The State of California recently authorized an amnesty program effective from February 1, 2005 through March 31, 2005. The program applies to personal income, corporation, franchise (income), and sales and use taxes for reporting periods beginning before January 1, 2003. The Board of Equalization is authorized to waive penalties, but not interest. In order to be eligible for the amnesty, taxpayers must have not filed California tax returns or underreported income on tax returns they did file, claimed excessive deductions, or paid their taxes late.
Taxpayers already under investigation for tax issues and taxpayers who could have participated in California’s Voluntary Compliance Initiative or the 2003 IRS Offshore Voluntary Compliance Initiative are not eligible. To participate, taxpayers must submit completed and signed amnesty applications by March 31, 2005, and amended or missing tax returns and payment of liabilities and interest must be remitted by May 31, 2005. An installment payment agreement plan will also be available, with all payments due by June 30, 2006. The amnesty application and tax forms for 1994 through 2003 are currently available online. If taxpayers do not participate in the amnesty program but owe sales or use tax for reporting periods beginning before January 1, 2003, the Board will assess a penalty equal to 50% of the interest on the unpaid tax amount as of March 31, 2005. If the Board issues a notice of determination on or after April 1, 2005, the penalties included in that determination will be doubled, excluding the previously described penalty. The amnesty program has also increased the statute of limitations for the open periods to ten years. The state Voluntary Disclosure Program remains in force, its terms include a three year look-back period and potential waiver of penalty if conditions have been satisfied, but the additional 50% interest on post-2003 liability would still apply.
It is our recommendation that if you have any potential issues in the periods related to the amnesty program, that you participate in the amnesty program as the penalties and statute of limitations imposed by the State of California are severe and can impact your company significantly.
If you have any questions or would like any assistance in applying for the program, please contact Diane Yetter of Yetter Consulting Services, Inc. at 312-701-1800 or via email at [email protected] or Barbara Timek of Yetter Consulting Services, Inc. at 973-347-0107 or via email at [email protected]. For our previous news item on this topic, click here.