N.J. Admin. Code § 18:2-2.6

Current through Register Vol. 56, No. 24, December 18, 2024

Section 18:2-2.6 - Assessment of tax

(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 N.J.S.A. 54:49-3.1 and N.J.A.C. 18:2-4.1.

(c) The time to assess tax liabilities pursuant to the Gross Income Tax Act are as follows:

1. Pursuant to N.J.S.A. 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 N.J.S.A. 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 N.J.S.A. 54A:9-4(e).

4. When the last day prescribed under N.J.S.A. 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 N.J.A.C. 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 N.J.S.A. 54:49-5.

N.J. Admin. Code § 18:2-2.6

Amended by 47 N.J.R. 3150(a), effective 12/21/2015