N.J. Admin. Code § 18:2-2.4

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

Section 18:2-2.4 - Failure to pay on time; extensions of time to pay

(a) Any taxpayer who fails to pay a tax within the time prescribed by the act imposing a particular tax is liable, in addition to the unpaid tax, for the following:

1. Interest on the unpaid tax is charged at the rate of three percentage points above the prime rate assessed for each month or fraction thereof, and interest is compounded annually at the end of each calendar year.

2. Five percent of the tax shall be added to the amount of the unpaid tax as a penalty, unless any part of any underpayment of tax required to be shown on a return or report is shown to be unpaid due to reasonable cause. The taxpayer has the affirmative obligation to show reasonable cause for the underpayment in order to avoid imposition of the penalty. See N.J.A.C. 18:2-2.7 for basis for a finding of reasonable cause.

3. Interest accrues on penalties from the date that the underlying tax is due, except for those penalties imposed on a date other than when the tax is due, such as amnesty penalties.

Examples:

1. Corporation X's corporation business tax return was due and filed on April 15, 2014. A deficiency of $ 50,000.00 is assessed by the Division, payment due by July 31, 2014.

The taxpayer must submit the following amounts on or before July 31, 2014.
Late payment penalty: five percent of the balance of tax due	$ 2,500.00
Deficiency assessed:	$ 50,000.00
$ 52,500.00

Interest on tax, calculated at an annual rate of the prime rate plus three percentage points from the original due date (April 15, 2014) until the date of payment (assume July 31, 2014), plus interest on penalty, calculated at the same rate from the date the tax is due until the date of payment. The applicable prime rate shall be 6.25 percent.

($ 52,500 x 6.25% x 107/365 = $ 962)*	$ 962.00
Total	$ 53,462.00

2. Corporation X's Corporation Business Tax return was due and filed on April 15, 2001. A deficiency of $ 50,000.00 is assessed by the Division. Payment is made on July 31, 2002.

The taxpayer must submit the following amounts on July 31, 2002.

Late payment penalty: five percent of the balance of tax due	$ 2,500.00
Deficiency assessed:	$ 50,000.00
Interest to December 31, 2001	$ 3,219.76
Unpaid Tax	$ 55,719.76
Interest on unpaid tax, calculated at an annual rate of the prime rate plus three percentage points from
January 1, 2002 until payment made on July 31, 2002	$ 2,335.27
Amnesty Penalty (imposed date amnesty period ended, June 10, 2002) five percent of $ 55,719.76	$ 2,786.00
Interest on Amnesty Penalty	$ 28.22
Calculated from June 10, 2002 (date amnesty period ended) to payment date. ($ 2,786 x 7.25% x 51/365 = $ 28.22)*
Total	$ 60,869.25

*Rounded to the nearest dollar

(b) Where the Director grants an extension of time in which a tax otherwise due may be paid, interest on the unpaid tax is assessed 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. If any tax is not paid within the time fixed under the extension, the interest on the amount of such unpaid tax is computed 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.

(c) For purposes of calculating interest, "unpaid tax" means the sum of the following:

1. The actual unpaid tax liability;

2. All penalties accrued to that date; and

3. Interest accrued to that date.

Example:

Taxpayer failed to pay tax that was due April 15, 2012. On January 15, 2013, the Division issues a Notice and Demand for payment of tax, which includes the applicable interest and penalty on the outstanding tax. Interest is calculated at the rate of three percent above the prime rate for each month or fraction thereof, commencing on the date that the tax was originally due (April 15, 2012), and shall continue to accrue until the date upon which payment is received. If a late payment penalty is imposed, interest on the penalty is calculated at the same rate as the unpaid tax commencing on the date that the tax was originally due, and shall continue to accrue until full payment is received. Beginning January 1, 2013, tax, penalty, and interest are added together at the beginning of each calendar year to become the basis for further calculations of interest.

N.J. Admin. Code § 18:2-2.4

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