The New Jersey Division of Taxation has announced that they have increased the interest rate on outstanding tax balances to 6.50% for 2017. This is an increase from the 6.25% rate that has been in place for the past seven years.
For more details on how the New Jersey Division of Taxation determines this rate, they have provided the following information and chart outlining the interest rate for the past 10 years (via: http://www.state.nj.us/treasury/taxation/pdf/pubs/tb/tb21y.pdf).
The rate is calculated as follows: Prime Rate (3.50%) + 3% = 6.50%, compounded annually.
Under the Taxpayers’ Bill of Rights, interest assessed on outstanding tax balances is Prime Rate plus 3%. Prime Rate for this purpose is the average predominant prime rate, as determined by the Board of Governors of the Federal Reserve System, that was in effect on December 1 of the year prior to the year in which the tax became due. If the prime rate varies by more than one percentage point from the rate previously determined, the Director of the Division of Taxation shall redetermine the rate to be the quoted prime rate for subsequent calendar quarters of the year in which the payments become due. At the end of each calendar year any unpaid tax, penalties and interest will become part of the balance on which interest is charged.
Listed below is the Federal Reserve prime rate and assessed interest rate history:
If you have questions about how this change may impact you, contact your Untracht Early Advisor.