Table of Contents

What to do about your Notice of Assessment Related to Final Audit Determination from the New Jersey Division of Taxation.

Key Areas of Focus in a New Jersey Tax Audit

Personal Liability Alert

Urgent Actions Required

Consequences of Not Taking Action

Types of Audits and Their Impact

Related Notices You May Receive

Why Did I Receive a New Jersey Notice of Assessment Related to Final Audit Determination?

Steps to Take If You Disagree with the Notice

What to do about your Notice of Assessment Related to Final Audit Determination from the New Jersey Division of Taxation.

If you’ve received a Notice of Assessment from the State of New Jersey Division of Taxation, it indicates a tax deficiency resulting from a tax audit. These audits can have significant financial consequences for your business and personal finances, especially if you operate in an industry identified as a “cash business” such as restaurants, pizzerias, or liquor stores, which are often targeted for sales and use tax audits.

Key Areas of Focus in a New Jersey Tax Audit

• Sales and Use Tax: This is the primary focus of most New Jersey tax audits, particularly for businesses that are classified by the New Jersey Division of taxation as cash businesses.

• Employment Taxes: These may be assessed based on the sales and use tax audit findings.

• Corporate Business Tax (CBT): If your business sales tax sales are recalculated, this tax might also be applied.

• Income Tax for Pass-Through Entities: If your business is a pass-through entity, income tax may also be assessed against you personally.

Personal Liability Alert

As a business owner, you might be personally liable for the sales and use taxes or employment taxes assessed against your business. This legal responsibility, known as being a “responsible person,” can extend the financial consequences beyond your business to your personal assets.

Urgent Actions Required

• File a Protest or Petition: You must file a Protest Letter with the New Jersey Division of Taxation Conference and Appeals Branch or a Petition with the New Jersey Tax Court within 90 days of the notice date.

• File Separate Petitions: If you are assessed for income taxes personally or as a responsible person, be sure to file separate petitions for the business and yourself.

Consequences of Not Taking Action

If you fail to act within the 90-day period beginning with the date of the Notice, a judgment will be entered against both your business and you, potentially leading to severe financial repercussions.

Possible Exception to the 90 day period

In certain cases, you may be able to reopen an audit or judgment if the assessment was estimated or arbitrarily determined. However, this option is at the discretion of the New Jersey Division of Taxation and should not be relied upon as your primary strategy.

Types of Audits and Their Impact

1. Cash Businesses: Businesses like restaurants, pizzerias, and liquor stores are particularly vulnerable to audits where the NJ Division of Taxation uses statistical analysis to estimate gross sales. These audits often result in significant tax deficiencies, with sample periods being extended to four taxable years. The taxpayer bears the burden of proving that the increased audited gross sales determined by the New Jersey auditor are incorrect.

2. Non-Cash Businesses: Audits in these industries focus on examining sales invoices to ensure the correct amount of sales tax has been collected and remitted to the State.

The extension of the statistical sales and use tax audit sample to four years may result in hundreds of thousands of dollars in additional taxes.

Related Notices You May Receive

• Notice of Final Determination: This notice is issued by the New Jersey Division of Taxation Conference and Appeals Branch, informing you of the decision of the branch regarding your protest letter.

• Notice of Finding of Responsible Person Status: This notice indicates you have been determined to be a responsible person for trust fund taxes, such as sales and use taxes and employment taxes which have been assessed against your business.

• Notice of Tax Due: This notice notifies you of increases made to your personal New Jersey Gross Income Tax returns as the result of the sales and use tax audit.

Why Did I Receive a New Jersey Notice of Assessment Related to Final Audit Determination?

The State of New Jersey audited your business's records and found a deficiency in the sales and use, employment, CBT or income taxes taxes you reported. If your records were incomplete, not provided, or showed discrepancies, the state is legally allowed to estimate the amount of taxes owed.

Steps to Take If You Disagree with the Notice

If you disagree with the notice, it is important to carefully consider the reasons behind your disagreement before taking any further action. Review the notice thoroughly to understand the basis of the decision and gather any relevant information or evidence that supports your position.

It may be beneficial to seek advice from a legal professional or an expert in sales and use tax related to the notice to help you navigate the process of challenging it. Keep in mind that presenting a well-structured argument backed by facts and legal considerations can significantly strengthen your case. Additionally, be prepared for a potential lengthy negotiation or mediation process to resolve the disagreement amicably.

• File a Protest with the New Jersey Division of Taxation Conference and Appeals Branch, or

• File a Complaint with the New Jersey Tax Court.

  
  

Unlike the IRS, New Jersey does only grants one 90 day period to respond to the notice of assessment. You may file either a protest letter with the NJ conference and appeals branch, or a petition with the new jersey tax court. If you do not take action, a judgment will be issued against you.