e tax buttonTRENTON, NJ – Taxpayers should be aware this year that making a failed electronic payment to satisfy their tax bill is the same as bouncing a check.  

Prior to last fall, the criminal penalties that could be levied against taxpayers for passing bad checks were more severe than those that could be assessed against people who sent e-payments that failed to clear.

On Sept. 11, 2014, Governor Chris Christie signed two bills into law – A-1153 and A-1162, which became Chapters 45 and 46 of the Public Laws of 2014. These new laws fix a longstanding discrepancy that treated bounced paper checks and bounced electronic payments differently. Chapter 45 extends criminal penalties – and Chapter 46 extends civil sanctions – against people who send insufficient e-payments just as if they were bad checks.

Just like a bad check, a failed electronic payment occurs when a taxpayer filing online designates a financial institution from which to draw payment, and the account either does not exist or there are insufficient funds in that account.  The failure can occur for a number of reasons, such as incorrectly typing a checking account or bank routing number.

“In some instances, it is an honest mistake that the taxpayer will quickly correct as soon as he or she is made aware of it,” said State Division of Taxation Director Michael Bryan. “Sometimes, the filer deliberately enters the wrong number and, upon notice of the ‘error,’ refuses to pay.”

Businesses also are covered by the new laws, which is important because most taxes remitted by businesses must be made online. Online payments ensure the State receives taxes and fees when they are due, and they also help to greatly reduce processing costs. Taxpayers benefit because they can print out a receipt to prove they paid the proper amount when it was due.

When e-payments fail, a notice is sent to taxpayers to notify them that the money was not available to pay the tax bill. Depending on the reason for the electronic failure, they may be assessed a $50 fee in addition to the amount they owe.  Penalties and interest accrue just as they do for all taxpayers who make delinquent or deficient payments.  If the taxpayer corrects the problem expeditiously, little additional monies are owed and the Division need not initiate further recovery efforts.

The Office of Criminal Investigation’s Technical Enforcement Unit is tasked with recovering funds owed as a result of failed electronic payments from taxpayers who don’t make good on the payments.  It works cooperatively with the Economic Crimes Unit of the Mercer County Prosecutor’s Office to criminally charge violators.

The Technical Enforcement Unit notifies the taxpayer of the failed payment. If the situation can be properly addressed, the taxpayer merely pays the penalty and interest that has accrued since the electronic payment failure was made.

However, the unit refers some “bad actors” to the Mercer County Prosecutor’s Office for criminal prosecution.  Now that e-payments are treated like bad checks, violators can face charges – up to a second-degree crime. Conviction can result in the defendant being sentenced to pay a fine, to make restitution, or both. The fine cannot exceed $150,000. The court also may impose probation or potential incarceration.