New Jersey 2014 Tax Resolution Program
Corporate & Finance Alert
October 24, 2014
The New Jersey Division of Taxation (the “Division”) is offering businesses and individuals that have unpaid tax liabilities for the taxable years 2005 through 2013 a way to request and enter into a closing agreement with the Division in order to satisfy their outstanding tax liabilities and possibly avoid payment of most penalties. By participating in this program, taxpayers can fully satisfy their outstanding tax liabilities with a significantly lower payment than would ordinarily be required.
As part of this program, the Division is sending letters to taxpayers with outstanding tax liabilities, which include a “Schedule of Liabilities” showing the reduced amount that a taxpayer can pay to settle their tax obligations. Under this program, most penalties normally imposed by the Division can be reduced or even waived, except for the 5% non-participation penalty imposed on taxes due on and after January 1, 2002 and before February 1, 2009, which applies to taxpayers who failed to pay taxes that were eligible for payment under the New Jersey tax amnesty adopted pursuant to P.L. 2009, c. 21. The reduced amount shown on the Schedule of Liabilities will include the total tax liability and interest due, as well as any reduced penalties. The interest due will be calculated only on the tax and reduced penalties.
In addition to reducing or waiving penalties, the Division may also waive recovery fees associated with the outstanding tax liability, and may further eliminate any costs of collection. The recovery fee is a 10% fee imposed on each tax liability that is forwarded to the Division’s authorized collection agency because the first bills were not paid. Costs of collection are a 10% fee applied to cover the Division’s legal and collection costs when it must secure a tax debt by filing a Certificate of Judgment.
If a taxpayer fails to respond to the Division’s letter, the tax, interest, and any and all penalties, recovery fees, and costs of collection will remain due, and the Division may pursue further collection activity. However, by making the full, reduced payment listed in the Schedule of Liabilities, a taxpayer is effectively entering into a closing agreement with the Division, which confirms the final satisfaction of the outstanding tax liability. Full payment must be made by November 17, 2014 for a taxpayer to take advantage of this program.
Critically, while any tax liabilities related to delinquent or unfiled returns may be eligible for this program, these tax liabilities must first become assessed liabilities, which requires filing the requisite returns. These returns must be processed by the Division in order for it to assess tax, and any such tax must be paid by November 17, 2014. Therefore, taxpayers with unfiled returns who wish to participate in the program should file their returns immediately. These taxpayers, as well as timely filing taxpayers who have not received a letter from the Division but who have unpaid tax obligations, should confirm their eligibility for the program by contacting the Division.