NJ Voluntary Compliance Policy Improved

New Jersey’s Voluntary Disclosure Policy Program allows certain taxpayers to come forward and file appropriate tax return(s), registration materials, and to pay outstanding tax obligations when they determine that their activity creates a taxable presence, or nexus, for New Jersey state tax purposes.

The Division of Taxation has announced a return to a general look-back period is four years (three prior years and the current year) for applications under the state’s Voluntary Disclosure Program.

Post-Amnesty Change

The close of New Jersey’s successful 2009 tax amnesty program brought with it a toughening of the Division of Taxation’s policy for voluntary compliance.

The general look-back period for post-amnesty applications was expanded to seven (7) years (6 prior years and the current year). This change found New Jersey with one of the longer look-back periods of any state offering a Voluntary Disclosure Program.

Return to Past Policy

The Division of Taxation announced that the general look-back period under its Voluntary Disclosure Program will return to four years (three prior years and the current year). See Voluntary Disclosure Program.

Taxpayers who come forward before they are contacted by the Division of Taxation will be eligible for the favorable terms that are offered under the Voluntary Disclosure Program. These include anonymity pending an agreement and relief from the Late Filing and Late Payment Penalties.

The general guidelines to be eligible for the Voluntary Disclosure Program are:

  • No previous contact with the Taxpayer by the Division or any of its Agents
  • Taxpayer is not registered for the taxes they wish to come forward on
  • Taxpayer is not currently under any criminal investigation
  • Taxpayer must be willing to pay outstanding tax liabilities and file the prior year returns within a reasonable period

Multistate Tax Commission

For taxpayer’s doing business in multiple states, the Multistate Tax Commission (through its National Nexus Program) also has a Voluntary Disclosure Program. Referrals from MTC will have to meet the new terms and conditions required by the Division.

Closing Agreements

Closing agreements may offer an alternative resolution for taxpayers considering voluntary disclosue and taxpayers ineligible for voluntary disclosue under the Divisions guidelines. The Division is willing to enter into negotiations leading to a taxpayer specific closing agreement with a taxpayer who is prepared to come forward with full disclosure of all pertinent information. Since each request for voluntary disclosue or closing agreement is considered on a case-by-case basis, the Division may request additional information during the evaluation process.

Kulzer & DiPadova helps its clients and their accounting and financial professionals determine whether activities in New Jersey or another state create tax registration and filing obligations. If voluntary disclosue is appropriate, Kulzer & DiPadova will help identify the type of taxes that must be addressed and the periods to be included in a voluntary disclosue request.