Vernoia, Enterline + Brewer, CPA LLC

The Appellate Division of the New Jersey Superior Court upheld the Tax Court’s grant of summary judgment to the Division of Taxation (Division) in its claim for a refund of gross income (personal income) taxes erroneously made to beneficiaries of a New Jersey resident trust because a taxpayer, who was acting on behalf of the beneficiaries, failed to establish that the Division’s determination concerning the repayment of refund was incorrect.

The Tax Court had found that the Division is authorized to treat any erroneous refund it makes as an underpayment of taxes owed and recoverable, provided the refund is attributable to a clerical error. In this case, the Division had erroneously refunded the nonresident beneficiaries who had failed to report their New Jersey source income on their returns. Accordingly, the Division assessed tax to reclaim the refund. The court found that the refund issued to the beneficiaries was a clerical error, as generally the “Statements of Accounts” that the Division issues to taxpayers are not final determinations. Thus, the taxpayer was liable for the refunded amount. Hill v. Director, Division of Taxation, New Jersey Superior Court, Appellate Division, No. A-1980-13T1, June 17, 2016

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