Owe NJ Back Taxes? The Division of Taxation Updated its Deferred Payment Plan Guidelines

The Division of Taxation updated its guidelines regarding tax payment plans.  To be granted an installment agreement, the NJ Division of Taxation instructs taxpayers to include all delinquent years and file all unfiled tax returns.  Therefore, similar to the old guidelines, tax compliance is essential to resolving your back taxes.

What if I Owe Personal Income Taxes to the NJ Division of Taxation?

Generally speaking, the Division will grant payment plans ranging from Three (3) to Thirty-Six (36) months long.  If you cannot pay within THIRTY SIX (36) months, then the Division of Taxation instructs taxpayers to contact the assigned caseworker or the Deferred Payment Control Unit for approval. In my experience, if you want to pay your back taxes beyond THIRTY SIX (36) months, then the Division will require you submit a financial disclosure justifying a longer payment plan.

The Division reminds taxpayers that while paying off your back taxes, interest accrues on the unpaid balance over the duration of the plan.  Currently interest is 6.25% compounded annually.

How Can I Get Rid of a New Jersey Tax Lien?

The best way to get rid of a NJ tax lien, known as a Certificate of Debt, is to avoid it.  NJ does not have the Fresh Start Initiative Program like the IRS.  In 2013, the Fresh Start Initiative Program was established by the IRS to help taxpayers resolve back taxes and avoid or assist in the withdrawal of a federal tax lien.  Once NJ files a tax lien, the only way to get rid of it is to pay the tax, successfully challenge the liability on a motion to revive or in bankruptcy court.

Once NJ files a tax lien, the damage is done.  A NJ Certificate of Debt is valid for 20 years with the ability for the NJ Office of the Attorney General to revive the lien for another 20 years.  Once the tax lien is paid in full, a taxpayer will receive a Warrant of Satisfaction.  The Warrant of Satisfaction stays on a NJ taxpayer’s credit for approximately 6-7 years.  Therefore, the best way to resolve a NJ tax lien is to avoid it.  The Division of Taxation provides the following guidance pertaining to payment plans and tax lien filings:

  • If you owe NJ less than $2,500 in back taxes, you can avoid a tax lien if you tender timely payments under your agreement and remain compliant with your NJ tax filings.
  • If your owe NJ tax debt of more than $2,500, then you can avoid a tax lien if you pay your back taxes in less than 12 months.
  • If you owe more than more than $2,500 and can pay within 12 months or less, then you can avoid a tax lien if you pay the amount owed within 12 months.

As long as you satisfy the aforementioned thresholds and stay compliant, you can circumvent a tax lien filing.  Compliance means making timely payments under the plan and remaining current with your NJ filings.

If you breach the NJ installment agreement, then NJ will file a tax lien in the NJ Superior Court and, to add insult to injury, will charge you the cost of collection (10% of the outstanding liability).

Unfortunately, if your tax debt is over $2,500 and your plan is greater than TWELVE (12) months, then NJ will file a tax lien and charge you the 10% cost of collection fee.

What Happens to my Tax Refunds if I’m in a NJ Payment Plan?

New Jersey is the administrator and participant of set-off programs.  A set-off program stops payments from the federal and state government while owing money to the government.  Therefore, while you are paying down back taxes in a NJ payment plan, NJ will take both your federal and state refunds, including SAVER, Homestead Rebates, and payments owed to your business for services rendered to NJ or the federal government.

How does my business pay back NJ Tax Debt?

The payment plan guidelines and lien filing thresholds for businesses tax debt is similar to the individual payment plans.

  • If the tax debt you owe is less than $2,500, then you may receive a Certified Notice and Demand Letter.  You can avoid a NJ tax lien, if you stay compliant with the terms of the installment agreement and your tax obligations.
  • If the tax debt you owe NJ is over $2,500, and you pay the amount is TWELVE (12) months or less, then you can avoid a NJ tax lien if you stay compliant with the terms of the installment agreement and your tax obligations.
  • If your tax debt is above $2,500 and your plan is more than TWELVE (12) months, the NJ Division of Taxation will file Certificate of Debt in Superior Court and tack on a 10% collection fee.

If your payment plan is greater than THIRTY SIX (36) months, the Division states you will be forwarded to an outside collection agency. The Division of Taxation has been using Pioneer Credit Recovery as its collection agency. The Division of Taxation may require you submit a financial disclosure to justify a longer payment plan. Typically, the financial disclosure is reviewed by an investigator.  The Division warns that a 10% collection fee, and others, will be added to the amount of back taxes you owe.  Similar to the individual plans, interest will continue to accrue on the unpaid balance over the duration of the plan.

The NJ Tax Guidelines are located at the Division’s website at: http://www.state.nj.us/treasury/taxation/dpc.shtml

Contact Tax Attorney Todd S. Unger, Esq. Today

Handling a New Jersey back tax matter can be difficult especially when you owe other taxing authorities and creditors.  The Division’s rigid guidelines and policies regarding the filing of tax liens can destroy businesses and create a burden on households.  The Law Offices of Todd S. Unger, Esq. has experience resolving tax disputes with the NJ Division of Taxation and the NJ Office of Attorney General.  Call tax attorney, Todd S. Unger today (877) 544-4743.