Frost Law
On September 5, the Virginia Department of Taxation (“Department”) issued Public Document 17-156 (9/5/17), providing the final guidelines for the 2017 Tax Amnesty Program (“Amnesty”). This is the fourth tax amnesty program in Virginia history. Beginning on September 13 through November 14, Amnesty will allow taxpayers favorable terms to satisfy eligible tax debt. With certain exceptions, taxpayers with outstanding tax debt will have the option to pay only the tax owed and half of the interest on eligible bills and delinquent tax returns. All remaining interest and penalties will be waived once full payment has been received.
Generally, both individuals and businesses are eligible to participate in Amnesty to satisfy tax bills and file delinquent returns. Bills must relate to an amnesty eligible period and have an assessment date on or before June 15, 2017; returns must apply to an eligible period. The Department’s guidelines clarify that eligible taxable periods are calculated from the original due date of the tax return, without consideration of filing extensions.
You can view a comprehensive list of the tax and periods eligible for amnesty here.
An application is not required to be submitted to participate. To qualify, taxpayers must file all relevant tax returns with corresponding documents. Taxpayers who under-reported income, or overstated deductions or exemptions will need to file an amended return accompanied by any additional tax owed. Payments must be postmarked by November 14, 2017 and should specify the tax bill number the payment is to be applied to. Payments without a specified tax bill number will be applied to tax bills that are eligible first.
According to the Department’s statement, Amnesty benefits will be granted on a bill-by-bill or return-by-return basis. The guidelines explain that a taxpayer with three outstanding bills and three delinquent returns, who cannot pay all of the tax and half of the interest for all items, may still participate in Amnesty to satisfy some of the amnesty eligible items. Taxpayers should understand that failure to take advantage of Amnesty will result in a 20 percent post-amnesty penalty to all eligible tax liabilities. The penalty will only be applied to unpaid taxes, not associated penalties and interest.
Those who have entered into a payment plan with a private collection agency contracted by the Department prior to the beginning of the amnesty period will be allowed to participate if their tax liability is amnesty eligible. Additionally, taxpayers are permitted to enter into a payment plan during the Amnesty period if their tax liability meet the requirements. Entering into a payment plan does not extend the date for when payment needs to be received–bills from payment plans will still need to be paid in full during the Amnesty period. If the taxpayer fails to make timely payments or does not comply with the terms of any payment plan during or after the amnesty period, the 20 percent Amnesty penalty will be applied to the balance.
Taxpayers who have an appeal pursuant to Va. Code § 58.1-1821 pending during amnesty on an eligible assessment may also participate by paying the full amount of the tax and one half of the interest owed. Amnesty payment received by the Department will be deemed the taxpayer’s withdrawal of the pending appeal and waiver of the right to an additional administrative or judicial appeal.
The Offer in Compromise process will also continue throughout the Amnesty period. A taxpayer may choose to withdraw a current Offer in Compromise on an eligible bill by paying the full tax and one half of the interest due under Amnesty guidelines.
The following are not eligible for Amnesty benefits:
1. Bills and accounts paid before September 13, 2017;
2. Federal tax assessments;
3. Local tax assessments;
4. Bills with an assessment date after June 15, 2017, with certain exceptions for bills issued during the amnesty period;
5. All obligations of a taxpayer under criminal investigation or prosecution for filing a fraudulent return or failing to file a return with the intent to evade the tax;
6. All obligations of a taxpayer with an active jeopardy or fraud assessment; and
7. Any tax liability attributable to an issue that is the subject of a decision of a Virginia court rendered on or after January 1, 2016.
The short 62-day period requires taxpayers to be proactive in reviewing their outstanding tax debt to determine their eligibility to participate in the amnesty program. To find the best option for you, you should review the new Amnesty guidelines and exceptions, as well as the existing Voluntary Disclosure Program to see what program offers the best benefits for your particular situation. For more information, please contact our office for a free consultation at 410-862-4675.
