UNION COUNTY, NJ — Thousands of homeowners may want to enjoy the tax credits they claimed in the past because the state comptroller figured out where things can be tightened up in the future.
In a report released late last week, a state comptroller investigation found the state can possibly save millions annually in property tax relief programs by correcting a data sharing blind spot. Specifically, the application needs to be clarified because it creates “ambiguity and confusion.”
The comptroller investigation began with a tip from a member of the general public, who alleged that eight homeowners in their municipality were receiving a larger homestead credit than they were entitled to because a portion of their residence was occupied by other tenants. Subsequently the comptroller found that seven of the eight homeowners had, in fact, received overpayments of $2,897.
The report, issued April 9, estimates that thousands of homeowners have received larger property tax credits than they were entitled to because they inaccurately claimed to occupy 100 percent of a multi-unit property when applying for the Homestead Property Tax Credit program, the Property Tax Reimbursement program and the state Property Tax Deduction.
Homestead credits are available to New Jersey homeowners who meet certain income limits as well as other guidelines. The Property Tax Reimbursement program provides reimbursements to eligible senior citizens and disabled citizens to offset property tax increases to their primary residence. The Property Tax Deduction reduces gross income taxes for eligible homeowners and tenants who pay property taxes.
In order to correct this “blind spot,” the comptroller’s office has asked the state division of taxation to require local tax assessors to report information regarding the number of dwelling units for each property in their municipality. This data, they said, is already being collected by local tax assessors and could easily be included with property information currently being reported to the state.
“Our report identifies a gap in the oversight of property tax relief programs and it offers a clear solution for closing that gap,” said Marc Larkins, acting state comptroller.
The state, he explained, can save millions of dollars a year by requiring local tax assessors to report information already known.
“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,” Larkins said.
In response to the investigation, the division of taxation has already sent letters to municipalities seeking adjustments from 3,771 taxpayers who received a full rebate from the Homestead Property Tax Credit program even though their properties were designated as multi-unit. The comptroller anticipates recovering more than $1.6 million from that effort.
The comptroller also recommended that the taxation department attempt to identify all other property owners in the state who improperly received 100 percent credit from the Homestead Property Tax Credit, Property Tax Reimbursement and state Property Tax Deduction programs. More than $1 billion has been budgeted for the three programs for 2015 and the comptroller estimates that such a review could possibly save the state millions of additional dollars.
The amount of rebates and credits for all three programs are adjusted downward when eligible homeowners do not occupy 100 percent of a multi-unit property. For example, the comptroller said the owner of a two-family home who occupies only one of two equally-sized units, would only be entitled to 50 percent of the total Homestead Property Tax Credit.
In order to see if the overpayments were occurring statewide, the comptroller’s office got together with the division of taxation to identify properties whose owners received 100 percent of the homestead credit and had addresses that were listed on more than one state tax return. The search found 65,000 addresses.
From that list the state took a closer look at 101 properties and eventually determined that homeowners at 29 of them received $9,000 more in rebates than they were entitled because they inaccurately reported occupying 100 percent of their residence. On average, the comptroller found homeowners received a rebate that was 55 percent higher than the amount they were entitled.
From that group of 29, the comptroller’s office identified four homeowners who received excessive property tax reimbursements totaling $1,500 and 12 homeowners who claimed excess property tax deductions amounting to more than $48,000.
The names of these 29 property owners have all been referred to the state division of taxation.