty program are non-refundable and taxpayers must also waive their right to appeal.
Governor Murphy signed the tax amnesty measure into law on July 1, 2018. This tax amnesty program applies to state tax liabilities for tax returns that were due on or after February 1, 2009 and prior to September 1, 2017, whether previously filed or not. The program covers all New Jersey state tax liabilities and fees administered by the Division of Taxation, such as individual gross income tax, corporation business tax, sales and use tax, motor fuels tax, cigarette tax, alcoholic beverage tax, insurance premiums tax, transfer inheritance and estate taxes, and many others. The amnesty program does not cover liabilities administered by other taxing agencies, such as local property taxes, unemployment taxes, and disability insurance premiums.
The amnesty program covers taxpayers who owe tax relating to filed returns as well as unfiled returns. Taxpayers with delinquent returns can only take advantage of amnesty by filing those returns prior to the end of the amnesty period. Amnesty is also available to taxpayers who face adjustments due to an ongoing audit or who need to file an amended return. In addition, amnesty is available, but only with the approval of the Division of Taxation, to taxpayers who through a protest have requested a conference with the Conference and Appeals Branch or who have filed a complaint with the New Jersey Tax Court. The Division states that it is requiring such taxpayers to withdraw the appeal and waive all rights to a future appeal, at least with respect to those items submitted through the amnesty program.
Critically, the amnesty provisions do not extend to any taxpayer under criminal investigation or charge for any State tax matter by a county prosecutor or New Jersey's Attorney General. Although the underlying statute provides that taxpayers would be required to pay any previously assessed civil fraud or criminal penalties, the Division of Taxation’s Amnesty website is not referencing this.
Nearly all taxpayers with outstanding tax balances will receive customized notices of the amnesty program with login instructions and a personalized Amnesty ID and PIN. Details on the covered taxes, related forms, and amnesty in general, can be obtained from the Division's updated Amnesty Website. Based on the website, the Division is stating that all requests for amnesty must be filed electronically and that payments should be made electronically either by e-check or by credit card. The Division will accept payment by check, cashier's check, or money order at one of its seven Regional Information Centers.
Consistent with the Division's on-line instructions to take advantage of the amnesty program a taxpayer should:
- File any unfiled tax returns or required amended returns for the period or periods in question, as soon as possible;
- Pay the balance of the tax due and one-half of the balance of interest due as of November 1, 2018 for the particular period through the amnesty program; and
- Complete, sign, and submit a payment/waiver statement.
Amnesty is available to taxpayers who are subject to wage garnishment, attachment, or other collection procedures. Taxpayers will be allowed "partial" amnesty if they can only pay a portion of an outstanding eligible liability. The balance of the liability will remain subject to penalties and interest at the rates applicable to the pre- and post-amnesty periods (including the five percent (5%) penalty described below). All tax that the taxpayer wishes to qualify for amnesty must be paid during the amnesty period; installment plans will not be available. Again, all payments must be made by 11:59 pm, January 15, 2019.
Taxpayers waive the right to appeal any liability paid under amnesty, including any overpayments. That is, a taxpayer relinquishes all rights of administrative and judicial appeal which have not run or otherwise expired. If a taxpayer who is eligible to pay taxes through the amnesty program fails to pay outstanding tax liabilities, a five percent (5%) additional penalty, which cannot be waived or abated, will be imposed upon expiration of the amnesty period, in addition to any other penalties, applicable interest, and costs.
Taxpayers with items in dispute should consider having their representative contact the Division of Taxation to attempt to negotiate a fixed tax amount with respect to amnesty-eligible items so that they may make timely payments during the amnesty period.
The Division of Taxation retains the right to conduct an audit of any amnesty payment situation, and such an audit could lead to further liabilities not subject to amnesty. However, the Division of Taxation has not normally targeted amnesty filings through the normal audit system and the Division actually states on its website that a taxpayer’s chances of being audited should not increase or decrease by virtue of the taxpayer’s participation in the amnesty program.
The fact that nearly all penalties and one-half of interest are being foregone makes this a generous program. Although the premise of amnesty is simple, the quantification of tax due, the review and analysis of related issues, the preparation of any returns to be filed, as well as the actual Payment/Waiver Statements may require professional assistance and take some time. Again, it is mandatory that all of these activities be completed no later than January 15, 2019. If you, your business, or a family member might benefit from this program, please feel free to contact us on a confidential basis to discuss the amnesty program in more detail.