New Jersey Consequences of Unpaid Taxes & Docket Judgements
If you have unpaid taxes in New Jersey, the state may use private collection agencies, liens, levies, and other collection tactics to claim its funds. The New Jersey Division of Taxation takes unpaid taxes very seriously, and ignoring your tax bill can lead to significant consequences.
If you have past due taxes (deficiencies) or unfiled returns (delinquencies) in New Jersey, here is what to expect.
New Jersey Tax Collection Process
The New Jersey Division of Taxation will try to contact you through the mail and phone if you have unpaid taxes. The division will refer your unpaid taxes to a private collection company if you don’t respond.
Currently, the private collection company is Pioneer Credit Recovery. As of 2021, when the case is referred to the collection agency, a Referral Cost Recovery Fee of $10.75 is added to the tax liability.
Certificate of Liability (COD) in New Jersey
If you ignore the collection agency, a Certificate of Liability (COD) will be filed with the Clerk of the New Jersey Superior Court. Once the COD is filed, the case is returned to the State for further collection activity.
In New Jersey, a COD is a tax lien filed against you. A tax lien is the state's legal claim to your assets in relation to your unpaid tax liability. It secures the state's interest and carries the same effect as a Docketed Judgment.
COD vs. a Docketed Judgment
A docketed judgment is a judgment entered in court. A tax lien, in contrast, is filed with the Clerk of the New Jersey Superior Court. Although the filing process is different, both COD and Docketed Judgments create an official notice of the lien against you. They both allow the state to take the next step to a levy.
Bank Levies in New Jersey
Once a COD or Docketed Judgment is issued, the state will send a bank levy to your bank requesting that they forward the required amount to the state. By law, banks must comply with these orders.
If your bank receives a levy notice from the state, it will put a hold on the funds, and it must send them to the state in a certain amount of time.
How to Remove a COD in New Jersey
To remove a COD, you must pay the balance in full with certified funds. Paying the balance in full is also called satisfying the docketed judgment. The final payment may include interest and penalties, making it more than your original tax bill. You can contact the state to find your pay-off amount.
Judgment Payoff Request
To find out the amount of your judgment pay off, contact your assigned caseworker. If you don't have a caseworker, complete a Judgment Payoff Request Form.
This form simply needs your name, address, and Social Security Number, as well as your lien or docket judgment number and the date filed. Then, you can submit it through email, fax, or mail.
- Email: [email protected].
- Fax: (609) 292-9614
- Mail: NJ Division of Taxation Judgment Section, PO Box 245, Trenton, NJ 08695-0245
Release or Subordination of New Jersey Tax Lien
Tax liens attach to your assets, and they can prevent you from selling or refinancing your assets. In New Jersey, you may be able to obtain a release or subordination of your tax lien if you can prove financial hardship.
A release simply means that the state removes the tax lien. A subordination means that the state allows another creditor to claim first rights to the asset.
For example, the state may attach liens to your motor vehicles if you have unpaid taxes in New Jersey. If you want to sell the vehicle to pay off your tax liability, you will need to request the lien removed. However, if you want to take out a loan against the vehicle and use it to pay off your taxes owed, the state will need to subordinate its lien to the new lender.
To apply for a release or subordination of your tax lien, contact your caseworker or email the Judgments Unit at [email protected]. There is no official form to request release or lien subordination in New Jersey. You may want to work with a tax professional to get help with this process.
Statute of Limitations in New Jersey
New Jersey has a twenty-year collection statute as opposed to the IRS collection statute of ten years. This time limit gives New Jersey an extra decade to collect unpaid state taxes. This means that even if you have old IRS tax liabilities that have expired, your New Jersey tax bill from the same time period may still be active.
Get Help With New Jersey Back Taxes
Don't let the New Jersey Division of Taxation issue COD, place liens on your vehicles, levy your bank account, or engage in other tax collection actions. Instead, contact the state and make arrangements now.
New Jersey offers payment plans, closing agreements, and penalty abatement to taxpayers with unpaid tax liabilities. Contact a New Jersey tax professional today to get help with unfiled returns or unpaid taxes. They can help you deal with NJ taxes and get the best resolution for your situation. Charles Montecino, the author of this article and a CPA located in Pitman, NJ, has extensive experience resolving New Jersey tax problems.