Tax Amnesty (California)

 

 

This is information taken from the FTB website dealing with their 2005 tax amnesty program.
 

WHAT IS TAX AMNESTY?

If you are an eligible individual or business taxpayer, California’s 2005 tax amnesty program offers you a window of opportunity. Pay your past-due income, franchise, sales or use tax and you won’t have to pay most penalties and fees or fear prosecution.

 

WHO IS ELIGIBLE?
California individual and business taxpayers are eligible for amnesty for taxable years beginning before January 1, 2003 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.

  • Did not pay previously assessed taxes, interest, penalties, or fees.

  

WHO IS NOT ELIGIBLE?

  • Taxpayers currently under criminal investigation or prosecution on tax-related matters;

  • Abusive tax shelter transactions that were eligible for relief under California’s Voluntary Compliance Initiative or the 2003 IRS Offshore Voluntary Compliance Initiative. These initiatives applied to taxpayers with non-reported or underreported tax liability amounts attributable to an investment in an abusive tax shelter.
    Note: These taxpayers are eligible for amnesty for non-abusive tax shelter items.

  

HOW DO I PARTICIPATE IN THE PROGRAM?

  • Apply for amnesty. Complete and submit an amnesty application by April 4,  2005 (the FTB extended the deadline from March 31 due to technical issues).   Here is a link to the application for INDIVIDUALS for INCOME TAX.  You can get the application for BUSINESS and SALES TAXES from the FTB website.

  • File all missing income or franchise tax returns by May 31, 2005 for amnesty years (2002 and prior).

  • File amended income or franchise tax returns by May 31, 2005 for any years you underreported your tax.

  • Pay all outstanding tax liabilities and interest by May 31, 2005. Or, set up an installment agreement that will fully pay the amnesty years liability by June 30, 2006.

  

What happens if I am eligible and choose not to participate in the amnesty program?

If you are eligible for amnesty and choose not to participate, you may be subject to substantial, new penalties:

  • Accuracy related penalty changes
 Accuracy Related Penalty Changes (R&TC Section 19164)
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Description

The new law provides for an increase to the existing accuracy related penalty for an amnesty eligible tax year from twenty percent to forty percent, for any proposed deficiency assessment issued after the end of the amnesty period (March 31, 2005).

Amount

    We may impose the 40% penalty on the underpayment of tax caused by:

  • Negligence or disregard of rules or regulations.
  • Substantial understatement of income tax.
  • Substantial valuation misstatement.
  • Substantial overstatement of pension liabilities.
  • Substantial estate or gift tax valuation understatement.

When the increased penalty does not apply

The increased penalty does not apply to understatements related to tax shelter items. The increased penalty also does not apply to any understatement that is the subject of an audit, protest, appeal, settlement or litigation as of the start of the amnesty period.

Effective date

This penalty applies to taxable years 2002 and prior. It applies to notices of proposed assessment issued after March 31, 2005.

Tax Amnesty: Amnesty penalty R&TC 19777.5
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Updated – December 14, 2004

Description

This new penalty is an addition to tax for each tax year that was eligible for amnesty, but amnesty was not requested, and there was an unpaid amount due on March 31, 2005 (amnesty noncompliance penalty). The penalty is also imposed where the Franchise Tax Board mails a notice of proposed assessment or a notice of tax due or where a taxpayer self assesses additional tax for an amnesty eligible tax year after the end of the amnesty period (post-amnesty penalty).

Amount

The amnesty noncompliance penalty is calculated as an amount equal to fifty percent of the interest that accrued on the unpaid daily balance from the original due date of the tax to March 31, 2005. The post-amnesty penalty is calculated as an amount equal to fifty percent of the interest computed on the additional amount from the original due date of the tax year to March 31, 2005.

When this penalty does not apply

This penalty does not apply to amounts covered by an existing personal income tax installment agreement entered into before February 1, 2005.

No right to protest or claim a refund

There is no right to protest or pay and file a claim for refund or credit of this penalty.

Effective date

This penalty applies to taxable years 2002 and prior. The amnesty noncompliance penalty applies to balances due on March 31, 2005. The post-amnesty penalty applies to final amounts shown on notices issued or returns filed after March 31, 2005.