Current through Register Vol. 56, No. 18, September 16, 2024
(a) Upon audit or investigation of a return that
has been filed, where the Director determines that there is a deficiency with
respect to the payment of any tax due, the additional taxes will be assessed
together with penalties of five percent of the additional tax and interest at the
rate of three percentage points above the prime rate assessed for each month or
fraction thereof, compounded annually at the end of each calendar year, from the
date the tax was originally due to the date of actual payment. Any prior year's
outstanding tax, penalty, and interest will be added together to become the basis
for further calculations of interest. The taxpayer will be given notice of such
assessment and a demand will be made for payment.
Example:
1. Taxpayer's
gross income tax return was due on April 15, 2013, and filed on October 24, 2013. A
Notice and Demand is sent by the Division to the taxpayer on December 30, 2013.
Payment is made on February 15, 2014. Interest will be calculated from April 15,
2013, to February 15, 2014, at the rate of three percent above the prime rate for
each month or fraction thereof on the tax and any penalty, such as late filing and
late payment penalty, that may be imposed. Accrued interest computed for the period
January 1, 2014, through February 15, 2014, shall be calculated on the total of the
tax, penalty (if any), and accrued interest calculated from April 15, 2013 through
December 31, 2013.
2. Corporation X was
a fiscal year taxpayer whose year ended July 31, 1984. The final return was due and
filed on November 15, 1984. Upon audit in July, 1987, it was determined that there
was a $ 1,000 deficiency with respect to tax due. If Corporation X pays the
deficiency on the final day of the 90 day tax amnesty period authorized by P.L.
1987, c.76, which ends December 8, 1987, the following amounts would be due:
| Deficiency assessed: | $ 1,000.00 |
| Simple interest calculated at nine percent per annum
* | $ 275.75 |
| from November 16, 1984 through December 8, 1987 |
| ........ |
| Total due | $ 1,275.75 |
| ........ |
| * Through statutory interest to December 8, 1987
was 18 percent, P.L. 1987, |
| c. 76 mandates a nine percent rate for debts paid
during the 90 day amnesty |
| period. |
3. Corporation X
fails to pay the deficiency assessed within the amnesty period. When payment is made
on May 6, 1988 the taxpayer remits $ 1,746.63 which represents the following
amounts:
| Deficiency assessed: | $ 1,000.00 |
| Late payment penalty: five percent of the balance | $
50.00 |
| of tax due |
| Simple interest calculated at the rate of one and | $
555.00 |
| one-half percent per month from November 16, 1984 |
| through December 8, 1987 |
| ........ |
| $ 1,655.00 PLUS |
| ............... |
Interest on $ 1,655.00, calculated at an annual rate of the prime
rate plus five percentage points compounded daily from December 8, 1987 until the
date of payment (May 6, 1988). The applicable prime rate shall be the rates
effective on July 1, 1987, October 1, 1987 and January 1, 1988. For the purposes of
this example the prime rate is assumed to be:
| July 1, 1987 | 8.25 percent |
| October 1, 1987 | 8.75 percent |
| January 1, 1988 | 9.00 percent | $ 91.63 |
| ........ |
| Total | $ 1,746.63 |
| ........ |
4.
Taxpayer's gross income tax return was due on April 15, 1994 and filed on October
24, 1994. A Notice and Demand is sent by the Division to the taxpayer on December
30, 1994. Payment is made on February 15, 1995. Interest will be calculated from
April 15, 1994 to February 15, 1995 at the rate of three percent above the prime
rate for each month or fraction thereof. Accrued interest computed for the period
January 1, 1995, through February 15, 1995, shall be calculated on the total of the
tax, penalty (if any) and accrued interest calculated from April 15, 1994 through
December 31, 1994. In addition, late filing and late payment penalties may be
imposed on the balance of the tax due.
(b) Other than tax assessments referenced in (c)
below, no assessment of additional tax shall be made after the expiration of more
than four years from the date of the filing of a return; provided, that in the case
of a false or fraudulent return with intent to evade tax, or failure to file a
return, the tax may be assessed at any time. If a shorter time for the assessment of
additional tax is fixed by the law imposing the tax, the shorter time shall govern.
If, before the expiration of the period prescribed herein for the assessment of
additional tax, a taxpayer consents in writing that such period may be extended, the
amount of such additional tax due may be determined at any time within such extended
period. The period so extended may be further extended by subsequent consent in
writing made before the expiration of the extended period. The consent of a taxpayer
to extend the period of assessment shall extend the period in which the taxpayer may
file a refund claim with respect to the identical taxes and tax periods for which
the limitations periods have been expressly extended by written consent of the
taxpayer. For purposes of this subsection, a return filed before the last day
prescribed by law or by rules promulgated pursuant to law for the filing thereof, is
considered filed on such last day. A return or refund claim is deemed filed with the
Division of Taxation in the Department of the Treasury, unless a different agency is
specified by law, pursuant to the postmark rule of
54:49-3.1 and
18:2-4.1.
(c) The time to assess tax liabilities pursuant to
the Gross Income Tax Act are as follows:
1.
Pursuant to 54A:9-4, additional gross income tax
shall be assessed within three years after the return was filed, or deemed filed if
filed prior to the date prescribed, whether or not such return was filed after the
date prescribed. Additional gross income tax may be assessed at any time if no
return is filed, a false or fraudulent return is filed with intent to evade tax, or
the taxpayer fails to comply with
54A:8-7, in not reporting a change or
correction in Federal taxable income as reported on the taxpayer's Federal income
tax return, or in not reporting a change or correction which is treated in the same
manner as if it were a deficiency for Federal income tax purposes, or in not filing
an amended New Jersey return within 90 days of filing an amended Federal income tax
return.
2. Additional gross income tax
may be assessed at any time within six years after the return was filed if:
i. An individual omits from New Jersey income an
amount properly includible therein which is in excess of 25 percent of the amount of
New Jersey income stated in the return; or
ii. An estate or trust omits income from its
return in an amount in excess of 25 percent of its income determined as if it were
an individual, computing his or her New Jersey income under the Act. For purposes of
this paragraph, there shall not be taken into account any amount which is omitted in
the return if such amount is disclosed in the return, or in a statement attached to
the return, in a manner adequate to apprise the Director of the nature and amount of
such item.
3. The period for
assessment of gross income tax may be extended if the taxpayer amends or the
Internal Revenue Service adjusts Federal taxable income, or if the taxpayer enters
into a written agreement with the Division extending the time to make an assessment,
or if an erroneous refund is made as a result of fraud or misrepresentation by the
taxpayer. The period of assessment may be suspended under
54A:9-4(e).
4. When the last day prescribed under
54A:8-1(a),
54A:9-4(a),
54A:9-4(b)(1) and
54A:9-4(d) for
filing a gross income tax return or for assessing an additional tax after the return
has been filed falls on a Saturday, Sunday or holiday, the performance of the act of
filing or assessing shall be considered timely if it is performed by the taxpayer or
the Director, as the case may be, on the next succeeding business day.
5. See
18:7-13.1 for assessment of corporation
business tax.
(d) A tax
assessment made due to a taxpayer's failure to comply with an audit or investigation
by the Director is an estimated assessment under
54:49-5.
