Date: February 22, 2023Attorney: Martin D. Hauptman

Filing status.

The New Jersey Division of Taxation has updated its publication that discusses filing status. The publication states that a civil union couple, even if legally sanctioned in another state, must file their gross income tax return as either Married/Civil Union Filing Jointly or Married/Civil Union Filing Separately even though the Internal Revenue Service (IRS) does not recognize the civil union as a marriage. Such taxpayers cannot use the single filing status, even if they do so federally. (New Jersey Division of Taxation Technical Bulletin No. GIT-4, 01/01/2023.)

Estimated income taxes.

The New Jersey Division of Taxation has updated its publication that discusses estimated income taxes for individuals, estates and trusts. The publication discusses: (a) estimated tax requirements; (b) ways to make payments; (c) how interest is charged if a taxpayers fails to make required payments; and (d) how to complete Form NJ 2210 (Underpayment of Estimated Tax By Individuals, Estates and Trusts). (New Jersey Division of Taxation Technical Bulletin No. GIT-8, 01/01/2023.)

Military personnel and families.

The New Jersey Division of Taxation has updated its gross income tax publication that discusses gross income tax issues for resident and nonresident military service members and their families. The publication also discusses how residency is determined for military service members. (New Jersey Division of Taxation Technical Bulletin No. GIT-7, 01/01/2023.)

Nontaxable investment income.

The New Jersey Division of Taxation has updated its publication that discusses nontaxable income. The publication provides a list of taxable and nontaxable obligations. (New Jersey Division of Taxation Technical Bulletin No. GIT-5, 01/01/2023.)

Part-year and nonresident returns.

The New Jersey Division of Taxation has updated its publication that discusses part-year resident and nonresident income tax returns. The publication explains: (1) how to determine residency; (2) tax responsibilities; (3) how to complete a part-year New Jersey income tax return; and (4) when a part-year resident must file both resident and nonresident income tax returns. (New Jersey Division of Taxation Technical Bulletin No. GIT-6, 01/01/2023.)

Timing of Anchor Benefit Payments.

Governor Murphy and State Treasurer Muoio have announced that more than 800,000 New Jersey residents are scheduled to receive their Anchor benefits electronically on March 28, 2023. Other taxpayers who applied and are eligible for the Anchor benefits will receive paper checks starting in the first week of April in batches of mailings. (Governor Murphy and Treasurer Muoio Announce More Than 800,000 New Jerseyans to Receive Anchor Rebate Tomorrow, 03/27/2023.)

Leases and Rentals

The New Jersey Division of Taxation has updated its publication that explains how and when sales and use tax is imposed on lease and rental transactions in New Jersey. The publication also provides information on the correct procedures for charging, collecting, and remitting sales tax on lease and rental transactions. Leases of more than six months are treated differently than rentals of less than six months. The methods that may be used to calculate the sales tax due on leases of more than six months are the Original Price Purchase Method and the Total Lease Payments Method. However, under either method, the sales tax is due upfront. If a lessee transfers property out of state after paying the sales tax upfront, the lessee is eligible for a refund for the period of time that the property is not located in New Jersey. (New Jersey Division of Taxation Technical Bulletin No. S&U-12, 03/01/2023.)

Noneconomic gains are not taxable.

The New Jersey Tax Court has held that the gain that a taxpayer recognized for federal tax purposes on the liquidation of his interest in an LLC was not a taxable gain for New Jersey gross income tax purposes. The taxpayer received no cash upon liquidation or prior to the liquidation. The taxpayer had a large negative balance in his capital account when it was determined that the LLC would be liquidated. For federal tax purposes, all of the capital accounts were written to zero. This resulted in taxpayers with positive capital balances having tax losses and taxpayers with negative capital balances having tax gains. The taxpayer argued and the court agreed that under the precedent established in Koch v. Div. of Taxation, N.J. S. Ct., Dkt. No. A-135-97, 01/14/1999, the taxpayer’s gain on the liquidation was not an economic gain and should not be taxed. The taxpayer received no benefits from the losses that created the negative capital balance and should not be taxed the zeroing out of his negative balance. (Musumeci v. Dir. Div. of Taxation, N.J. Tax Ct., Dkt. No. 000169-2021, 03/28/2023.)

Reminder: July 17 is Deadline for Claiming 2019 Refunds

“The 2019 tax returns came due during the pandemic, and many people may have overlooked or forgotten about these refunds,” said IRS Commissioner Daniel Werfel. “We want taxpayers to claim these refunds, but time is running out. People face a July 17 deadline to file their returns. We recommend taxpayers start soon to make sure they don’t miss out.”

Taxpayers usually have a three-year lookback period to claim a tax refund. Generally, the lookback period begins on the due date of the return, usually April 15, and ends on the filing deadline, usually April 15, three years later. If taxpayers don’t claim a refund within three years, the taxpayer loses the refund and the government gets the money instead. 

Because the 2019 tax returns were due at the beginning of the Covid-19 pandemic (April 2020), Congress postponed the usual April filing deadline and gave taxpayers until July 15, 2020, to file their 2019 returns. As a result, taxpayers have until July 17, 2023, to claim their 2019 refunds.

New Jersey Division of Taxation Updates College Tuition Deductions for 2022 and Beyond

The New Jersey Division of Taxation has updated its discussion of the deductions related to college tuition expenses. For the 2022 tax year and thereafter, the New Jersey College Affordability Act allows for three income tax deductions. Deductions include contributions to a NJBEST 529 savings plan, payments made for an NJCLASS student loan, and tuition costs for New Jersey colleges and universities. Taxpayers with New Jersey gross income not greater than $200,000 may deduct up to $10,000 of contributions made during the year into an NJBEST account; up to $2,500 of both principal and interest paid on student loans during the year under NJCLASS and up to $10,000 in tuition costs for the taxpayer, spouse or dependent to attend a New Jersey institution of higher education. Nothing prevents the same amounts being claimed for any of the deductions, i.e., contribution in 2022 to NJ Best and tuition paid in 2023. (College and Tuition Assistance, N.J. Div. of Taxation, 06/06/2023.)