Tax amnesty q&a: preliminary information on the FTB and BOE's 2005 amnesty program.Recent legislation authorizes the Franchise Tax Board and the Board of Equalization In communications, techniques used to reduce distortion and compensate for signal loss (attenuation) over long distances. to administer a tax amnesty Tax amnesty is a limited-time opportunity for a specified group of taxpayers to pay a defined amount, in exchange for forgiveness of a tax liability (including interest and penalties) relating to a previous tax period or periods and without fear of criminal prosecution. program in early 2005. The following provides some preliminary information about the program, who is eligible to participate and when to apply. WHAT IS TAX AMNESTY? Tax amnesty is a limited-time chance for individuals and businesses to pay past-due income, franchise, sales or use taxes and the related interest penalty-free--without the fear of criminal prosecution. It runs from Feb. 1, 2005, through March 31, 2005. Taxpayers eligible to participate in amnesty amnesty (ăm`nəstē), in law, exemption from prosecution for criminal action. It signifies forgiveness and the forgetting of past actions. but who choose not to do so will be subject to additional penalties. WHO IS ELIGIBLE? Amnesty is open to both individuals and businesses for taxable years Taxable year The 12-month period an individual uses to report income for income tax purposes. For most individuals, their tax year is the calendar year. 2002 and prior if they did any of the following: * Did not file the required California tax returns; * Underreported income on a previously filed tax return; * Claimed excessive deductions; or * Did not pay income/franchise, sales or use taxes on time. The following taxpayers or transactions are not eligible for amnesty: * Taxpayers under criminal investigation or prosecution on tax-related matters; and * Abusive tax shelter Abusive tax shelter A limited partnership that the IRS judges to be claiming tax deductions illegally. abusive tax shelter A tax shelter in which an improper interpretation of the law is used to produce tax benefits that are transactions that were eligible for relief under California's Voluntary Compliance Initiative or the 2003 IRS An abbreviation for the Internal Revenue Service, a federal agency charged with the responsibility of administering and enforcing internal revenue laws. Offshore Voluntary Compliance Initiative. These initiatives applied to taxpayers with nonreported or underreported tax liability amounts attributable to an investment in an abusive tax shelter. These taxpayers are eligible for amnesty for non-abusive tax shelter tax shelter: see tax exemption. items. HOW AND WHEN DO I APPLY? * Complete and return a signed amnesty application by March 31, 2005. Amnesty runs from Feb. 1, 2005, through March 31, 2005. Since March 31 is a state holiday, the FTB FTB Franchise Tax Board (California; they collect income and sales tax) FTB Family Tax Benefit (Australian welfare assistance) FTB First Time Buyer (housing) will accept applications postmarked April 1, 2005. * File all missing income tax returns for amnesty years by May 31, 2005. * File amended a·mend v. a·mend·ed, a·mend·ing, a·mends v.tr. 1. To change for the better; improve: amended the earlier proposal so as to make it more comprehensive. 2. income tax returns for taxable years where you underreported your income for tax amnesty years by May 31, 2005. * Pay all outstanding tax liabilities and interest by May 31, 2005. Or set up an installment payment agreement that will be fully paid by June 30, 2006. WHERE DO I GET FORMS? * The amnesty application will be available on the FTB's website by Jan. 15, 2005. * Tax forms for years 1994-02 are available on the FTB's website (www.ftb.ca.gov) under Forms & Publications. * Tax forms for years before 1994 are available by calling (800) 852-5711. CAN I DELAY FILING AND PAYING PAST-DUE TAXES UNTIL THE AMNESTY PERIOD BEGINS? No. The state will continue its normal compliance, enforcement and collection efforts to enforce the tax laws. This means that new audits will be conducted and non-filer enforcement efforts will proceed as planned. It also means that normal billing and collection actions will continue. This can result in a levy against your bank account, garnishments of wages, filing of a tax lien Tax Lien A claim imposed by the federal government to liquidate a persons property until owing tax and debt is fully paid. Notes: Tax liens can be purchased from the government in the form of an investment. and other actions allowed by law. WHAT IF I DON'T FILE FOR AMNESTY? Amnesty legislation provides for increased enforcement actions for years 2002 and prior, including: * The accuracy-related penalty increases from 20 percent to 40 percent on new tax assessments. This penalty is assessed for negligence negligence, in law, especially tort law, the breach of an obligation (duty) to act with care, or the failure to act as a reasonable and prudent person would under similar circumstances. or disregard of rules or regulations; any substantial understatement of income tax (10 percent); and other reasons. [ILLUSTRATION OMITTED] * An amnesty penalty is imposed at the rate of 50 percent of the existing unpaid interest amount on years for which you could have applied for amnesty. * An amnesty penalty is imposed at the rate of 50 percent of unpaid interest on tax assessments that become final after the amnesty ending date. CAN I APPLY FOR AMNESTY IF I AM IN BANKRUPTCY bankruptcy, in law, settlement of the liabilities of a person or organization wholly or partially unable to meet financial obligations. The purposes are to distribute, through a court-appointed receiver, the bankrupt's assets equitably among creditors and, in most ? Yes. However, if you are in an active bankruptcy, you will need the approval of the Court/Trustee to participate in the amnesty program. CAN I FILE AN EXTENSION FOR AMNESTY? No. Amnesty applications must be post-marked by March 31, 2005. Since March 31 is a state holiday, the FTB will accept applications postmarked April 1, 2005. IF I FILE AN APPLICATION DURING AMNESTY, CAN I FILE MY RETURNS AND PAY AFTER THE DEADLINE? Yes, but you must file returns and make payments by May 31, 2005. If you enter into an installment payment plan you can pay the taxes and interest over time, but you must pay the entire balance by June 30, 2006. This Q&A is provided courtesy of the Franchise Tax Board. |
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