New Florida Tax Amnesty Program
Recent economic downturns have not only affected U.S. business but have also dramatically altered the landscape by which state and local governmental authorities operate. In an effort to generate revenues necessary to fund state and local governmental operations, many states have increased state and local tax rates, enforcement and collection efforts. Florida is no exception.
From time to time, federal, state and local governments offer certain incentives to taxpayers in an effort to increase or facilitate the collection of tax revenues. These incentives may include an economically feasible structure of installment payments, the settlement of tax debt for a lesser amount, a reduction or elimination of penalties and even interest.
To this end, the State of Florida recently enacted a tax amnesty program designed to generate revenues in a settlement of taxes that are, or may be, owed to the State of Florida.
What Are the Benefits of the Tax Amnesty Program?
The tax amnesty program is a one-time opportunity for eligible taxpayers to satisfy their tax liabilities and avoid criminal prosecution, penalties, and interest. Specifically, tax penalties cannot be imposed and the Department of Revenue may not initial a criminal investigation or refer for prosecution any participating taxpayer. As an added incentive, taxpayers may receive a reduction of 25% or more of the interest that may be assessed.
What are the Time Restrictions?
The tax amnesty program is limited. This program in effect for a 3-month period from July 1, 2010 through September 30, 2010.
What Taxes Apply?
The program includes most Florida taxes excluding employment taxes. Specifically, the program includes state and local taxes imposed by chapters 125, 175, 185, 198, 199, 201, 202, 203, 206, 211, 212, 220, 221, 252, 336, 376, 403, 624, 627, 629, and 681 of the Florida Statutes.
How Can You Apply?
In order to participate in the amnesty program, eligible taxpayers must file the forms and other documentation specified by the Department of Revenue, including but not limited to, tax returns and amended returns, and must agree to make full payment of taxes due, interest and administrative collection processing fees.
Who Can Apply?
The availability of the program to qualifying taxpayers is significant. Taxpayers may participate in the amnesty program whether or not the taxpayer is under audit, inquiry, examination, or civil investigation initiated by the Department of Revenue, regardless of whether the amount due is included in a proposed assessment or an assessment, bill, notice, or demand for payment issued by the Department of Revenue, and without regard to whether the amount due is subject to a pending administrative or judicial proceeding. When the department has issued a notice of intent to conduct an audit to a taxpayer but has not commenced the audit, the taxpayer may apply to the department during the amnesty program for approval to have the audit converted to the certified audits program authorized by s. 213.285, Florida Statutes.
Who is Excluded?
The following taxpayers are excluded:
- Any taxpayer that has entered into a settlement of liability for state or local option taxes before July 1, 2010, whether or not full and complete payment of the settlement amount has been made, is not eligible to participate in the amnesty program.
- A taxpayer under criminal investigation, indictment, information, or prosecution regarding a revenue law of this state is not eligible.
- A taxpayer under pretrial intervention or a diversion program, probation, or community control or in a work camp, jail, state prison, or another correctional system regarding a revenue law of this state is not eligible to participate in the amnesty program.
Can Qualifying Taxpayers Pay In Installments?
Yes. In lieu of making full payment, qualifying taxpayers can often make payments under a short-term stipulated payment agreement. The general terms are a minimum down payment of 12.5 percent of the outstanding amount due and the agreement to pay the remaining balance in up to seven additional monthly installments. In certain limited circumstances under the discretion of the Department of Revenue, more favorable terms may apply.
However, if the taxpayer fails to make a monthly installment payment or is delinquent, the agreement to participate in the amnesty program and the stipulated payment agreement are void and the full amount of the original liability, including any interest and penalty, are due and payable.
Commentary
For certain taxpayers, the provisions of the amnesty program may be quite favorable. For others, the program may not provide a large enough incentive to move ahead. In this writer’s opinion, the tax amnesty program is “a dollar short and a day late”; typical for programs offered by the State of Florida.
Other state and Federal programs are of the realization that underreporting and tax delinquencies are often due to economic hardships – hardships so intense that business owners believe they have little choice but to underreport or not pay taxes in an effort to keep their business alive. It is not that I am in agreement with this logic — in fact I strongly object and would always advise otherwise.
Yet in the minds of business owners, they often believe that
- they have no choice but to delay the reporting or payment of these taxes;
- the situation is only temporary and will eventually turn around, and;
- they have every intention of making good on the debt.
Unfortunately, in many cases, the problem seems to continue or otherwise pyramid into future periods.
Due to the inability to timely enforce compliance and collection actions by the overworked, understaffed workers of the Florida Department of Revenue, often these conditions persist until the point of no return.
What Are The Recommended Actions?
In all cases, taxpayers should consult first with their tax attorney, certified public accountant or financial advisors to quantify their exposure and determine if the benefits of the program is economically sound.
In those cases where taxpayers have the ability to pay delinquent or underreported taxes, either currently or through the use of a short term payment plan, the benefits of the tax amnesty program may indeed be worth consideration.
In those cases where taxes are due and it is imminent that the taxpayer will be examined, it is most certainly in the taxpayer’s interests to participate in the tax amnesty program and to voluntarily disclose the obligations and apply for economic relief.
In those cases where criminal charges may apply, it is always our recommendation to consider the seriousness of such potential exposure and to immediately cease and desist such actions going forward at all costs at a minimum. In those circumstances in which it is, or may appear, that discovery is imminent, I believe that immediate action in the consideration of such a plan is warranted. This may indeed be your best opportunity to successfully settle these matters with the added incentive of beneficial economic terms.
For additional information, please visit http://laws.flrules.org/2010/166
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