United States: New Jersey Is Giving The Gift Of Tax Amnesty This Holiday Season

New Jersey taxpayers—now may be a great time to come clean!

The state of New Jersey is kicking off the holiday season before the Black Friday sales begin by providing a generous and thoughtful deal to individuals, corporations, partnerships and trusts (hereinafter collectively referred to as "taxpayers")  beginning November 15. New Jersey is offering, up to January 15, 2019, a 100 percent reduction to penalty and 50 percent reduction to interest if a taxpayer chooses to settle any outstanding New Jersey tax debts and/or file any previously unfiled New Jersey tax returns. We know what you are thinking: "I would love to take advantage of the program, but New Jersey has already reached out to me so amnesty will not be available." Well, New Jersey is really in a giving mood. Even if you are already on New Jersey's radar, you may still qualify.

In July 2018, Governor Murphy signed into law New Jersey Assembly Bill No. 3438, which authorized the Division of Taxation to implement the state's tax amnesty program. The New Jersey Division of Taxation just announced that the 90-day state tax amnesty period begins November 15, 2018, and ends January 15, 2019. During this period, taxpayers have the opportunity to file prior year tax returns and/or pay back taxes along with half of the interest due as of November 1, 2018. Amnesty only applies to outstanding tax filings or payments that are reportable on a tax return due on or after February 1, 2009, and prior to September 1, 2017, and the tax must be administered and collected by the New Jersey Division of Taxation. This excludes taxes such as local property taxes and payroll taxes owed to the New Jersey Department of Labor.

The giving does not stop there, though! Almost everyone qualifies for this amnesty program. Surprisingly, even if a taxpayer is subject to audit, assessment or has filed an administrative or judicial appeal related to a tax assessment, the taxpayer is still eligible to participate in the program on the condition that they withdraw their appeal, waive all rights to future appeals and receive written approval from the director of the division. A taxpayer will not be eligible for amnesty if they are under criminal investigation or charge for a state tax matter by a county prosecutor or New Jersey attorney general. This is amnesty, not a pardon.

What does a taxpayer need to do to take advantage of these opportunities? If a taxpayer has a known tax debt or unfiled return, the state of New Jersey will be sending (and taxpayers may have already received) a notice from the New Jersey Department of Taxation advising the taxpayer of the taxes owed and/or the need to file tax returns for amnesty during the eligible period. The New Jersey Division of Taxation will provide an amnesty ID (note that a taxpayer will have this amnesty ID for each tax debt with the state of New Jersey) along with a PIN. The taxpayer should immediately contact their tax professional and provide the notice received for further guidance through the process. If the state of New Jersey is not aware of a potential tax debt and it falls within the amnesty period, a taxpayer can take advantage of the program as well.

TAG's Perspective

If a taxpayer does not take advantage of the amnesty program and settles any tax debts by the January 15, 2019, deadline, the state of New Jersey is authorized to impose a 5 percent amnesty penalty, which cannot be waived or abated under current legislation. This amnesty penalty will be in addition to all other penalties, interest and other recovery costs authorized by law. If you have any outstanding tax debts, unfiled tax returns or federal income tax audits that may affect your New Jersey tax, it may be to your advantage to act promptly to gobble up these savings, as the last amnesty program was in 2009 and there may not be another opportunity in the near future.

Disclaimer: This Alert has been prepared and published for informational purposes only and is not offered, nor should be construed, as legal advice. For more information, please see the firm's full disclaimer.

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