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Say what you will about the Internal Revenue Service - and, believe me, I have said a lot about the IRS over the past 40 tax filing seasons - when it comes to its dealings with individual taxpayers the Service really does attempt to be fair, honest, consistent, and, at times, even flexible.
Obviously there are individual auditors and collection agents who are arbitrary, abusive, dishonest, and difficult. But on the whole, the Service itself does try to be honest with the taxpayer.
Now the New Jersey Division of Taxation is something else altogether. I certainly cannot say the same thing about this tax agency.
Let us say you made a payment to the Internal Revenue Service and the Service did not know what it was for. Or the Service erroneously applied the payment to the wrong year, creating an overpayment for a particular tax year. The IRS would automatically send you a letter asking you to explain what the payment was for, or identifying the fact that there is an overpayment in your “account” for a particular year and ask for clarification. The Service may even automatically send you a refund for the overpayment.
Not so the New Jersey Division of Taxation.
For two non-consecutive years in the recent past the NJ Division of Taxation applied timely payments by taxpayers, who had submitted their NJ-1040 online via NJWebFile, of balances due on their NJ-1040 to the wrong year.
A taxpayer submitted his/her 2005 NJ-1040 online via NJWebfile, or I so submitted a return for a client, and there was a balance due. The system would automatically create a payment voucher with pre-printed taxpayer and payment information which the taxpayer, or I, would print out. The taxpayer or client would send a check to the NJ Division of Taxation along with this payment voucher in time to meet the April 15th deadline.
The problem was that the extensive pre-printed code on the bottom of the voucher, which was “read” by the NJDOT computer system when the payment was being processed, indicated that the payment was for tax year 2004 and NOT 2005. The payment was applied to the taxpayer’s 2004 “account”, creating an overpayment, and in the fall the taxpayer received a billing notice for the tax due on the 2005 NJ-1040, which had already been timely paid, plus penalty and interest.
Did the NJ Division of Taxation send a notice to the taxpayer telling them that there was an overpayment on their 2004 account and asking for clarification, or send the taxpayer a refund check for the overpayment, as the Internal Revenue Service would have done? What do you think? Of course not! The NJ Division of Taxation kept the money and kept quiet – hoping the overpayment would not be discovered by the taxpayer and our corrupt elected officials would have more cash to waste on entitlements and pork.
In most cases the taxpayer receiving the balance due notice would either give the notice to me, or their tax preparer, as they should have done, or call Trenton directly and tell them of the FU. In both cases the problem would eventually be resolved and the taxpayer’s payment would be properly credited.
I am sure that there are also cases where the taxpayer receiving the balance due notice, intimidated by any government correspondence, paid the amount billed without telling anyone – effectively paying the tax due on their 2005 return twice. Hopefully if they used a tax preparer he/she would discover the double-payment when preparing the 2006 state return.
This problem was fixed for tax year 2006, but happened once again for tax year 2007. With the 2007 FUs I was actually able to get the NJ Division of Taxation to issue letters of apology to my affected clients, as I dealt with a specific NJDOT employee, one of the rare honest and competent ones, on fixing all the FUs.
I recently come across a situation where a corporate employer double-paid the NJ Gross Income Tax withheld from employees for a particular year (the employer’s error), a while ago, and in all the time that has elapsed since the double-payment the NJ Division of Taxation has never contacted the employer to ask why the payment was made twice. As they had hoped to do with double payments made by 2005 and 2007 NJ-1040 filers using NJWebFile, they simply “took the money and ran”, crossing their fingers that the double-payment would not be discovered by the taxpayer.
I admit I am cynical on this topic - a result of having grown up in Hudson County, NJ (at one time the "poster child" for political corruption in the most politically corrupt state in the union). I obviously cannot say for sure if the NJ Division of Taxation, or the State of New Jersey, purposefully does not contact taxpayers regarding unidentified payments or overpayments so it can keep the money, or if they are too lazy or cheap to program this into their internal software system, or if they are just idiots.
This problem has not occurred to a client of mine in the past year or so, so maybe the new Director of the NJ Division of Taxation has already fixed the problem.
I will continue to point out problems with the NJDOT in future posts - and welcome fellow NJ tax preparers to submit examples of problems they have identified with the DOT's administration of taxes.
TAFN
