What’s the good news/bad news regarding amnesty 2018?

On July 1, 2018 Governor Murphy signed a law granting amnesty to anyone behind on taxes owed between February 1, 2009 and September 1, 2017 - as long as the individual is not under criminal investigation. This legislation includes total forgiveness of both the penalties and of the high costs of collection fees along with one-half of accrued interest.  But there is a down side. 

If eligible taxpayers refuse to take advantage of the offer of amnesty, they will be penalized.  An additional (unwaivable) five percent penalty will be automatically imposed on top of the already existing penalties and interest on any tax liability that would have been forgiven under the amnesty program.

When does the offer of amnesty take effect?

Under this new initiative passed last week, The Director of the Division of Taxation will soon announce a start date for the program. The Division will establish a period not exceeding 90 days and concluding no later than January 15, 2019, during which time all penalties and one-half of the accrued interest that are due as of November 1, 2018 will be forgiven in return for payment of the tax which will be nonrefundable. The remaining one-half of accrued interest will be due and a waiver of the right to appeal any liability paid under amnesty will be required.

What taxes qualify under the amnesty initiative?

  1. The 2018 law applies to unassessed amounts, as well as to amounts that are under audit or are being contested with the Division of Taxation (at either its Conference Branch or in the tax court).
  2. The new law also applies to all state taxes administered by the Division of Taxation but does not apply to unemployment-type taxes administered by the Department of Labor.
  3. The initiative applies to state tax liabilities for tax returns due on and after February 1, 2009 and prior to September 1, 2017, including Gross Income Tax, Corporate Business Tax returns, and for all sales and use tax quarters ending December 31, 2009 through June 30, 2017.

How can an individual prepare to take advantage of this new opportunity for amnesty?

Since the start date for this program has not yet been determined, individuals who want to claim amnesty should contact their CPA or financial advisor in advance and work together now to connect with the Division of Taxation. By being proactive they can determine the correct amount they owe so that they have ample time to comply before the amnesty period ends on January 15, 2019.  

Amnesty doesn’t apply to individuals under criminal investigation

Individuals under criminal investigation, or who are certified as being charged with a state tax matter, will not be eligible to receive amnesty. It is not completely clear how this section will be interpreted, but it is suspected that anyone whose case has not been referred for prosecution to the Attorney General's Office may participate in the program.

Will New Jersey inform the IRS of the delinquent tax situation?

The worry of being ‘turned in’  doesn’t need to be of concern to anyone seeking amnesty because the NJ Division of Taxation has already stated that it  doesn’t intend to provide any information obtained through the amnesty program to the Internal Revenue Service. However, if the IRS specifically requests amnesty-related data, the NJ Tax Division will comply.

Seek professional assistance

Although it is not anticipated that a taxpayer's chances of being audited will be increased by an amnesty program filing, there may be other concerns for the taxpayer.

All issues should be thoroughly discussed with an experienced professional, such as a CPA.  The 2018 amnesty program is designed to bring the taxpayer potential savings regarding outstanding tax liabilities, but given the limited duration of the program and the potential for confusion regarding the proper calculations, individuals involved should begin now to determine how to structure their amnesty arrangements.

Please feel free to call us if you have questions. You can call Ken Bagner at 973-994-9494 or email Ken at kenneth.bagner@SobelCoLLC.com.