The Individual Tax Audit Branch is comprised of the Gross Income Tax section and the Transfer Inheritance and Estate Tax section.
The Gross Income Tax Sectionís
main responsibility is the desk audit of New Jersey Gross Income Tax returns filed by resident and nonresident individuals, estates and trusts. Audit candidates are selected using a variety of criteria developed within the section and utilizing information from the Internal Revenue Service, other states, other New Jersey state agencies and public information.
Working independently and on joint projects with other Division of Taxation Branches, state agencies and the Internal Revenue Service, this section also pursues delinquent resident and nonresident taxpayers who have been identified as having a New Jersey income tax filing responsibility. These include S corporation shareholders, partners, members of LLCs, beneficiaries of estates and trusts, self-employed individuals, entertainers and professional athletes; as well as delinquent business entities such as partnerships, LLCs and employers that withhold New Jersey gross income tax.
The Transfer Inheritance and Estate Tax Section
is responsible for all phases of the administration of the inheritance tax and the estate tax.
The New Jersey Inheritance Tax was first enacted in 1892. It is a succession or legacy tax which is a tax on the right to receive property. The tax imposed is dependent upon the value (on a decedentís date of death) of the property received by a beneficiary and the relationship of that beneficiary to the decedent. Beneficiaries such as a surviving spouse, domestic or civil union partner, parent, child, stepchild, or adopted child are exempt from the tax. In the case of a resident decedent the tax is imposed on the transfer of real and tangible personal property located in this state and intangible personal property wherever it is located. In the case of a nonresident decedent the tax is imposed only on the transfer of real and tangible personal property located in New Jersey.
The New Jersey Estate Tax was first enacted in 1934. For decedents dying prior to January 1, 2002 the New Jersey Estate Tax was a ďsponge or pickup taxĒ whose purpose was to absorb the credit for state death taxes allowable in the Federal estate tax proceeding. Under changes made to the Federal estate tax law in 2001 the New Jersey estate tax would have been phased out over a three year period beginning in 2002. Legislation was enacted in July, 2002 which decoupled the New Jersey Estate Tax from the Federal tax for decedents dying after December 31, 2001. The New Jersey Estate Tax is payable by the estate of resident decedents and is the maximum credit for state death taxes allowable under the provisions of the Internal Revenue Code in effect on December 31, 2001 or an amount determined pursuant to the simplified tax system prescribed by the Director. A deduction is provided for property passing to a surviving spouse, civil union partner or for charitable purposes. A deduction is also provided for death taxes paid to New Jersey and other states.
Among the sectionís many responsibilities are the drafting of tax forms, instructional materials, notices, publications, regulations and statutes. The section conducts audits, holds hearings and works with the State Attorney Generalís Office to resolve Court proceedings. The section also participates in meetings held by various legal and accounting organizations, banking institutions and other interested groups to explain various aspects of the two taxes. The section provides assistance to attorneys, accountants, taxpayers and banking institutions. The section responds to correspondence and inquiries made either in person or by phone related to the inheritance and the estate tax statutes, regulations, rules, policies, procedures and case law.