N.J. Admin. Code § 18:35-3.2

Current through Register Vol. 56, No. 11, June 3, 2024

Section 18:35-3.2 - Failure to file declaration or underpayment of estimated tax

(a) If any taxpayer fails to file a declaration of estimated tax or fails to pay all or any part of an installment of estimated tax, the taxpayer shall be deemed to have made an underpayment of estimated tax.

(b)54A:9-6(c) imposes an addition to tax on an underpayment of any installment of estimated tax by an individual. The amount of the underpayment for any installment is the excess of the lesser of:

1. The amount of the installment which would be required to be paid if all installment payments were equal to 80 percent of the tax (two-thirds of the tax for farmers) shown on the return for the taxable year; or

2. One hundred percent of the tax shown on the return for the previous taxable year, over the amount, if any, of the installment paid on or before the last day prescribed for such installment.

(c)54A:9-6(c) requires that each underpayment shall bear interest at the rate imposed under the State Tax Uniform Procedure Law, 54:48-1 et seq. (for tax first due or deficiencies first assessed on or after July 3, 1993, three percent above the prime rate assessed for each month or fraction thereof, compounded annually from the date the tax was originally due and payable until the date of payment). Interest is determined at the annual rate referred to above based on the amount of the underpayment of any installment of estimated tax for the period from the date such installment was required to be paid until the 15th day of the fourth month following the close of the taxable year, or the date such underpayment was received by the Director, whichever is earlier.

(d) Individuals must complete Form NJ-2210 to determine underpayments of estimated tax, and to calculate the interest due on underpayments. Estates and trusts are subject to interest on underpayment of estimated tax and may need to complete Form NJ-2210, except estates and trusts that meet the two-year limitation and other criteria of I.R.C. § 6654(l)(2). If there has been an underpayment of estimated tax as of the installment date prescribed for its payment and the individual believes that one or more of the exceptions described in (e) below precludes the imposition of the addition to the tax, the individual must attach Form NJ-2210 to the declaration showing the applicability of any exception upon which the individual relied.

(e) The addition to tax with respect to any underpayment of any installment shall not be imposed if, on or before the last date prescribed for the payment of the installment, the total amount of all payments of estimated tax made on or before the due date for the installment equals or exceeds the amount which would have been required to be paid on or before such date if the estimated tax equals or exceeds the lesser of the amounts determined under (e)1 or 2 below:

1. The amount which would have been required to be paid on or before the due date for the installment if the estimated tax were the lesser of:

i. An amount equal to 100 percent of the tax shown on the return of the taxpayer for the preceding taxable year, if a return showing a liability for tax was filed by the taxpayer for the preceding taxable year and the preceding taxable year was 12 months (for taxable periods beginning on or after 1999, 110 percent of the tax shown on the return for taxpayers with taxable gross income in excess of $ 150,000, $ 75,000 for a married individual as defined in Internal Revenue Code section 7703 filing separately);

ii. An amount equal to 100 percent of the tax computed at the rates applicable to the taxable year, on the basis of the taxpayer's status with respect to the taxpayer's personal exemptions for the taxable year, but otherwise on the basis of the facts shown on the taxpayer's return for, and the law applicable to, the preceding taxable year (for taxable periods beginning on or after 1999, 110 percent of the tax shown on the return for taxpayers with taxable gross income in excess of $ 150,000, $ 75,000 for a married individual as defined in Internal Revenue Code section 7703 filing separately); or

iii. An amount equal to 80 percent of the tax for the taxable year (two-thirds of the tax for farmers) computed by placing the income for the months in the taxable year ending before the month in which the installment is due on an annualized basis by:

(1) Multiplying by 12 (or, in the case of a taxable year of less than 12 months, the number of months in the taxable year) the income for the months in the taxable year ending before the month in which the installment is due. (For trusts and estates, the income for the months ending before the date one month before the month in which the installment is required);

(2) Dividing the resulting amount by the number of months in the taxable year ending before the month in which the installment due date falls. (For trusts and estates, the number of months ending before the date one month before the month in which the installment due date falls); and

(3) Deducting from such amount the deductions for personal exemptions allowable for the taxable year (such personal exemptions being determined as of the installment due date); or

2. An amount equal to 90 percent of the tax computed, at the rates applicable to the taxable year, on the basis of the actual income for the months in the taxable year ending before the month in which the installment is required to be paid.

N.J. Admin. Code § 18:35-3.2

Amended by 48 N.J.R. 295(a), effective 2/16/2016