Don't Mess With Taxes

Sorry for the Postal Service style headline, but states have gone tax amnesty crazy!

Which prompts the question, what's up with them and taxpayer friendly programs in this economy?

First a batch of states held sales tax holidays this month. Texas' tax-free weekend this weekend will close the August events, but more are scheduled in the fall.

OK, off the hook might be a bit extreme. What's happening is tax amnesty periods.

They've been going on for the last couple of months in Florida, Nevada and New Mexico (as detailed in my July 6 post); just begun in Washington, D.C.; and coming soon in Kansas, Illinois and Maine.

During specific time frames, folks who owe a variety of taxes can pay up what they owe their state and avoid at least some of the usual penalties that accrue in these situations.

Even more appealing, the states usually promise not to file potential criminal charges.

Plus, taxpayers get a firm cut-off date with regard to future look backs into tax filing (or nonfiling) history. That means the tax man can't go poking into your affairs after a certain date.

Alternate ways to raise money: Which makes me repeat, what's up with states, especially since they're all complaining about how revenue-challenged they are in this economy?

Well, with the sales tax holidays, they thought is that anything that gets consumers into stores is good. I don't buy that argument. I think tax holidays tend to be more bogus than bonanza. But states (and retailers) hope that some people will add a few taxable items to their carts during their tax holiday shopping trips.

As for giving delinquent taxpayers a break, the idea here is that it's better for the states to get some revenue in a relatively easy manner. Many revenue departments have cut back their staffs, so they don't have the personnel to track down and keep bugging folks who owe the state money.

In each case of alternate revenue collection, it's essentially a guessing game judgment call on how much return a state tax office will get for the effort it has to expend.

Tax amnesties more profitable: While many folks who pay their taxes on time think amnesties are unfair, the programs do seem to pay off.

Even though it seems counter-intuitive to let tax scofflaws off the hook even a bit, when folks know they won't have to pay an even harsher price for their tax payment oversight, many take advantage of the opportunity to come clean.

Almost every state and many cities, as tracked by the Federation of Tax Administrators, has at one time or another turned to a tax amnesty to collect unpaid amounts.

And every state revenue department is hoping to replicate the great success that Pennsylvania had earlier this year, raking in $261 million in previously unpaid taxes despite its creepy Orwellian 1984 television ad promoting the tax-forgiveness period.

So here's the scoop on the current and upcoming amnesties, starting with the one in the nation's capital that kicked off Aug. 2.

D.C.: Aug. 2 through Sept. 30
The District of Columbia's tax amnesty program is for both individuals and businesses. The District is waiving all penalties and fees if a taxpayer pays all outstanding tax and interest during the amnesty period.

Taxpayers are eligible to participate if they have unpaid Washington, D.C., tax obligations relating to returns with a due date before Dec. 31, 2009. District tax officials say they Know of $170 million in taxes that are owed to the nation's capitol by 42,000 individuals and businesses. Sixty percent are located in the District, with 40 percent outside its boundaries, primarily in the Maryland and Virginia suburbs.

The amnesty program applies to the following types of taxes:

• Individual income
• Corporate and unincorporated franchise
  
• Withholding
• Sales and use
  
• Personal property
  
• Fiduciary income
  
• Motor fuel
  
• Special event
  
• Gross receipts
  
• Estate
  
• Tobacco 
• Toll communication

However, real property taxes and the ball park fee are not eligible for the District's amnesty program. More details are available at the District's tax amnesty website.

Florida: July 1 through Sept. 30
The Sunshine States says its taxpayers who participate in the amnesty will received a "significant" reduction in interest that's due (possibly as much as 50 percent) and won't face any penalty charges. Details in my earlier post and at the Florida tax amnesty website.

Nevada: July 1 through Sept. 30
The Silver State will offer a one-time waiver of penalty and interest on taxes that due before the amnesty period started and that are paid in full by the time the program ends in September. Details are in my earlier post and at the Nevada tax amnesty website.

New Mexico: June 7 through Sept. 30
Land of Enchantment residents can disclose unreported and unassessed taxes due without incurring penalties. Most New Mexico taxes and fees administered by the state's tax office are eligible. Detail sare in my earlier post and at the New Mexico tax amnesty website.

Now to the states that soon will be offering their residents tax amnesties.

Kansas: Sept. 1 through Oct. 15
The Sunflower State's tax amnesty program is available to Kansans who are delinquent on income, withholding, sales, privilege, severance, estate, liquor, cigarette and tobacco product taxes. Those tax liabilities must have been due by  on or before Dec. 31, 2008.

If taxpayers pay the taxes they owe during the amnesty, the Kansas Department of Revenue will waive interest and penalties. Payments must be postmarked no later than Oct. 15.

More information on the Kansas tax amnesty is available on page 30 of the revenue department's report on 2010 law changes.

Kansas taxpayers can call the tax office at (785) 368-8222 to discuss eligibility. During the call, amnesty applications may be made via telephone with a department agent. The application form also will be posted at the Kansas Department of Revenue's website at the end of August.

Maine: Sept. 1 through Nov. 30
The Pine Tree State will give taxpayers the opportunity to receive interest and penalty waivers when they pay their delinquent tax debt during the amnesty period.

Maine's tax forgiveness program, officially known as the 2010 Tax Receivables Reduction Initiatives, is divided into two parts, the "short-term initiative" and the "five-year initiative."  The short-term initiative applies to tax liabilities assessed as of Dec. 31, 2009, as well as interest and penalties assessed after that date. The five-year initiative applies to tax liabilities assessed as of June 30, 2005, along with interest and penalties assessed after that date.

Maine taxpayers who qualify under the short-term initiative are eligible to receive a waiver of 95 percent of the assessed penalties only.  Those who qualify under the five-year initiative are eligible for a waiver of 95 percent of the assessed penalties and interest.

Taxpayers can contact the Compliance Division of the Maine Revenue Services for the 2010 Tax Initiatives Application required to participate in the amnesty.

Illinois: Oct. 1 through Nov. 8
The Land of Lincoln hopes that taxpayers who want to finally follow in the footsteps of native son Honest Abe will net the state treasury $250 million this fall.

On Monday, Illinois Gov. Pat Quinn signed the amnesty bill into law, offering people who didn't pay their state taxes between July 1, 2002, and July 1, 2009, to pay those bills before the state doubles its penalty and interest assessments.

Details on the amnesty and application to participate will be posted on the Illinois Department of Revenue website as the Oct. 1 tax amnesty start date nears.

And if I missed your state, drop me a note in the comments section and I'll share that tax amnesty info in a future post.

Related posts:

• Tax amnesties underway in Florida, Nevada and New Mexico
• George Orwell, Pennsylvania tax collector
  
• Giving thanks for tax amnesties
• And tax amnesty for all
• Tax amnesty alert: Massachusetts, Nevada and Pennsylvania
• Pennsylvania tax tidbit: amnesty
• Offshore amnesties are international
• State Tax Departments

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