N.J. seeking to recoup $1.6M in overpaid tax rebates

The state Division of Taxation is taking steps to recoup $1.6 million in rebates it overpaid nearly 3,800 taxpayers, following an investigation by the Office of the State Comptroller.

The comptroller’s office released the findings of its investigation into property tax relief programs for multi-unit properties Thursday along with steps it said the division is taking to remedy the problem.

The report estimates that thousands of homeowners have received larger property tax credits than they were entitled to because they claimed 100 percent residency of a multi-unit dwelling when applying for the Homestead Property Tax Credit and Property Tax Reimbursement programs and the state property tax deduction. The programs are provided to taxpayers who meet certain income limits, senior citizens and the disabled. Only a portion of the credits and rebates are supposed to be applied when an applicant lives in a multi-unit dwelling.

The report recommends that the Division of Taxation require local tax assessors to report the number of residential units in each property in the municipality to close what Acting State Comptroller Marc Larkins calls a “gap in the oversight of property tax relief programs.” Each municipality has the information on record, but the state doesn’t require that it be shared.

“The state can save millions of dollars a year by requiring local tax assessors to report already known information,” Larkins said in a statement announcing the findings of his office’s investigation. “We look forward to continuing to work with the state Division of Taxation to ensure that dollars set aside for property tax relief are spent appropriately and as the law intended.”

The comptroller’s office said in its report that the Division of Taxation is already seeking adjustments from 3,771 taxpayers who received the full rebate through the Homestead Property Tax Credit Program, even though they live in a multi-unit building. The state anticipates receiving $1.6 million in repayments, the report said.

The comptroller’s office also recommended that the Division of Taxation attempt to identify all other taxpayers in multi-unit buildings who erroneously received a full homestead rebate, property tax reimbursement or property tax deduction. The report notes that more than $1 billion is budgeted for the three programs for the fiscal year ending June 30 and a review of payouts could save the state millions.

The investigation began after the comptroller’s office received a tip alleging eight homeowners in Kearny were receiving larger homestead credits than they were entitled to because portions of the residences were occupied by tenants. Investigators found that seven of the eight homeowners had been overpaid a total of $2,897, according to the report.

The comptroller’s office looked at the credits for the 2011 tax year, which were applied to homeowner’s August 2013 property tax bills, after the state delayed the credits due to budgetary constraints – something that has become a common practice. The 2012 credits are set to be applied to the May 2015 tax bills.

In an effort to determine if the overpayments were a statewide issue, the comptroller’s office asked the Division of Taxation to identify properties where owners received 100 percent of the homestead credit, but the address was listed on more than one state tax return. The search resulted in a list of about 65,000 properties. The comptroller’s office narrowed that list to 4,700 addresses by looking at properties that had secondary address information, such as unit numbers. From that the report says, the office looked at a random sampling of 101 properties and found that of those 29 received $9,000 more in rebates than they were entitled to. Of those 29, the comptroller’s office also found four homeowners who received excessive property tax reimbursements and 12 who claimed excess tax deductions, according to the report.

The office contacted municipal tax assessors and found that they could easily provide the state with information on multi-unit residences.

The report also found that the application forms could be confusing and recommends that the Division of Taxation make changes to clarify the application, including replacing the term “principle residence” with “property” and to providing a definition of a unit.