Inactive Corporation - Back Taxes

[Jdub1234]

A corporation in New Jersey was marked "Inactive" as of 2007. The state is now coming after that corporation for unpaid back taxes beginning in the year 2008, with no notice of issue in the last 10 years.

Are there taxes that this corporation should have been paying, and if so, if they continue to not pay these taxes, what would the penalty be going forward??

 

[LdiJ]

A corporation in New Jersey was marked "Inactive" as of 2007. The state is now coming after that corporation for unpaid back taxes beginning in the year 2008, with no notice of issue in the last 10 years.

Are there taxes that this corporation should have been paying, and if so, if they continue to not pay these taxes, what would the penalty be going forward??

You are going to need to speak to a NJ tax professional. In the state I practice in, if you got such a letter, you would simply have to file a certain form stating that the corporation closed as of the date it was marked inactive. There may be something similar for NJ, but it will be more easily found by someone who deals with that sort of thing in NJ, on a regular basis.

 

[davew9128]

Is the corporation even otherwise in existence? If not, then I'd be inclined to tell the state to kiss off.

 

[LdiJ]

Is the corporation even otherwise in existence? If not, then I'd be inclined to tell the state to kiss off.

You really cannot tell a state to kiss off, they are relentless and they will go after the person who set up the corporation if necessary.

 

[Jdub1234]

Is the corporation even otherwise in existence? If not, then I'd be inclined to tell the state to kiss off.

The corporation still exists, it just doesn't have any business activity or assets.

 

[LdiJ]

The corporation still exists, it just doesn't have any business activity or assets.

Then you need to see a tax professional about back dating a closure back to 2007.

 

[Zigner]

The corporation still exists, it just doesn't have any business activity or assets.

Then it may, in fact, owe various fees and taxes since 2008.

 

[davew9128]

You really cannot tell a state to kiss off, they are relentless and they will go after the person who set up the corporation if necessary.

I disagree. I used to do it the CA FTB quite often in these situations. I had the benefit of case law to back up the position where clients walked away.

 

[Taxing Matters]

I disagree. I used to do it the CA FTB quite often in these situations. I had the benefit of case law to back up the position where clients walked away.

I agree that it is likely that there isn't much the state can do. There is nothing that a state can do to collect from a defunct corporation with no assets and, though state laws do differ and the type of tax matters, generally there will be no personal liability for the owners/officers/employees of the corporation for the taxes owed by the corporation unless they are withheld taxes or unless the shareholder/officers received assets of the corporation without paying the tax.

As this is NJ, the tax likely involved here is the NJ franchise tax, which is a minimum of $500/year. Thus, even inactive corporations would get hit with this tax. And it will continue to get hit with this tax until the corporation is properly dissolved. Dissolving the corporation is something the OP will want to do to avoid the state continuing to pile on the tax for future years. That won't be difficult to do, but won't resolve the taxes already owed for past years. See the NJ Division of Taxation discussion on dissolving corporations. It expressly states the general rule I posed above: the officers/shareholders are not personally liable for taxes owed by the corporation unless they are trust fund taxes (and the franchise tax is not one of those) or unless they caused the corporation to distribute assets to the shareholders without first paying the taxes owed.

So the OP can likely just dissolve this corporation and walk away. The OP might want to consult a tax attorney for assistance with that. I suggest an attorney since dissolving the corporation requires legal advice and assistance, something that other tax professionals cannot legally provide.