When will I get my “exit tax” refund?

Ask NJMoneyHelp

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Q. I filed a Form A-3128 to get a refund on the 2 percent withholding from the sale of my home in 2016 — the “exit tax.” Although I was a Florida resident, based on IRS rules, I was exempt from capital gains taxes because I had been a New Jersey resident for two of the past five years. I sent the state’s Taxation department a corrected GIT/REP 3 form because at closing, the title company insisted on using an incorrect one. How long should it take to receive my refund?
— Not-so-patiently waiting

A. New Jersey introduced the so-called “exit tax” in 2004 to ensure that New Jersey non-residents pay taxes on capital gains from the sale of real estate.

The amount of the estimated tax payment is calculated by taking the gain on the sale and multiplying it by the highest gross income tax rate, and the estimated payment cannot be less than 2 percent of the consideration received from the sale, said Matthew Masterson, a certified financial planner with RegentAtlantic in Morristown.

He said the estimated tax payment is made by filing at GIT/REP 1 form, which is attached to the recorded deed, and the tax payment is then sent to the Revenue Processing Center in Trenton.

Then when you file your New Jersey Part-Year or Non-Resident tax return, the actual tax due is calculated based on your New Jersey income, Masterson said.

“If you filed a GIT/REP 3 form, this means that you filed for an exemption on the tax and should have not had to make any payment as a result,” he said.

There are 14 possible exemptions, one of which is if the residence was your primary residence.

“You mention that you were a New Jersey resident for two of the past five years, but this is not quite the test used to determine if you are exempt,” he said. “For the specific exemption you mention, the home being sold must have been used as your principal residence as defined in the U.S. tax code – meaning the home had to be your primary residence for two of the last five years.”

You must also be claiming a gain exclusion for the property being sold on your federal income tax return, Masterson said.

Masterson said if the GIT/REP 3 form was filed and recorded with the deed — stating you did not owe tax — and then you filed for a refund, there may be some confusion at the tax department.

He recommends calling the customer service line to try to get to the bottom of it. That number is (609) 292-6400.

If that doesn’t work, reach out to the Office of the Taxpayer Advocate, which helps taxpayers who are unable to get answers for tax issues through the normal channels.

Email your questions to moc.p1550328220leHye1550328220noMJN1550328220@ksA1550328220.

NJMoneyHelp.com presents certain general financial planning principles and advice, but should never be viewed as a substitute for obtaining advice from a personal professional advisor who understands your unique individual circumstances.