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New Jersey State Tax Amnesty

Article

Corporate & Finance Alert

May 5, 2009

DEADLINE – JUNE 15, 2009

On Monday, May 4, 2009, the New Jersey tax amnesty program went into effect, and will last for only six weeks until June 15, 2009. During that period, individuals, businesses, and other taxpayers may pay their outstanding state tax obligations and receive amnesty from penalties, one-half of accrued interest, and accrued costs of collection. Payment of tax liabilities through the amnesty program will preclude imposition of civil or criminal tax penalties relating to the tax paid, but only if the taxpayer qualifies for amnesty.

This tax amnesty program applies to state tax liabilities for tax returns due on and after January 1, 2002 and prior to February 1, 2009 (e.g., gross income tax returns for the 2001 – 2007 calendar tax years). It covers all New Jersey 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 tax, and others. The amnesty program does not cover local property taxes, real property transfer taxes, unemployment taxes, and disability taxes. Details on the covered taxes, related forms, and amnesty in general, can be obtained from the Division’s website: www.taxamnesty.nj.gov.

The amnesty program covers taxpayers who owe tax relating to filed returns as well as unfiled returns. Taxpayers with delinquent returns can take advantage of amnesty by filing those 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 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 amnesty provisions do not extend to any taxpayer under criminal investigation or charge for any State tax matter.

To take advantage of the amnesty program, a taxpayer must:

  • File any unfiled tax returns or required amended returns for the period or periods in question;
  • Pay the balance of the tax due and one-half of the balance of interest due as of May 1, 2009 for the particular period; 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 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. The Division will accept payment by check, cashier’s check, and even certain credit cards. All payments must be made by midnight, Monday, June 15, 2009.

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 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.

Although the Division of Taxation has retained the right to conduct an audit of any amnesty payment situation, 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 penalties and one-half of interest are being foregone 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 the amnesty program in more detail. 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 take some time. It is mandatory that all of these activities be completed no later than June 15, 2009.