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The Pennsylvania Department of Revenue (“Department”), through Act 84 of 2016, is offering a Tax Amnesty Program (“Program”) which will run for sixty (60) days, beginning on April 21, 2017 and ending on June 19, 2017 (the “Amnesty Period”). The Department will waive all penalties and half of the interest for anyone who participates in the Program. Taxpayers with delinquencies that exist as of December 31, 2015, whether the delinquency is known or unknown to the Department, are eligible for the Program.
Applicable penalties. Penalties to which the Program apply include all penalties on all taxes owed to Pennsylvania and administered by the Department. These include penalties on non-filed tax returns or reports, as well as unpaid or under-reported tax liabilities, whether known or unknown to the Department and that exist as of December 31, 2015.
Non-applicable penalties. Penalties on taxes administered by another state or local government, and penalties on taxes administered by the federal government. These include penalties on unpaid taxes for periods after December 31, 2015. However, in order to participate in the Program for periods prior to December 31, 2015, unfiled returns for periods after December 31, 2015 must be filed.
Taxpayers eligible. Individuals, businesses, and other entities with Pennsylvania tax delinquencies as of December 31, 2015. Taxpayers who participated in the 1996 Tax Amnesty Program are also eligible.
Taxpayers ineligible. Individuals, businesses, and other entities that participated in the 2010 Tax Amnesty Program are ineligible for the 2017 Program. In addition, taxpayers who are under criminal tax investigation, taxpayers who have been named a defendant in a criminal tax complaint, and taxpayers who are defendants in a pending criminal action. Other taxpayers ineligible for the Program include taxpayers in bankruptcy (unless permission is granted by the Bankruptcy Court) and taxpayers who have a signed Voluntary Disclosure Agreement covering periods eligible for the Program.
Participation benefits. Taxpayers who participate in the Program will be able to obtain relief by paying the tax and one-half of the interest. The Department will rescind liens or other enforcement actions, and the taxpayer will not have to pay the other half of the interest, all of the penalty, and any fees associated with the tax. However, no refunds will be given for interest and penalties paid before the Amnesty Period.
Non-participation consequences. Taxpayers who are eligible to participate, but who choose not to participate, will be subject to a 5% non-participation penalty, which will be added to the balance of the tax, interest, and penalties due. Taxpayers may also be subject to other enforcement actions by the Department. The 5% penalty will not apply if the taxpayer is in bankruptcy protection, has received a bankruptcy discharge determination, has an active deferred payment plan, or if the tax liability is covered by a timely administrative or judicial appeal.
Participation requirements. Taxpayers wishing to participate in the Program must file an online Amnesty Return. In addition, taxpayers must file complete returns for all tax periods, including those periods not eligible for the Program, for which the taxpayer previously has not filed a return, and must file complete amended returns for all required periods for which the taxpayer has underreported the tax liability. The above requirements must be completed by June 19, 2017.
Appeals and future appeal rights. Taxpayers must agree to withdraw any administrative or judicial appeal of tax liabilities, although taxpayers need not withdraw appeals of tax liabilities for which the taxpayer is not applying for relief under the Program. In addition, taxpayers who apply for the Program will be prohibited from appealing liabilities paid through the Program in the future.
Continued eligibility for Program. In order to retain eligibility, taxpayers must remain compliant with Pennsylvania taxes for two years by timely filing returns and making tax payments.
Notification of Program. The Department will mail notices to taxpayers with known tax delinquencies where there is a valid address in the Department’s records. The notice will contain application instructions.
Future participation in Tax Amnesty Programs. Taxpayers who participate in the 2017 Program, or who have participated in the 2010 Tax Amnesty Program, will be prohibited from participating in any future Tax Amnesty Programs.
Effect on Voluntary Disclosure Program. The Voluntary Disclosure Program will continue during the Amnesty Period. Taxpayers who have entered into Voluntary Disclosure Agreements are bound by those agreements.
Payments. Taxpayers are required to pay all delinquent taxes and one-half of the interest. Payment for the entire liability can only be made during the Amnesty Period. Payment is considered timely if received electronically or postmarked on or before June 19, 2017. Taxpayers who cannot make a single payment due to financial hardship will be allowed to make three payments: the first for one-half of the amnesty total liability, and the balance in two payments during the Program.
Deadline for participation. The deadline for applying for the Program and meeting all requirements for participation is June 19, 2017.
Extensions. No extensions for the filing of missing tax returns and reports eligible for the Program will be granted.
For more information and a sample Tax Amnesty Return, see the 2017 Tax Amnesty Program Guidelines, available at: http://www.revenue.pa.gov/taxamnesty/Documents/2017_tax_amnesty_program_guidelines.pdf
Samantha Heaton is an associate with the firm. She is admitted to the Bars of the State of New Jersey and The Commonwealth of Pennsylvania. Mrs. Heaton earned her J.D., summa cum laude, from Rutgers Law School, where she also received a Certificate in Corporate and Business Law and served as an Articles Editor for the Rutgers University Law Review.