The New Jersey Division of Taxation participates in several different intercept and set-off programs. The division is also responsible for administering the state's set-off programs to collect tax debts from residents and nonresidents who owe income taxes and child support obligations to the state or New Jersey residents. According to the New Jersey Taxpayer Bill of Rights, the Division of Taxation must follow specific procedures when complying with federal or other states’ programs and during the administration of the state’s programs.
Types of Tax Intercept Programs
New Jersey participates in several types of tax intercept programs. The Set-Off of Individual Liability, known as SOIL, is the oldest national intercept program. The Federal Refunds for Individual Liability, known as FOIL, is a federal tax intercept program designed to help the New Jersey Division of Taxation satisfy the state's income tax liabilities. The State Vendor Set-Off Program is a New Jersey intercept program withholding government contract payments due government contractors to satisfy their state tax debts. The IRS Treasury Offset Program is a joint program between the federal government and states. Lastly, New Jersey participates in programs with Maryland, Delaware, New York and Connecticut allowing for reciprocal tax withholdings.
Federal Intercept Program
The federal Tax Offset Program allows the IRS to intercept federal tax refunds to satisfy child support debts. The IRS uses a cross-matching database to verify tax refunds are sent to taxpayers without past-due child support obligations. The IRS sends the intercepted tax refunds to the U.S. Department of Health and Human Services to send to state governments. The IRS is not required to send prior notice to taxpayers before intercepting a taxpayer’s federal tax refunds. However, the IRS sends a Notice of Offset after the intercept instructing parents to notify their state child support agencies for further information.
New Jersey Programs
Under SOIL, the Division of Taxation withholds state tax returns, homestead credit rebates and other types of income tax rebates from taxpayers with past-due state tax debts, tax debts to other states or tax debts with the IRS. The New Jersey Division of Taxation sends intercept notices to delinquent taxpayers, and if they do not respond to their notices, fail to negotiate installment agreements or do not satisfy their debts within 35 to 45 days, the Division of Revenue intercepts their tax returns and sends them to the federal government or to other states in which taxes or other debts are due.
New Jersey Tax Debts
Under the FOIL program, federal tax refunds are used to pay off New Jersey income tax liabilities. The IRS sends taxpayers a notice of past-due taxes. Taxpayers have 90 days to pay their taxes, and if they fail to pay them within 90 days, the Division of Taxation issues a Notice of Intended Federal Set-Off. Taxpayers have an additional 60 days to pay their tax debts. After 60 days, the New Jersey Division of Taxation asks the federal government to intercept a taxpayer’s federal tax refund and to send the money to New Jersey.
Since state laws can frequently change, do not use this information as a substitute for legal advice. Seek advice through an attorney licensed to practice law in your state.