54A:9-2. Notice of deficiency.

(a) General. If upon examination of a taxpayer's return under this act the director determines that there is a deficiency of income tax, he may mail a notice of deficiency to the taxpayer. If a taxpayer fails to file an income tax return required under this act, the director is authorized to estimate the taxpayer's New Jersey income and tax thereon, from any information in his possession, and to mail a notice of deficiency to the taxpayer. A notice of deficiency shall be mailed to the taxpayer at his last known address in or out of this State. If a husband and wife are jointly liable for tax, a notice of deficiency may be a single joint notice, except that if the director has been notified in writing by either spouse that separate residences have been established, then, in lieu of the single joint notice, a duplicate original of the joint notice shall be mailed to each spouse at his or her last known address in or out of this State. If the taxpayer is deceased or under a legal disability, a notice of deficiency may be mailed to his last known address in or out of this State, unless the director has received written notice of the existence of a fiduciary relationship with respect to the taxpayer.

(b) Notice of deficiency as assessment. After 90 days from the mailing of a notice of deficiency, such notice shall be an assessment of the amount of tax specified in such notice, together with the interest, additions to tax and penalties stated in such notice, except only for any such tax or other amounts as to which the taxpayer has within such 90-day period filed with the director a petition under section 54A:9-9. If the notice of deficiency is addressed to a person outside of the United States, such period shall be 150 days instead of 90 days.

(c) Restrictions on assessment and levy. No assessment of a deficiency in tax and no levy or proceeding in court for its collection shall be made, begun or prosecuted, except as otherwise provided in section 54A:9-14, until a notice of deficiency has been mailed to the taxpayer, nor until the expiration of the time for filing a petition contesting such notice, nor, if a petition with respect to the taxable year has been filed with the director, until the decision of the director has become final. For exception in the case of review of the decision of the director, see subsection (c) of section 54A:9-10.

(d) Exceptions for mathematical errors. If a mathematical error appears on a return (including an overstatement of the credit for income tax withheld at the source, or of the amount paid as estimated income tax), the director shall notify the taxpayer that an amount of tax in excess of that shown upon the return is due, and that such excess has been assessed. Such notice shall not be considered as a notice of deficiency for the purposes of this section, subsection (e) of section 54A:9-8 (limiting credits or refunds after petition to the director), or subsection (b) of section 54A:9-9 (authorizing the filing of a petition with the director based on a notice of deficiency) nor shall such assessment or collection be prohibited by the provisions of subsection (c).

(e) Exception where change in Federal taxable income is not reported.

(1) If the taxpayer fails to comply with section 54A:8-7 in not reporting a change or correction increasing his Federal taxable income as reported on his Federal income tax return or in not reporting a change or correction which is treated in the same manner as if it were a deficiency for Federal income tax purposes or in not filing an amended return, instead of the mode and time of assessment provided for in subsection (b) of this section, the director may assess a deficiency based upon such changed or corrected Federal taxable income by mailing to the taxpayer a notice of additional tax due specifying the amount of the deficiency, and such deficiency, together with the interest, additions to tax and penalties stated in such notice, shall be deemed assessed on the date such notice is mailed unless within 30 days after the mailing of such notice a report of the Federal change or correction or an amended return, where such return was required by section 54A:8-7, is filed accompanied by a statement showing wherein such Federal determination and such notice of additional tax due are erroneous.

(2) Such notice shall not be considered as a notice of deficiency for the purposes of this section, subsection (e) of section 54A:9-8 (limiting credits or refunds after petition to the director), or subsection (b) of section 54A:9-9 (authorizing the filing of a petition with the director based on a notice of deficiency), nor shall such assessment or the collection thereof be prohibited by the provisions of subsection (c).

(3) If a husband and wife are jointly liable for tax, a notice of additional tax due may be a single joint notice, except that if the director has been notified in writing by either spouse that separate residences have been established, then, in lieu of the joint notice, a duplicate original of the joint notice shall be mailed to each spouse at his or her last known address in or out of this State. If the taxpayer is deceased or under a legal disability, a notice of additional tax due may be mailed to his last known address in or out of this State, unless the director has received written notice of the existence of a fiduciary relationship with respect to the taxpayer.

(f) Waiver of restrictions. The taxpayer shall at any time (whether or not a notice of deficiency has been issued) have the right to waive the restrictions on assessment and collection of the whole or any part of the deficiency by a signed notice in writing filed with the director.

(g) Deficiency defined. For purposes of this act, a deficiency means the amount of the tax imposed by this act, less (i) the amount shown as the tax upon the taxpayer's return (whether the return was made or the tax computed by him or by the director), and less (ii) the amounts previously assessed (or collected without assessment) as a deficiency and plus (iii) the amount of any rebates. For the purpose of this definition, the tax imposed by this act and the tax shown on the return shall both be determined without regard to payments on account of estimated tax or the credit for withholding tax; and a rebate means so much of an abatement, credit, refund or other repayment (whether or not erroneous) made on the ground that the amounts entering into the definition of a deficiency showed a balance in favor of the taxpayer.

L.1976, c. 47, s. 54A:9-2, eff. July 8, 1976, operative Aug. 30, 1976.