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Division of Taxation

The Surety Process - Collection of Taxes While a Protest or Appeal Is Pending

The Director of the Division of Taxation has the right to pursue collection, or secure protested tax liabilities, while a finding or assessment is being protested.

However, N.J.S.A. 54:49-18 imposes certain restrictions on when we can require security as follows:

Except in the case of an arbitrary assessment pursuant to N.J.S.A. 54:49-5 or N.J.S.A.54:49-7, no security shall be required for an amount in controversy of less than $10,000. Contested assessments of $10,000 or more shall not require security unless the Director determines that there is a substantial risk of the taxpayer’s failure or inability to pay the liability, based on the compliance history and financial condition of the taxpayer.

The Conference and Appeals Branch identifies taxpayers who are required to provide security in order to stay the collection process. We will not seek any collections relative to a protested tax liability, if you remit all required security or where otherwise required by law.

The Conference and Appeals Branch will contact you and/or you representative, in writing, if it determines that you must:

  • Pay the tax, penalty, and/or interest assessed; 
  • Furnish a “Surety Bond” subject to the approval of the Director; or
  • Furnish a “Letter of Credit” subject to the approval of the Director.

How do you determine when security is required?

  • Security shall be required in the case of a protest to the Director of any liability consisting in whole or in part or arbitrary or estimated assessments. N.J.A.C. 18:32-1.3(a)2
  • Security may be required in the case of any contested liability of $10,000 or more including penalties and interest (other than an arbitrary or estimated assessment) where the Director determines that there is substantial risk of the taxpayer’s failure or inability to pay a liability based on the compliance history and financial condition of the taxpayer. N.J.A.C. 18:32-1.3(a)2ii
  • “Compliance History” is determined based upon any and all information obtained and/or maintained by the Director with respect to any State tax accounts of the taxpayer, including, but not limited to, information that the taxpayer has under reported or failed to report income. N.J.A.C. 18:32-1.3(a)2ii(1)
  • “Financial Condition” is determined based upon any and all information that has a potential impact on the taxpayer’s present ability to pay the assessed taxes, including but not limited to factors set forth at N.J.A.C. 18:32-1.3(a).2ii(2)

What happens if I fail to comply with your determination?

If we request you pay your tax and/or furnish security, and you do not to do so within 30 days, we will file a “Certificate of Debt” with the Superior Court of New Jersey N.J.S.A. 54:49-12.

For cases involving trust fund taxes, we may also issue a “Finding of Responsible Person.” 

The above rules also apply when filing a complaint with the Tax Court of New Jersey.

 


Last Updated: Friday, 07/17/20