Kentucky has enacted legislation that authorizes the Department of Revenue to conduct a tax amnesty program during fiscal year 2012-2013. A tax amnesty program will be held during the fiscal year ending June 30, 2013, for a period of 60 to 120 days. The program will be available to all taxpayers owing taxes, penalties, fees, or interest subject to the administrative jurisdiction of the department, with the exception of the following: ad valorem taxes levied on real property pursuant, ad valorem taxes on motor vehicles and motorboats collected by the county clerks, ad valorem taxes on personal property levied pursuant to KRS Ch. 132 that are payable to local officials, and any penalties imposed under KRS 131.630 or 138.205 (pertaining to cigarettes). The program will apply to tax liabilities for taxable periods ending or transactions occurring after December 1, 2001 and prior to October 1, 2011. Under the program, taxpayers are required to pay the full amount of tax due plus 50% of the interest due. Taxpayers are also required to file all tax returns when due and make all tax payments when due for three years following the date that amnesty is granted. Full payment must be made upon application, and any additional tax must be paid within 30 days of notification by the department. The department may allow installment payments in cases of severe hardship. Full rates of interest would apply to installment payments, and all required payments under such a plan must be made by May 31, 2013. Amnesty will be invalidated for taxpayers failing to make payment as required under the program.
Once the amnesty period expires, the following cost-of-collection fees will be imposed: 25% on all taxes that are or become due to the department for any reporting period, regardless of when due; 25% on taxes that are assessed and collected after the amnesty period for taxable periods ending or transactions occurring prior to October 1, 2011; and for any taxpayer who failed to file a return for any previous tax period for which amnesty is available and fails to file the return during the amnesty period, 50% of any tax deficiency assessed after the amnesty period. Additionally, once the amnesty period expires, an amnesty-eligible tax liability that is still unpaid and not covered by an installment plan will accrue interest at a rate that is 2% higher than the otherwise applicable rate. Based on these post amnesty “penalties” all taxpayers (registered and unregistered) should closely evaluate any potential tax underpayment and file under amnesty to reduce the risk of 25% to 50% penalties as well as the additional interest costs.
UPDATE: The Kentucky Finance and Administration Cabinet announced on September 20, 2012 that the tax amnesty program will be held between October 1 and November 30, 2012. Delinquent taxpayers will receive mailed notifications indicating the known amount of back taxes and will have until November 30 to apply for amnesty and pay overdue taxes. Taxpayers taking advantage of amnesty must remain current for the next three years. (H.B. 499, Laws 2012, effective April 11, 2012, and as noted; Press Release, Kentucky Finance and Administration Cabinet, September 20, 2012)