How to Minimize Your Future Income Tax Debt
- File Your Tax Return On Time. When you file a tax return on time, you can save 5% - 25% in late filing penalty charges.
- Pay Your Taxes On Time. If you pay the tax due to the Division on or before the due date, you will not be charged penalty and/or interest. Once the due date has passed, interest will be charged, along with the late filing penalty (if applicable), and we will bill you. If not paid by the “Pay By” date, we will charge you an additional late payment penalty of 5% and issue a second bill.
- Increase Your Withholdings. If taxes are withheld from your paycheck by your employer, contact your Human Resources Department to review your filed Form NJ-W4 or Federal Form W-4 (if you did not file Form NJ-W4). You can change the number of allowances you have and even request an additional amount to be deducted from each paycheck. For more information, see NJ Income Tax – Forms W-4 and NJ-W-4.
- Make Estimated Payments. If you are self-employed or you work for an employer that does not withhold New Jersey taxes from your pay, you should make estimated tax payments on a quarterly basis. If you expect your New Jersey income tax for the year to be more than $400 after subtracting any likely withholdings, deductions and credits, you are required to make estimated payments. By making estimated payments you can avoid a large tax amount due at the time of filing and also installment interest. For more information or to make an estimated payment, see NJ Income Tax – Estimated Payments.
- Know the Taxable Amount for Your Pension Income. If you take a distribution from your pension or annuity, you will be taxed on the taxable amount. To avoid a large tax amount due at the time of filing, you can request to have New Jersey State tax withheld from your pension. You can discuss this matter with your financial advisor. For more information on Pensions and Annuities, see NJ Income Tax – Retirement Income.
- Remain Current on Your Deferred (Installment) Payment Plan. If you have a Division of Taxation approved repayment plan, remain current on the agreed upon plan. We recommend that you try to make larger payments when possible to save yourself additional interest that will continue to accumulate.
- Avoid a Certificate of Debt (Lien). Satisfying your debt (amount owed) voluntarily is the best way to avoid a Certificate of Debt being filed against you and the additional Referral Cost Recovery Fee of 10.7% and a Cost of Collection Fee of 10%. To satisfy your debt, you can make a payment for the full amount due or request and obtain an approved Voluntary Compliance Repayment Plan. An approved repayment plan must be less than 24 months in length.