New Jersey State Tax Amnesty
Corporate & Finance Alert
April 1, 2002
On Monday, April 15, 2002, the New Jersey tax amnesty program went into effect, and will last for only eight weeks until June 10, 2002. During this period, individuals, businesses and other taxpayers can pay their outstanding state tax obligations and receive amnesty from penalties, interest and accrued costs of collection. Payment of tax liabilities through the amnesty program will preclude imposition of civil and criminal tax penalties relating to the tax paid.
The tax amnesty program applies to state tax liabilities for tax returns due on and after January 1, 1996 and prior to January 1, 2002 (for example, gross income tax returns for the 1995 – 2000 calendar years). It covers all New Jersey tax liabilities 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, and transfer inheritance tax (but not local property taxes, real property transfer taxes, unemployment taxes, and disability taxes).
The amnesty program covers taxpayers who owe tax on filed returns as well as unfiled returns. Thus, non-filers can take advantage of amnesty by filing returns during 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 have requested a conference with the Conference and Appeals Branch, or who have filed a complaint with the New Jersey Tax Court. The amnesty provisions do not apply to any taxpayer under criminal investigation or charged with a crime for any State tax matter.
Amnesty is available to taxpayers who are subject to wage garnishment, attachment, and 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 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 as part of the amnesty program. The Division will accept payment by check, cashier’s check and certain credit cards. Payment can be made through the mail or in person at its regional offices.
Taxpayers waive the right to appeal any liability paid under amnesty. Once amnesty is granted and payment of the tax has been made, a taxpayer relinquishes all rights of administrative and judicial appeal that have not run or otherwise expired. If a taxpayer who is eligible to pay taxes through the amnesty program fails to take advantage of the program, a five percent (5%) additional penalty, which cannot be waived or abated, will be imposed upon a tax paid after the expiration of the amnesty period.
Although the Division of Taxation has retained the right to conduct an audit of any amnesty payment, and such an audit could lead to further liabilities not subject to amnesty, it is not anticipated that the Division will specifically target amnesty filings for audit.
The fact that interest and penalties are being waived makes this a generous program. If you, your business, a friend, or a family member might benefit from this program, please contact us to discuss it in more detail. Although the premise of amnesty is simple, the determination of tax due, the review and analysis of related issues, the preparation of any returns to be filed, and the completion of the Tax Amnesty Payment/Waiver Statements can take some time. It is mandatory that all of these activities be completed on or before June 10, 2002. If you need additional information, please contact us.
The Gibbons Tax Department handles a wide range of federal and state tax matters related to mergers and acquisitions, structuring of business entities, executive compensation and employee benefits, international tax planning, tax controversy work, public finance, and nonprofit organizations.
Peter J. Ulrich, Director
Steven H. Sholk, Director
This publication contains general information and is not intended to provide legal advice. Accordingly, should you require legal advice, you should seek the assistance of counsel.