Audit Reveals New Jersey Giving Away Millions in Undeserved Tax Breaks

The New Jersey Division of Taxation is supposed to make sure that only those who are qualified to obtain various tax breaks, including the senior freeze and property tax relief are actually taking those credits and breaks.

Problem is that the Division isn't doing its job as a new audit reveals.

For years the state has offered rebate programs and tax breaks to seniors and disabled homeowners in the form of checks that are usually mailed out in the fall, just in time for November elections.

But a new report by the State Auditor found that the Division of Taxation, which oversees the programs, and municipalities failed to cross-check records or demand proof from homeowners to make sure they qualify for the programs.

In 2007, the year examined by the auditor, the two programs paid out more than a quarter billion dollars.

"We're kind of taking people at their word,'' said Acting State Auditor Stephen Eells, "and there are improper payments going out.''

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In 2007, the average "freeze'' rebate checks averaged $958, according to the Treasury Department. That year, 154,600 senior and disabled homeowners received ``senior freeze'' rebates totaling $165 million.

A random sample found that 6,000 homeowners who received the rebates were younger than 65, according to federal records. Of those, 405 receiving $318,000 in rebates weren't receiving social security benefits, indicating that they weren't as old as they claimed.

The audit also found sloppy accounting; some homeowners who claimed disabilities were listed instead as over 65. And it found that many, nearly 1,250 homeowners who received a total of $1.3 million in rebates, claimed they made less than $60,000 a year while a cross-check against federal tax forms showed they made too much to qualify.

It's simply inexcusable that these kinds of checks weren't conducted. After all, with many taxpayers filing electronically (and the number of e-filers is growing each year) it's a matter of checking identifying information to make sure that they qualify for the credits. How difficult is it for the Division to verify the age of those attempting to take the senior freeze? It's a matter of clicking through to various databases to make sure that the person is qualified to receive the credit.

At a time when the state is struggling to pay its bills, assuring that the various tax programs are administered correctly is critical to minimize that money isn't wasted.

Meanwhile, for those taxpayers who are taking the credit improperly it could be a matter of an innocent mistake or willful fraud. That's a matter to be determined by administrative action.

Of course, it would be far easier for all involved to simplify the tax system in New Jersey to make it easier for taxpayers to properly remit their taxes and for the Division to collect the taxes accurately. That would mean eliminating various tax breaks and programs while lowering the overall tax rate. A streamlining of the tax system in New Jersey would have a multiplier effect since taxpayers wouldn't need to spend more and more time in trying to figure out their tax obligations and the state would have a better understanding of annual tax revenues.