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Big Tax Savings Coming for Delinquent Taxpayers Under NJ’s Proposed Tax Amnesty Program

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Big Tax Savings Coming for Delinquent Taxpayers Under NJ’s Proposed Tax Amnesty Program

On July 1, 2018, Gov. Phil Murphy signed into law a bill requiring the New Jersey Division of Taxation to raise revenues through a Tax Amnesty program to go into effect for a period of 90-days, ending on January 15, 2019.  Taxpayers who pay their delinquent taxes will see the interest and one-half of the penalties on accrued taxes waived, in consideration for their retiring the past due balances.

One way to help solve New Jersey’s budget problems is to incentivize payment of delinquent taxes through an amnesty program.  Assembly Speaker Craig Coughlin and Assemblyman Robert Karbinchak championed such a measure over the winter.  The state tax amnesty was originally to run for three-to-six months, starting July 1, and bring in an estimated $200 million.  The Assembly recently passed tax amnesty bill (A3438) that sponsors say could shore up some money to help balance the state’s budget.  The bill was introduced and referred to the Assembly Budget Committee on March 5. It was released out of the Committee on June 18.  The bill was passed by the Senate and signed by the Governor on July 1st, just after the government shutdown stalemate was broken and a NJ Budget passed.

Karabinchak styled the bill as a relief measure for taxpayers still reeling from the Great Recession and as string of other financial challenges.  “This bill (A3438) will help eligible taxpayers who, for a variety of reasons, are in arrears with their state taxes,” said Karabinchak (D-Middlesex). “A job loss, health crisis or even a family emergency can change a person’s financial picture. This bill would provide relief and a means to satisfy such outstanding debt.”  Parroting these rationales Coughlin noted, “[i]t’s very easy to pass judgment on someone who has fallen behind on their taxes,” said Coughlin (D-Middlesex). “Yet the reality is, each person’s financial situation is unique. Life happens, and finances can change for the worse very quickly.”

Past amnesties have raised significant sums for the state — varying from $75 million in 2014, to $725 million in 2009, to $277 million in 2002.

The proposed amnesty period would cover Jan. 1, 2014 through Dec. 31, 2016. Delinquent payers would have to come into compliance and pay all delinquent taxes, less interest and one-half of penalties. In turn, the state would waive recovery fees, civil and criminal penalties.

Coughlin gave a nod to temporary economic hardships taxpayer’s face, after which they look to get caught up on tax obligations.  “[P]eople who’ve lost their jobs, people whose businesses have failed. But they want to pay their taxes, here’s a way to help them in that respect.”

Murphy said in a letter in June that he would accept Assembly Speaker Craig Coughlin’s request for an amnesty program to collect delinquent taxes, as well as his push to restore homestead property tax credits to 2017 levels.  He has lived up to his promise.

“Every potential dollar counts,” Coughlin said in a statement. “We must consider every possible option to find money, and we know tax amnesty programs work without burdening New Jersey’s families. This is an effective and common-sense way to raise money that the state otherwise likely wouldn’t collect to help ease budget concerns and protect our families. It needs to be part of the debate as we consider state spending in the weeks ahead.”

“It is a thoughtful proposal that will help New Jersey address the fiscal challenges we face in a resourceful and responsible way,” Sweeney (D-Gloucester) said in a statement. “We have to maintain an open mind and a receptive attitude towards the best ideas to address the state’s needs, and this idea will be an effective way of capturing revenue that is already due.”

New Jersey had 452,000 tax debt collection cases assigned to a collection agency that handles debts over $100 as of June 22, according to an audit of the Division of Taxation.

The audit found 427,000 of those cases were not assigned to caseworkers at the collection agency and 185,000 cases had been inactive for two years or longer, including nearly 27,000 that had been inactive for at least eight years.  In short, the government has become increasingly efficient at assessing taxes, but never gets around to collecting any.  All the more reason to champion a tax amnesty measure for those that would like to resolve their tax debts and move on to future successes, but who cannot get out from under the albatross around their necks—which the state is doing—literally nothing about.







Category: Tax

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