AN ANSWER FROM THE NJ DIVISION OF TAXATION

It took a month, but I finally got a reply to my letter to NJ Division of Taxation Acting Director Maureen Adams. See my “GOING TO THE TOP” posting. As expected, the response came from an “underling” and not from Ms Adams herself.

So here is the reply I received:

“Dear Mr. Flach:

Thank you for your inquiry to the Director of the Division of Taxation regarding the payment of interest on overpayments.

The Taxpayers Bill of Rights provides consistent treatment for assessment and refunds. The law also standardizes the time for claiming a refund for most taxes administered by the Division of Taxation and establishes a consistent treatment of postmark dates for all State taxes.

Interest at the prime rate, compounded annually, will be paid on refunds made by the Division six (6) months after the filing date, the due date of the return, the date the refund claim was filed, or the date the tax was paid (whichever is later). This provision applies to all New Jersey taxes administered by the Division.

Additionally, no interest may be paid on a refund of an overpayment, unless the claim for refund or amended return contains sufficient information, whether on the refund claim, amended return and necessary attachments, to permit the verification of the claim, including a full narrative description of the basis for the claim. N.J.A.C. 18:2-5.9(c). All required schedules and attachments must be submitted in order for a return to be deemed filed. N.J.A.C. 18:35-9.2(h).

According to the information presented in your letter of September 25, 2007, no claim was filed until your client came in to provide information for the next years filing. As long as that refund was issued within six (6) months of the claim of the overpayment no interest is due.

If the return year is being reviewed for some reason and the overpayment is verified to be the taxpayers, the Division will refund the overpayment with no interest without a claim. Due to the volume of Gross Income Tax filers, it is impossible to review every account.

If you have any further concerns do not hesitate to contact me at 609-633-6890.

Very truly yours,

Allette F Wooley
Assistant Chief
Taxpayer Accounting”

(1) So, unlike the Internal Revenue Service, the NJ Division of Taxation does not have to pay interest unless it takes them more than (six) 6 months to send you a check once you have asked for it. Regardless of the fact that the State of New Jersey was never entitled to the money in the first place and held on to it for close to a year.

Of course if a taxpayer owes the NJ Division of Taxation say $100.00 on April 15th and he/she does not mail the check until May 10th then the NJ Division of Taxation is allowed to charge the taxpayer interest.

To me this is not “consistent treatment for assessments and refunds”. As I have said here before, what is good for the goose is apparently not good for the gander here in New Jersey.

(2) The “consistent treatment of postmark dates for all State taxes” is contrary to what I was told by a NJDOT employee in response to my email question on the subject – “The correspondence would need to be received by the Division by the specified date”. I guess NJDOT employees are not required to read, or comply with, the Taxpayers Bill of Rights.

(3) The volume of IRS filers is hundreds of times greater than the volume of NJ Gross Income Tax filers, and yet I have seen on several occasions in the past a notice to a client from the IRS stating that there was an overpayment of $XXX.00 in a taxpayer’s “account” and the IRS did not know how to apply the money. If the IRS can do it, why can’t the State of New Jersey?

All it would take is a software program to generate a periodic report of all taxpayer “accounts” that have a positive balance (indicating an overpayment or unapplied payment) and automatically send a notice to the taxpayer with an inquiry. If they can do it for accounts with underpayments (how else would they generate balance due billing notices), why can’t they also do it for those with overpayments?

No wonder more than half the people questioned in a recent survey said that they would move out of New Jersey as soon as they were able to! Myself included!

TAFN

SCREWED AGAIN!

The DFBs!

The NJ Division of Taxation once again screws the taxpayer.

As a general rule, the postmark on a filed return or payment sets the “date filed” or “date received”. This is certainly the case with the IRS. If your 1040 is due on April 15th and your return, with payment, is postmarked by midnight on April 15th, then it is treated as received by the IRS on April 15th, even if the Post Office screws up and the envelope doesn’t actually get to the appropriate Service Center until April 25th.

The same applied to the state return. If the NJ-1040, and payment, was postmarked on April 15th it was considered to have been filed on time.

Apparently this is not so with any other payment to the State of New Jersey.

I completed the GD extension for a client on June 5th and mailed the finished returns out immediately, instructing the client in my cover letter to make sure that both the federal and the NJ return, on which there was a balance due, was in the mail by June 15th or earlier.

The NJDOT sent the client a penalty and interest notice, denying the extension (no money was sent with a NJ-630 – only the federal extension was submitted, which should have covered the NJ return) because it failed the 80% test. The notice indicated that the return was received on June 27th, and the client was charged the 5% penalty for 3 months.

I asked the client if he sat on the NJ return, or mailed it by June 15th. He said he did not recall, but could not think of a reason why he would not have sent out the return as soon as it was received.

So I contacted the NJDOT via email and said that if the return had been mailed by June 15th the penalty should only be assessed for 2 months. It was my belief that the postmark “trumped” the date of receipt.

As it turns out the check was dated June 23rd – so the client did indeed not follow my instructions and did sit on it for two weeks.

I emailed the NJDOT person back and thanked them, telling them I would appropriately chastise my client for mailing the return late. While I had her, I asked if the envelope containing the return and payment had actually been postmarked by or before June 15th would the return be treated as having been received on June 15 and not June 27, thus making it only two (2) months late.

She replied, “The correspondence would need to be received by the Division by the specified date.”

So the NJDOT will ignore the postmark on filings and payments made, except for April 15th and, presumably, October 15th.

The DFBs! Another way to nickel and dime the poor overtaxed NJ resident!

Do any of you have any experiences with or comments on this situation?

TAFN

AN UPDATE

Just a brief update on my earlier posts.

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* The problem with the client who was not given credit for $100,000 of NJ Gross Income Tax withheld was promptly fixed after I faxed a copy of the W-2. In response to my question on why this has happened two years in a row I was told “if you filed there taxes electronically the booklet states W2 must be verified” – but I did not file the return electronically because I could not – and “if the withholdings is over 25,000.00 it must be verified” – which it apparently was not since the client was billed for $75,000+. The client has received the appropriate refund check – of course with no interest despite the fact that NJDOT took about 6 months to process the refund.

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* No response at all yet from the Acting Executive Director of NJDOT, or even a flunky, to my inquiry about account overpayments and interest paid to taxpayers when the DOT FUs. See my post "Going to the Top".

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BTW - check out this post at THE WANDERING TAX PRO about a new email scam.

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TAFN

WONDER OF WONDERS - MIRACLE OF MIRACLES

I hope you are sitting down.

While it may come as a surprise to most NJ tax professionals, there actually are a few employees of the NJ Division of Taxation who are intelligent and competent. I recently worked with one while dealing with the Conference and Appeals Branch.

I had written to the Acting Director of NJDOT a while back regarding a corporate client when the outside collection agency used by the state was charging the client $1,000+ in penalties for an alleged $45.00 tax deficiency (the $45.00 had actually been paid by the client) and, as usual, normal correspondence to the DOT was totally ignored. Of course the AD did not respond directly to me, but sent my letter to an “underling” in the Conference and Appeals Branch. Unbeknownst to me, my letter to the AD had been used to institute a formal “protest”.

The person to whom my client’s situation was referred had no problem complying with my “eccentricity” of dealing via email (or postal mail) only, and never by phone, and the “case” was satisfactorily and promptly resolved via a couple of emails and mailings of documentation. At the request of the person with whom I dealt I officially withdrew my “protest” and the matter was closed. As I said in my final email to the C+A person, “All such contact with the State of New Jersey should be this efficient!”

Unfortunately, for every success story there are multiple tales of incompetence and frustration.

A client recently received a Statement of Account notice from the NJDOT indicating that the taxpayers owed “Uncle Jon” a ton of money. Upon review of the notice I discovered that the DOT did not give the taxpayer credit for $100,000.00 of NJGIT withholding, clearly reported on the 2006 NJ-1040 and on the Form W-2 included with the mailing of the return.

The NJDOT had made the exact same FU last year – sending the taxpayers a balance due notice because it had not included $100,000.00 in NJGIT withholding for 2005!

In both cases, the notice came almost six months after the taxpayer had submitted the returns, each of which requested a refund.

Last year the state’s FU was promptly cleared up via email and my faxing the state a copy of the W-2. I emailed NJDOT about this year’s FU late in the day on September 28th, but as of this writing I have not received a response.

I thought the fact that paper NJ-1040s, which were submitted in both years, are computer scanned was supposed to do away with “human error”. What gives?

TAFN