United States

Virginia issues tax amnesty program guidance

TAX ALERT  | 

UPDATE: Sept. 7, 2017

On Sept. 5, 2017, the Virginia Department of Taxation released details in Public Document 17-156 regarding the state tax amnesty program being offered this year. The amnesty was enacted earlier in the year, but the details of the program had not yet been determined. Accordingly, the state will administer a 62-day amnesty period beginning on Sept. 13, 2017, and ending on Nov. 14, 2017. Benefits of the program include waiver of all penalties and one-half of the interest.

In order to receive those benefits, the taxpayer must pay all of the tax due and one-half of the interest liability. Penalties are waived once the payment has been made. Failure to take advantage of the tax amnesty program on eligible liabilities will result in an additional 20 percent amnesty penalty.

Eligibility

Most state taxes are eligible for amnesty, including sales and use taxes and income taxes. A number of other taxes and fees are also eligible, including the apple excise tax, bank franchise tax, cigarette tax, forest products tax, litter tax and the tire recycling fee, among others. In order to qualify, bills must be related to an amnesty eligible period and have an assessment date on or before June 15, 2017, while returns must be applicable to an eligible period. Each tax or fee has a designated period eligible for the amnesty.

Taxpayers should also be aware of a number of ineligible assessments and disqualifying scenarios, including:

  • Bills and accounts paid before Sept. 13, 2017;
  • Federal tax assessments;
  • Local tax assessments;
  • Bills with an assessment date after June 15, 2017, with certain exceptions for bills issued during the amnesty period;
  • 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;
  • All obligations of a taxpayer with an active jeopardy or fraud assessment; and
  • Any tax liability attributable to an issue that is the subject of a decision of a Virginia court rendered on or after Jan. 1, 2016.

Application and payments

No designated application is required to apply for amnesty. According to the department, benefits are granted on a bill or return basis. The department provides the following illustration to clarify that procedure:

If a taxpayer has three outstanding bills and three delinquent returns, but cannot pay all of the tax and half of the interest for all items, the taxpayer may still participate in amnesty to satisfy some of the amnesty eligible bills and/or delinquent returns. The taxpayer may pay only two amnesty-eligible bills under amnesty program and receive amnesty benefits for those bills. Taxpayers are not required to satisfy all outstanding bills and delinquent returns in order to participate. 

Additionally:

  • Payments related to eligible bills with an assessment date on or before June 15, 2017, must be mailed by Nov. 14, 2017.
  • Payments related to delinquent returns require that all relevant filings and documentation are delivered between Sept. 13, 2017 and Nov. 14, 2017, as if the return was timely and properly filed. Taxpayers who filed returns without payment or with insufficient payment will be assessed tax, penalties and interest, unless paid before the later of the end of the amnesty period or within 30 days of the date of the assessment.
  • An interest rate of 5 percent will be used to determine the interest on previously unfiled returns or underreported income.
  • Penalty-only assessments for amnesty eligible taxes and periods will be waived under the amnesty program.
  • If a taxpayer has an interest-only assessment and the total amount of the interest is less than or equal to $50, the interest will be waived.
  • Taxpayers under appeal are also eligible for amnesty if the full amount of the tax and half the interest is paid. If the amnesty procedure is utilized, the appeal will be considered withdrawn and any further appeal rights will be waived.
  • Taxpayers currently on a payment plan entered into prior to the beginning of the amnesty period are also eligible to participate in the tax amnesty program so long as the bill is paid in full in accordance with the amnesty program.

Takeaways

Taxpayers should understand that amnesty-eligible tax liabilities that remain unpaid after the amnesty period will be subject to a 20 percent penalty, in addition to any other applicable penalties. Most taxpayers eligible for amnesty will receive a notice through the mail, but taxpayers who believe they have eligible liabilities and have not received a notice should review the eligibility criteria. The 62-day period requires taxpayers to be expedient in reviewing their eligible liabilities and should contact their Virginia tax advisors as soon as possible with questions.

ORIGINAL ALERT: Virginia enacts tax amnesty program for fiscal year 2017-18

AUTHORS


Subscribe to Tax Alerts



How can we help you with state & local tax planning?