What is Amnesty? Tax Amnesty MeaningAmnesty is defined as an official pardon, such as one from the government or a governmental organization such as the IRS. Tax amnesty is a chance for taxpayers who owe back taxes to the IRS to pay back their taxes without the corresponding penalties, such as accrued tax penalties or interest. While most IRS tax relief programs are prescribed with extremely detailed rules, tax amnesty is extremely loosely defined. It has no set terms and can be offered to taxpayers and corporations alike. It may be offered to all residents in a certain state, or to a highly specific group of people In addition to waiving penalties or interest, a tax amnesty program may also be offered to taxpayers who know that they have unpaid tax debt that the IRS has not yet discovered. These types of programs encourage indebted taxpayers to come forward and pay off their outstanding balance. In turn, they promise not to impose punishments on those unpaid taxes, and may even allow criminal offenses to go without prosecution. If a taxpayer is eligible for a tax amnesty and refuses to take advantage of it, they may end up in extremely hot water. The IRS does not just look down on taxpayers who don’t take advantage of tax amnesty; the IRS may punish them, too. Taxpayers who choose not to participate in an amnesty program that they’re eligible for pay end up with greater penalties in addition to those already in place. Generally speaking, as soon as the IRS begins to investigate a suspicion that a taxpayer knowingly chose not to participate in an amnesty program, the amnesty program’s offer is withdrawn.
There is No Universal Federal Tax Amnesty ProgramYou read it right. There isn’t one universal amnesty program. You can’t email or phone the IRS and ask for the program because more often than not, they won’t know what you’re talking about. This is because it is not handled through the IRS, but state-to-state. As such, specifics of these programs will vary by your state. If you’re looking to apply for a tax amnesty program, you’ll want to be sure to do the proper research to make sure that the information you’ve acquired on amnesty programs is what your state offers. It’s important not to bank on a certain program, because it could be far different from the one offered to you – that is, if it’s offered at all. What the will ultimately be reviewed in your case is the extent of your noncompliance and the risk involved with your portfolio. To note here, it’s important to receive proper legal advice in regards to choosing a program because there are a plethora of advantages and disadvantages to each specific program.
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Similar Qualities Between Amnesty ProgramsAlthough there are multitudes of different tax amnesty programs out there, there are also many similarities that we will explain here:
- Many programs require legislative action before the program is offered. This legislation, on top of allowing for someone to be eligible, details all the elements at play within the specific program itself (parameters, duration, timing, penalties and interest waivers, the amount of taxes required, payment provisions, and which taxpayers qualify).
- Most states only offer the program for a certain amount of time. This period of time can be anywhere from one to six months, but two months is the most common amount of time delegated.
- The programs are generally limited to nonfiling taxpayers. This means that yes, if you’re currently under audit or have an investigation set against you, you’re not going to be qualified for any sort of amnesty program. This goes without saying, but criminal investigations being sought out for any tax matter will revoke the taxpayer of their eligibility.
- Most often, these programs cover all taxes liable, but in some cases amnesty programs will cover a specific type of tax (for example targeting specifically income tax, or foreign income tax). However, as a keynote here, a taxpayer should expect most programs to cover all types of tax.
- The type of payments differ, but as a rule of thumb most amnesty tax programs require the taxpayer to pay all tax debt once an agreement has been made. In some rare cases, the settlement will involve a payment plan.
- In some cases the program will provide a limited waiver of interest. At the same time, most programs will provide a waiver of penalties that would have otherwise been outstanding. This is one of the huge benefits of entering a tax amnesty program.
- This aspect is important, as it can hurt taxpayers without their knowledge: a large number of programs will tack on heavy post-amnesty penalties to someone who is eligible to enter the program does not do so. This is tough, because sometimes the taxpayer is unaware they are eligible
- Amnesty programs may not be here to stay. As time goes on, it is possible we see a closing of such programs.