Posted by Pat Raskob

State Tax Amnesty Programs for 2021

State Tax Amnesty Programs for 2021

Amnesty is an expression of forgiveness on the part of the federal government to its citizens. The choice is not to punish a business, an individual, or an entity for a crime. Under a tax amnesty program, the state provides for a period in which people can file taxes or pay unpaid tax debts without penalty. It's a good way for states to increase their revenue and help taxpayers in the process.

Amnesty programs help address three tax problems: tax arrears, taxes due, and underestimated tax liabilities.


How the tax amnesty works

A state typically waives late filing of fines when late tax returns are filed in an amnesty period. 

Most of them will also waive late payments and even sometimes waive interest if the outstanding balance is fully paid during the amnesty period.

States generally waive penalties for accuracy and fraud, even if the taxpayer submits a correct return to report the true and fair tax debt. They must also pay any additional tax owed during the amnesty program.


Example of Tax amnesty

Over the years, Arizona has offered several amnesty programs. 

One of the government's amnesty programs ended in 2015. It reduced or waived civil penalties and interest for unpaid tax obligations in any fiscal year ended before January 1, 2014, for annual taxpayers or before February 1, 2015, for all other taxpayers.

The following types of taxes were qualified for amnesty:

  • Any special taxes administered by the Department

  • Car rental surcharge

  • County excise duty

  • Income tax

  • Jail excise tax, 

  • Jet fuel excise and use tax 

  • Severance tax

  • Tax on hotels

  • Tax on water use

  • Taxes on the use of electricity and natural gas

  • Telecommunications service consumption tax

  • Transaction privilege tax

  • Use tax.

Taxpayers were required to submit amnesty applications, tax arrears payment, and any amended or original returns to be qualified. They were not qualified for the program if they had previously been the subject of a criminal investigation or prosecution. The convictions for tax violations disqualified taxpayers who fell into that category, and they would be ineligible if they agreed to a resolution for their tax debt to the state.

Instead, the ADR (Arizona Department of Revenue) waived or reduced penalties and civil interest. The Arizona Department of Revenue has also agreed to waive any civil, administrative, or criminal action. However, tax returns were still candidates for audit.

Anyone who requests an amnesty waives the right to challenge any decision taken in the case.


Upcoming state amnesty programs in 2021

Amnesty periods are not continuous nor permanent, and not all states offer them. States can change each year. Only one state offers active amnesty programs in 2021:

The Nevada Legislature has passed a unique tax amnesty program for qualified businesses or individuals doing business in Nevada. The program allows the exemption of fines and interest on taxes due and payable on or before June 30, 2020. The period of amnesty extends from February 1, 2021, to May 1, 2021.

Eligible taxes

The following types of taxes are eligible for amnesty: 

  • Amended business tax 

  • Bank branch excise tax

  • Centrally Assessed property tax

  • Cigarette tax 

  • Commerce tax 

  • Entertainment tax (non-gaming)

  • Exhibition facilities fee 

  • Insurance premium tax

  • Net proceeds of mineral tax

  • Retail marijuana excise tax

  • Sales and use tax

  • Short term lessor (passenger car government service fee)

  • Tax on liquor

  • Tax on other tobacco products

  • Tire tax

  • Transportation connection tax

  • Wholesale marijuana excise tax 

Businesses or individuals who have entered into an agreement or arrangement with the Nevada Department of Taxation or the Nevada Tax Commission over an unpaid tax or assessment or who are currently under control but have not received a final determination deficient before the last day of the amnesty period, you are not eligible for the amnesty program. Companies or individuals who have filed for bankruptcy within the past five years should appeal to the Department for an amnesty.

Taxpayers should carefully consider the benefits and conditions of participating in an amnesty program. 


Alternative to state tax amnesty

Several states offer taxpayers a different option to pay their late bills and get exemptions from fines and, hopefully, interest. These "voluntary disclosure agreements" relate mainly to sales, income taxes, and use taxes.

The purpose of these voluntary disclosure agreement programs is to help taxpayers who are in debt volunteer and pay the taxes owed. You can take legal action if your state's national revenue does not contact you about your tax defaults and pay your back taxes and interest. 

Each state has different laws and rules but must confine the "look back" period to 3 to 5 years. This limits penalties and interest rates.


Federal tax amnesty

It's a great idea, but the IRS doesn't offer tax amnesty unless you have undisclosed accounts abroad. However, it offers several commitment options and installment contracts, making it easier for taxpayers to collect taxes and avoid the tax burden.


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Pat Raskob
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