Beginning Nov. 1, 2021, taxpayers may apply for Connecticut’s three-month tax amnesty program offering penalty waiver and a 75% reduction in interest in outstanding liabilities for eligible taxpayers. The program will run through Jan. 31, 2022.
Eligibility
The amnesty program will apply to most tax administered by the Connecticut Department of Revenue Services (DRS) except motor carrier road taxes. Eligible periods for tax liabilities include any taxable period ending on, or before, Dec. 31, 2020. There is no limitation on how far back an applicant may report outstanding liabilities. Individual income taxpayers may apply for amnesty for the 2020 tax year, or a prior tax year, but not for the 2021 tax year. Business taxpayers who file monthly or quarterly may apply for amnesty up through the period ending Dec. 31, 2020.
The program offers broad eligibility to most taxpayers, including the following:
- Individuals or businesses that owe taxes and are required by law to file a tax return with the DRS – within an eligible tax period – but have not filed.
- Individuals or businesses that previously filed a tax return with DRS – for an eligible tax period – but did not report all the tax that was due.
- Individuals or businesses that currently have an unpaid tax liability with DRS that includes tax and penalty and/or interest.
- Individuals or businesses currently under audit by DRS for periods ending on or before Dec. 31, 2020.
- Any individual or business with a protest pending before DRS’s Appellate Division.
- Any individual taxpayer or business currently pursuing civil litigation with DRS.
Taxpayers under the following conditions may not participate in tax amnesty:
- Anyone currently under criminal investigation by DRS.
- Anyone who is party to any criminal litigation pending as of Nov. 1, 2021.
- Anyone who is party to a closing agreement with DRS.
- Anyone who has made an Offer of Compromise that has been accepted by DRS.
- Anyone who is party to a managed audit agreement.
Generally, most taxes administered by the DRS are eligible for amnesty, including sales and use taxes, income taxes, withholding taxes, pass-through entity taxes and various excise taxes. The Connecticut motor carrier road tax, local property taxes, registration and other DRS fees and fees imposed by the Connecticut Secretary of State are not eligible for amnesty.
Applications
Taxpayers must apply to the program and make full payment electronically. Taxpayers may apply for amnesty for more than one tax or more than one liability under the same tax. Amnesty applications are considered tax returns and, therefore, are confidential. The DRS will not use a taxpayer’s amnesty application as evidence in any criminal investigation or prosecution unless the taxpayer knowingly files a fraudulent amnesty application.
Additionally, by agreeing to amnesty, taxpayers waive all administrative and judicial rights of appeal available in connection with the liability that is subject to amnesty. Payments made under the program will not be refunded or credited.
Most taxpayers with known and eligible liabilities will receive an amnesty offer letter from the DRS. Taxpayers may still be eligible without an offer letter as taxpayers may have liabilities unknown to the DRS or may not be registered in the state.
Benefits
Taxpayers eligible for amnesty will qualify for a 75% reduction in assessments of interest. The DRS will also refrain from seeking applicable civil penalties and criminal prosecution on reprieved taxpayers for tax years and/or periods under the tax amnesty program’s coverage.
The tax amnesty program is voluntary. Taxpayers will not be subject to a specific additional penalty for failing to file for amnesty, but also cannot receive amnesty benefits without participating in the program.
Takeaway
The three-month amnesty program was enacted by Gov. Ned Lamont as part of the FY22 fiscal year budget. The program offers generous benefits, by both eliminating penalties and offering a reduction in interest. Many state amnesty programs in recent years have offered a smaller reduction of interest or no reduction in interest. Some of those programs have also included additional failure to file penalties if outstanding liabilities were not submitted for amnesty.
Taxpayers may have experienced personal or business hardships due to the pandemic that made compliance with Connecticut’s tax laws and regulations more difficult. The tax amnesty program offers an excellent opportunity to come into compliance with only minor interest and full penalty waiver.
Taxpayers considering applying for amnesty or who would like to discuss the benefits and risks of the program, such as whether it is more advantageous to contest a liability, should contact their Connecticut tax advisers with questions.
