State & Local Tax Alerts & Articles
The State & Local Tax section is a compilation of alerts and articles written by members of the ICPAS State & Local Tax Committee as well as links to websites and other resources of interest to the state & local tax community. Follow the links below for more information on these topics.
Certain States Extend the R&D Credit
August 24, 2010
Laura Norlin
Corbett, Duncan & Hubly PC
lnorlin@cdhcpa.com
Key Highlight: Illinois Credit extended to December 31, 2010
Illinois has extended the Research and Development Tax Credit to December 31, 2010 . Taxpayers with qualified research and experimentation expenditures for taxable years ending after December 31, 2004 and prior to January 1, 2011 are eligible for a credit on their Illinois Income Tax Return equal to 6.5% of qualified expenditures. Qualified expenditures, as defined by Internal Revenue Code 41(b)(1), are simply "in-house" and "contract" research expenses incurred in the taxable year during the ordinary course of business. Any credits being carried forward from prior years have to be utilized by January 1, 2011; otherwise they will be lost. The credits are not allowed to be carried forward beyond December 31, 2010.
Other states with similar extensions include Maryland and New York. The Maryland Research and Development Credit has been extended from June 30, 2012 to June 30, 2021. Effective July 1, 2010, New York passed the "Excelsior Jobs Program" which includes a 10% Research and Development Credit based on the federal computation.
Disclaimer: This article is designed to provide information in regard to the subject matter and has been prepared with the understanding that neither the Illinois CPA Society nor the author of this article is providing accounting, tax or legal advice or is performing any legal, accounting or other professional service. If accounting, tax or legal advice or other expert assistance is required, the services of a competent professional person should be sought.
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Selling to Customers in Colorado or Oklahoma Could Create Additional Tax Filings
August 18, 2010
Derek Weber and Deb Rood
Blackman Kallick
dweber@blackmankallick.com and drood@blackmankallick.com
Key Highlight: Additional Reporting May Be Required
Sales and use taxes are a significant burden for businesses. The easiest way for states to collect sales tax is to have the seller collect it on the state's behalf. However, according to the U.S. Constitution and case law, states cannot collect sales taxes if your business has no physical presence in the state. States do not like this. Consequently, Colorado and Oklahoma are finding innovative ways of getting around their inability to collect sales taxes from out-of-state businesses. Most businesses maintain a customer list and frequently look at: to whom and to where they made sales. This is exactly the kind of information that states like Colorado and Oklahoma are looking to obtain. As with any tax compliance strategy, knowing your reporting requirements can prevent unnecessary penalties and headaches down the road.
If you are selling tangible personal property in Colorado and Oklahoma, there is new legislation and reporting requirements. While the reporting requirements may not have a cash flow impact on your business, you may need to remit additional filings.
As an out-of-state retailer you might not have been reporting sales tax to Colorado in the past. As of March 1, 2010 if you have at least $100,000 in Colorado sales and sales to one customer of at least $500, you will be required to report to your customers and the Colorado Department of Revenue at both the time of the transaction and at year end. The information you must report includes items such as: purchaser’s name, shipping address, billing address, and total dollar amount of purchases. Colorado is mandating that the reports, to be sent to the state, be submitted electronically. Though you may not owe sales or use taxes, your customers might. This new legislation is Colorado’s way of requiring you to help them find out who might owe use tax. Failure to comply with the reporting requirements could result in significant penalties. Failure to report to your customer at the time of the transaction is $5 per customer. Failure to send an annual report is $10 per customer and an additional $10 if you fail to report to the Colorado Department of Revenue. If you want to avoid these filings, your only other option is to collect and remit the sales taxes even if you are not required to do so. The Direct Marketing Association has filed a lawsuit against the Colorado Department of Revenue challenging the constitutionality of this new law. The lawsuit has not yet been settled.
Oklahoma lawmakers have passed legislation that also aims at forcing out-of-state retailers, internet sellers, and catalogs to notify their customers that use tax may be due on their purchases. If you have over $100,000 in total sales, you will have to notify your customers by way of a statement on a bill or invoice. This statement will inform the consumer that the purchase is subject to use tax and must be reported to the Oklahoma Tax Commission. Additionally, a retailer may not advertise on the internet that purchases made for use in Oklahoma are exempt from tax. Like Colorado, these new requirements should not create additional sales or use tax liabilities for the retailer, but the reporting requirements should be followed to avoid penalties, which have not yet been defined by Oklahoma.
As evidenced with Colorado and Oklahoma, states are constantly changing the ways they monitor activity in their state and the taxes associated with these activities. It is important to understand what your reporting requirements are in order to avoid penalties, audits, and ultimately stay in good standing with the state. At a minimum, we recommend that you add language to your website to alert customers of the potential taxability of a purchase. The next step is to contact your Blackman Kallick tax advisor to discuss your state and local reporting requirements. Blackman Kallick’s state and local tax group has the resources and expertise to help your business stay compliant. For further information regarding these, or any other state tax issues, please contact Deb Rood at (312) 980-2995 or Derek Weber at (312) 980-3268.
Disclaimer: This article is designed to provide information in regard to the subject matter and has been prepared with the understanding that neither the Illinois CPA Society nor the author of this article is providing accounting, tax or legal advice or is performing any legal, accounting or other professional service. If accounting, tax or legal advice or other expert assistance is required, the services of a competent professional person should be sought.
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Illinois Individual Use Tax Amnesty and New Reporting Option
August 10, 2010
Brad Greenberg
Silver, Lerner, Schwartz & Fertel
bgreenberg@slsf.com
Key Highlight: Illinois Enacts Individual Use Tax Amnesty for 2004-2010 and Provides a New Reporting Option starting in 2011
On August 6, 2010, Illinois enacted legislation establishing a use tax amnesty program for the period January 1, 2011 through October 15, 2011 for individual taxpayers. The legislation also provides a new reporting option for individuals with an annual use tax liability of $600 or less.
Under the amnesty program, individuals will not be held liable for interest or penalties or subject to civil or criminal prosecution upon the payment of use tax due for any taxable period ending after June 30, 2004, and before January 1, 2011. Amnesty will not be granted to businesses or any taxpayers who are a party to any criminal investigation or to any civil or criminal litigation that is pending in court. Amnesty will not be granted to taxpayers who are under audit for use tax or who have been contacted in writing by the Department concerning use tax prior to the amnesty filing.
Beginning with years ending on or after December 31, 2010, in lieu of filing monthly use tax returns, individuals may elect to report their use tax liability on their standard individual income tax return if their annual individual use tax liability does not exceed $600.
Disclaimer: This article is designed to provide information in regard to the subject matter and has been prepared with the understanding that neither the Illinois CPA Society nor the author of this article is providing accounting, tax or legal advice or is performing any legal, accounting or other professional service. If accounting, tax or legal advice or other expert assistance is required, the services of a competent professional person should be sought.
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Florida Adopts Tax Amnesty Program
July 7, 2010
Brad Greenberg
Silver, Lerner, Schwartz & Fertel
bgreenberg@slsf.com
Florida has enacted a tax amnesty program which runs from July 1 through September 30, 2010, under which participants would be granted a penalty waiver and a reduction of interest charges.
Tax amnesty applies to all tax liabilities due to the state prior to July 1, 2010. However, any taxpayer that has entered into a settlement of liability for state and local option taxes before July 1, 2010, would not be eligible to participate in the amnesty program. During the amnesty period, the Department of Revenue will not seek criminal prosecution against any taxpayer participating in the amnesty program.
If initial contact with the Department is made by the taxpayer pursuant to the amnesty program, the taxpayer is entitled to a waiver of 50% of the interest due on the amount paid during the amnesty period. If the taxpayer has already been contacted by the state with respect to outstanding taxes owed, the waiver is reduced to 25% of the interest due on amounts paid during the amnesty period.
Disclaimer: This article is designed to provide information in regard to the subject matter and has been prepared with the understanding that neither the Illinois CPA Society nor the author of this article is providing accounting, tax or legal advice or is performing any legal, accounting or other professional service. If accounting, tax or legal advice or other expert assistance is required, the services of a competent professional person should be sought.
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New Mexico Adopts Tax Amnesty Program
July 7, 2010
Brad Greenberg
Silver, Lerner, Schwartz & Fertel
bgreenberg@slsf.com
New Mexico has enacted a tax amnesty program which runs from June 7 through September 30, 2010. Under the program, the New Mexico Taxation and Revenue Department will waive penalties for participants as well as 100% of the interest due provided the tax liability is paid within 180 days of assessment.
Most taxes and fees administered by the Department are eligible for amnesty, including corporate income, personal income, sales/use, and withholding taxes. The amnesty program applies to tax periods for which an original tax return was due before January 1, 2010. Taxpayers qualify for amnesty if they have not filed a tax return or if they need to report additional tax. However, taxpayers cannot participate in the program if they have received an audit engagement letter from the Department for the tax type or period in question. Taxpayers do not qualify if they are under current investigation for a tax-related criminal act. Further, taxpayers may not participate in the amnesty program if they are currently in bankruptcy proceedings unless they receive a court order permitting full payment of taxes due.
Amnesty allows taxpayers to conduct an audit on themselves under the terms of a signed
audit agreement between the Department and the taxpayer. The taxpayer must submit a
signed amnesty application and agreement by September 30, 2010. After the application and agreement are submitted, the Department will review the documents and notify the taxpayer whether they are approved or denied. The Secretary of Revenue and Taxation will assign a Department reviewer to assist with the amnesty process.
Disclaimer: This article is designed to provide information in regard to the subject matter and has been prepared with the understanding that neither the Illinois CPA Society nor the author of this article is providing accounting, tax or legal advice or is performing any legal, accounting or other professional service. If accounting, tax or legal advice or other expert assistance is required, the services of a competent professional person should be sought.
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Michigan Addresses the Taxability of Disregarded Entities
June 2, 2010
David Hughes
Horwood Marcus & Berk Chartered
dhughes@hmblaw.com
Key Highlight: Michigan Legislature Clarifies that Disregarded Entities Are Not Required to File their Own Returns
The state of Michigan recently had to deal with what appeared to be a relatively straightforward question: did an entity that was disregarded for federal income tax purposes have to file its own Michigan Single Business Tax return? The answer – after a court decision, a Department of Treasury response, and a legislative fix – was not as straightforward.
The Court Decision
In Kmart Michigan Property Services LLC v. Department of Treasury (2009), the Michigan Court of Appeals concluded that a single member limited liability company was required to file its own Single Business Tax (SBT) return even though it was a disregarded entity for federal income tax purposes. The Department of Treasury had previously announced in Revenue Administrative Bulletin (RAB) 1999-9 that a single member limited liability company was not required to file a separate SBT return as long as it was treated as a disregarded entity for federal purposes.
Department Response
In response to the Kmart decision, the Department issued a Notice on February 5, 2010 in which it announced that it would apply the Kmart decision retroactively to all open tax years. According to the Department, disregarded entities that previously filed as a branch, division or sole proprietor of their owner for SBT purposes had to file a separate SBT return for all open tax periods. Significantly, the Department stated that the previously disregarded entities were considered non-filers for statute of limitations purposes and must therefore file returns for all years for which their Michigan apportioned or allocated gross receipts exceeded $350,000.
Legislative Fix
The Michigan legislature was not happy with the Department’s response to the Kmart decision and therefore adopted “curative” legislation to negate the effect of the Department’s Notice. Under this legislation (Mich. Comp. Laws Ann. §205.27(a)(8)) (effective March 31, 2010), a taxpayer that filed a SBT return that included an entity disregarded for federal income tax purposes was subject to the following rules: 1) the Department cannot assess the taxpayer an additional tax or reduce an overpayment because the taxpayer included an entity disregarded for federal income tax purposes on its SBT return; and 2) the Department cannot require an entity disregarded for federal income tax purposes to file a separate return. Further, if a taxpayer filed an SBT return that included a disregarded entity, then the taxpayer cannot claim a refund based on the disregarded entity filing a separate return as a separate taxpayer. The purpose of the legislation was, very simply, to correct any misinterpretation concerning the treatment of disregarded entities that may have been caused by the Kmart decision.
Disclaimer: This article is designed to provide information in regard to the subject matter and has been prepared with the understanding that neither the Illinois CPA Society nor the author of this article is providing accounting, tax or legal advice or is performing any legal, accounting or other professional service. If accounting, tax or legal advice or other expert assistance is required, the services of a competent professional person should be sought.
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Nevada Adopts Tax Amnesty Program
May 5, 2010
Brad Greenberg
Silver, Lerner, Schwartz & Fertel
bgreenberg@slsf.com
Nevada has enacted a tax amnesty program for taxpayers subject to a tax, fee, or assessment required to be paid to the Department of Taxation. Since Nevada has no individual or corporate income tax, this amnesty program will likely be most beneficial to companies with sales/use tax liabilities or individuals who have purchased large assets and owe sales tax on those purchases. The program begins on July 1, 2010 and runs through September 30, 2010. Qualifying taxpayers will be relieved of all the penalties and interest with regard to the unpaid tax, fee, or assessment in full to the Department. The program applies only to taxes, fees, and assessments that are due and payable before July 1, 2010, and does not apply to any person who has entered into certain compromises or settlement agreements with the Department or the Nevada Tax Commission.
Disclaimer: This article is designed to provide information in regard to the subject matter and has been prepared with the understanding that neither the Illinois CPA Society nor the author of this article is providing accounting, tax or legal advice or is performing any legal, accounting or other professional service. If accounting, tax or legal advice or other expert assistance is required, the services of a competent professional person should be sought.
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New Illinois Employment Tax Credit
May 3, 2010
Deb Rood
Blackman Kallick, LLP
drood@blackmankallick.com
On April 13, 2010, Illinois Governor Pat Quinn signed Senate Bill 1578 into law, creating the Small Business Job Creation Tax Credit Act. The $2,500 withholding tax credit is available for each new, full-time Illinois job created during the incentive period that results in a net increase in full-time Illinois employees. Employers with fifty or fewer total employees who hire new, full-time Illinois employees from July 1, 2010 through June 30, 2011 are eligible to obtain the credit. If credits exceed the current period’s withholding tax, the credit can be carried forward and applied against the taxpayer’s liability for the five succeeding calendar years.
The maximum credits awarded under this Act will be $50 million, which could equate to 20,000 jobs. With 95% of Illinois businesses having fewer than fifty employees, the window of opportunity to obtain the credit may be limited. Therefore, it is important to act quickly.
To qualify for the credit, the new full-time job must pay at least $25,000 annually and be sustained for at least one year. Employees hired for this new job must average at least thirty-five hours per week. Further, eligibility for the credit does not require that a particular individual employee be retained for one year, only that a new, full-time Illinois job be created and sustained for one year.
The applicant cannot have more than fifty full-time employees as of June 30, 2010. This fifty-employee threshold includes all employees in Illinois and other states. Related businesses will be treated as one business unit for determining the fifty-employee threshold.
Applications for the credit must be submitted online to the Illinois Department of Commerce and Economic Affairs. Once approved, the taxpayer will be issued a tax credit certificate that can be used for the first calendar year ending on or after the date on the certificate. Applicants may apply for the credit as soon as a new, full-time Illinois employee is hired and begins providing services within the incentive period, July 1, 2010 through June 30, 2011.
Disclaimer: This article is designed to provide information in regard to the subject matter and has been prepared with the understanding that neither the Illinois CPA Society nor the author of this article is providing accounting, tax or legal advice or is performing any legal, accounting or other professional service. If accounting, tax or legal advice or other expert assistance is required, the services of a competent professional person should be sought.
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Limitations to Illinois Credit for Taxes Paid to Other States
March 16, 2010
Debbie Rood
Blackman Kallick, LLC
drood@blackmankallick.com
The goal of state income tax systems is to make sure all income is subject to tax once. For individual taxpayers, this is accomplished through a system of credits. An individual pays tax on all of their income in their resident state and receives a credit for tax paid to other states.
For example, if an Illinois resident receives income from a California source, the Illinois resident will file a California return and pay California personal income tax on that income. In addition, that resident will pay Illinois income tax on that income but, to prevent double taxation, should receive a credit for income taxes paid to the other state on income received while a resident of Illinois and therefore also subject to Illinois income tax. This credit is claimed on Illinois Schedule CR and is generally limited to 3% of the income taxed by the other state, even though the tax rate California applied may be much greater.
Since 2002, it has been Illinois’ policy to prevent this credit in situations where an Illinois employee works for an Illinois based business, but may also work in other states and therefore will have income and withholding allocated to these other states. Moreover, during 2009, the State of Illinois statutorily changed the method by which the credit is calculated.
How has Illinois accomplished this? By saying that the Illinois income sourced to other states is only sourced pursuant to Illinois’ allocation and apportionment rules. Because, under Illinois statute, generally all wage income from an Illinois employer is Illinois income, none of the employees’ W-2 wages would be allocated or apportioned to other states under the Illinois sourcing rules applicable to W-2 compensation. As a result, none of the W-2 compensation would be subject to tax in other states under Illinois sourcing rules and therefore a credit is not earned.
For example, Karen, an Illinois resident, works for an international consulting firm based in Illinois. Karen’s W-2 reflects that she earned wages in Illinois (resident state and base of operations), New York and California. Since most other states, including New York and California, require that W-2 compensation is sourced to the state where the services are actually performed, regardless of base of operations, it is not unusual for an Illinois employee to receive a W-2 that reflects withholding in multiple states. Traditionally, Karen would calculate her Illinois tax based on all of her wages but receive a credit for the tax she paid to California and New York. However, under the new statute, Karen would not earn that credit and would be subject to double taxation.
Why does Illinois think it has the power to do this? Because, in 2002, it was successful in arguing this against Sammy Sosa . While Sosa may have struck out, attorneys are already discussing anticipated litigation and we fully expect this to be challenged in the courts. Because of the uncertainty involved, you should discuss filing options with your clients when preparing 2009 Illinois tax returns.
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1 Samuel Sosa and Sonya Sosa v. Bower, Circuit Court, Cook County Judicial Circuit (June 26, 2002)
Disclaimer: This article is designed to provide information in regard to the subject matter and has been prepared with the understanding that neither the Illinois CPA Society nor the author of this article is providing accounting, tax or legal advice or is performing any legal, accounting or other professional service. If accounting, tax or legal advice or other expert assistance is required, the services of a competent professional person should be sought.
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City of Philadelphia Adopts Tax Amnesty Program
January 28, 2010
Brad Greenberg
Silver, Lerner, Schwartz & Fertel
bgreenberg@slsf.com
The City of Philadelphia has authorized a tax amnesty program which will occur over a 45-day period in May and June 2010, overlapping with the Commonwealth of Pennsylvania's amnesty program. Most city taxes will be included in the amnesty, with the exception of The General Acute Care Assessment Tax (paid by certain medical facilities) and the Sales Tax. Under the amnesty program, 100% of the penalties and 50% of the interest due on outstanding debts will be waived.
Amnesty is available for eligible tax liabilities associated with tax periods commencing February 1, 1986 and ending June 30, 2009. Taxpayers who are either under criminal investigation or have been named in a criminal complaint related to the delinquency are ineligible to participate in the program.
Disclaimer: This article is designed to provide information in regard to the subject matter and has been prepared with the understanding that neither the Illinois CPA Society nor the author of this article is providing accounting, tax or legal advice or is performing any legal, accounting or other professional service. If accounting, tax or legal advice or other expert assistance is required, the services of a competent professional person should be sought.
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New York Adopts Tax Amnesty Program
January 20, 2010
Brad Greenberg
Silver, Lerner, Schwartz & Fertel
bgreenberg@slsf.com
The State of New York has enacted a tax amnesty program which will run begin January 15, 2010 and requires taxpayers to make all payments by the program's expiration date, March 15, 2010. Under the program, described as the PAID Program (Penalty and Interest Discount), taxpayers are liable for 80% of accrued penalty and interest on unpaid bills that were issued on or before December 31, 2003, or 50% of accrued penalty and interest on unpaid bills that were issued after December 31, 2003, and on or before December 31, 2006.
Any taxpayer who has a tax liability with regard to one or more eligible tax, fee, or surcharge liability is eligible to participate in the program. Eligible liabilities include taxes, fees, or surcharges imposed by, or authorized under the tax law, and administered by the Commissioner or Taxation and Finance.
In January 2010, the department will mail letters to taxpayers who qualify for the PAID discounts. As of January 15, 2010, taxpayers will be able to use the department's Web site (http://www.tax.state.ny.us) to participate in the program.
The PAID Program is focused on older tax liabilities and does not provide amnesty for tax liabilities related to the last three years.
Disclaimer: This article is designed to provide information in regard to the subject matter and has been prepared with the understanding that neither the Illinois CPA Society nor the author of this article is providing accounting, tax or legal advice or is performing any legal, accounting or other professional service. If accounting, tax or legal advice or other expert assistance is required, the services of a competent professional person should be sought.
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New York Eliminates Requirement for non-New York CPA Tax Preparer Registration
December 20, 2009
John Bird
McGladrey & Pullen LLP
john.bird@rsmi.com
New York's Governor David Paterson recently signed into law a bill that eliminates the requirement for non-New York CPA tax preparers who file New York returns to register with the state.
The original requirement, which was part of Governor Paterson's budget, was to take effect on Dec. 31, 2009, and required all tax preparers who provide tax services in New York to pay a $100 registration fee to the state. The law provided an exemption for New York CPAs, but out-of-state CPAs would have been required to register.
Disclaimer: This article is designed to provide information in regard to the subject matter and has been prepared with the understanding that neither the Illinois CPA Society nor the author of this article is providing accounting, tax or legal advice or is performing any legal, accounting or other professional service. If accounting, tax or legal advice or other expert assistance is required, the services of a competent professional person should be sought.
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Illinois Law Reinstates Personal Service/Reasonable Compensation Subtraction for Partnerships
December 20, 2009
John Bird
McGladrey & Pullen LLP
john.bird@rsmi.com
On December 16, 2009, Governor Pat Quinn signed HB 2239 into law (Public Act 96-0835). A provision in the Budget Implementation Act passed earlier this year (Public Act 96-0045) eliminated the deduction allowed for “reasonable compensation” paid to partners and instead limited this deduction to “guaranteed payments.” As a result, for the 2009 tax year, most partnerships providing services (e.g., law firms, accounting firms and other service firms) would have been required to pay the 1.5% Illinois Replacement tax on all profits earned by the partnership with the exception of guaranteed payments paid to partners. Since most service partnerships do not pay guaranteed payments to their equity partners, this new law would have resulted in a significant increase in tax for these partnerships.
HB 2239 reinstates the deduction for “reasonable compensation” paid to partners and therefore eliminates the additional 1.5 percent tax on partnership profits earned by partnerships providing services.
HB 2239 passed the General Assembly unanimously and is effective immediately.
Disclaimer: This article is designed to provide information in regard to the subject matter and has been prepared with the understanding that neither the Illinois CPA Society nor the author of this article is providing accounting, tax or legal advice or is performing any legal, accounting or other professional service. If accounting, tax or legal advice or other expert assistance is required, the services of a competent professional person should be sought.
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Gasoline Retailers' Voluntary Compliance Program
October 23, 2009
Brad Greenberg
Silver, Lerner, Schwartz & Fertel
bgreenberg@slsf.com
Key Highlight: The Illinois Department of Revenue announced a voluntary compliance program for gasoline retailers which will take effect through November 16, 2009.
Department of Revenue criminal investigators and auditors have identified multiple instances of gasoline retailers significantly underreporting and underpaying taxes in connection with the sale of gasoline, gasohol, majority blended ethanol (including biodiesel and biodiesel blends), alcoholic beverages, cigarettes, and soft drinks. Related taxes include sales and use taxes, County Motor Fuel Tax (DuPage, Kane, and McHenry counties), Metropolitan Pier and Exposition Authority Food and Beverage Tax, Chicago Soft Drink Tax, and income taxes.
As a result, the Department of Revenue and the Illinois Attorney General are taking a two-step approach to correcting this problem:
1. The Department is offering a voluntary compliance period (through November 16, 2009) during which gasoline retailers can come forward and pay the taxes which have been avoided. This includes related taxes, if applicable.
2. At the close of the Gasoline Retailers' Voluntary Compliance period, Department investigators and auditors and Illinois Attorney General prosecutors will target non-compliant gasoline retailers for both criminal prosecution and civil penalties.
A gasoline retailer's full disclosure under the program will be taken into account by the Department in determining whether to assess the 50 percent civil fraud penalty and by the Illinois Attorney General in deciding to file criminal charges.
To participate in the program, Taxpayers must:
• Submit a completed application for the program, file amended returns, and pay tax by November 16, 2009, for the periods of July 2006 through August 2009;
• Pay applicable penalties and interest when billed;
• Fully comply with all taxes administered by the Department (by filing amended returns and making payments) for sales-related and income taxes; and
• Cooperate with Department investigators and auditors during follow-up work.
The application and amended returns for the Gasoline Retailers' Voluntary Compliance Program are available at tax.illinois.gov.
Disclaimer: This article is designed to provide information in regard to the subject matter and has been prepared with the understanding that neither the Illinois CPA Society nor the author of this article is providing accounting, tax or legal advice or is performing any legal, accounting or other professional service. If accounting, tax or legal advice or other expert assistance is required, the services of a competent professional person should be sought.
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Virginia Adopts Tax Amnesty Program
October 12, 2009
Brad Greenberg
Silver, Lerner, Schwartz & Fertel
bgreenberg@slsf.com
Virginia has enacted a tax amnesty program titled "Get Square VA" which runs for 60 days from October 7 through December 5, 2009. During the amnesty period, qualifying taxpayers will be allowed to file a return or pay most taxes administered or collected by the Department of Taxation without civil or criminal penalties and with a reduction of 50 percent of the interest that would otherwise be imposed.
In order to qualify, tax bills must be related to an amnesty eligible tax type and period and have an assessment date on or before July 9, 2009. Returns must be applicable to an eligible tax type and period. For example, income taxes are eligible for amnesty for periods through the 2007 tax year; sales and use taxes are eligible for amnesty for periods through May 2009.
Taxpayers are cautioned that any tax liability remaining unpaid at the end of the amnesty period that was eligible for benefits will be subject to a 20 percent post-amnesty penalty. The penalty is in addition to all other penalties and applies to unpaid taxes only.
Full details of the program are available at www.GetSquareVA.com.
Disclaimer: This article is designed to provide information in regard to the subject matter and has been prepared with the understanding that neither the Illinois CPA Society nor the author of this article is providing accounting, tax or legal advice or is performing any legal, accounting or other professional service. If accounting, tax or legal advice or other expert assistance is required, the services of a competent professional person should be sought.
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Recently Enacted New York MTA Payroll Tax
September 7, 2009
John Bird
McGladrey & Pullen LLP
john.bird@rsmi.com
The MTA payroll tax is imposed on employers and individuals with earnings from self-employment. It is an entity level tax and cannot be withheld from employees. Below is an overview of the tax from the NY DOR website.
The tax applies to:
Employers required to withhold New York State income tax from employee wages and whose payroll expense exceeds $2,500 in any calendar quarter. Individuals with net earnings from self-employment allocated to the MCTD that exceed $10,000 for the tax year. (This includes partners in partnerships and members of an LLC treated as a partnership.)
Tax rate
- Employers: .34% of an employer’s payroll expense for employees employed within the MCTD
- Individuals: .34% of net earnings from self-employment allocated to the MCTD during the tax year
Effective dates
- Employers other than public school districts: March 1, 2009
- Individuals: Tax years beginning on or after January 1, 2009 (calculated on 10/12 of your net-earnings from self-employment allocated to the MCTD for the 2009 tax year)
Initial payment for 2009
Employers (other than employers required to file through the Promptax program)
- Due date: November 2, 2009
- Initial payment period: March 1, 2009 - September 30, 2009. Public schools have a different initial payment period: September 1, 2009 - September 30, 2009.
Employers who are required withholding tax Promptax filers (other than public school districts)
- Due date: Same date their 1st withholding tax Promptax payment is due on or after October 31, 2009.
- Initial payment period: March 1, 2009 through and including the payroll date for which the Promptax payment was made.
Individuals
- Due date: November 2, 2009
- Initial payment calculation:
- Compute your 2009 estimated net earnings allocated to the MCTD
- Divide A by 12
- Multiply B by 7
- Multiply C by.34% (.0034)
You can obtain more information about the MTA Payroll Tax via the following webpage:http://www.tax.state.ny.us/sbc/mta.htm
Disclaimer: This article is designed to provide information in regard to the subject matter and has been prepared with the understanding that neither the Illinois CPA Society nor the author of this article is providing accounting, tax or legal advice or is performing any legal, accounting or other professional service. If accounting, tax or legal advice or other expert assistance is required, the services of a competent professional person should be sought.
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Maryland Combined Reporting Information Reports Due
September 7, 2009
John Bird
McGladrey & Pullen LLP
john.bird@rsmi.com
This is a reminder that the Maryland Combined Reporting Information reports are due October 15, 2009 for the 2008 calendar year.
The information reports are required for tax years beginning after December 31, 2005 and before January 1, 2011. The information reports for tax year 2006 (a tax year beginning after December 31, 2005 and before January 1, 2007) must be submitted on or before October 15, 2008. The information reports for tax years 2007 through 2010 must be submitted on or before seven months after the original due date of the corporation’s Maryland tax return for the corresponding tax year.
Penalties
If a corporation fails to file the required reports, the Comptroller may assess penalties up to $5,000 per day for each of the first 30 days following the due date during which a report has not been filed; and up to $10,000 per day for each day thereafter. The Comptroller may abate or decrease the penalties.
You can also gain additional information via the following link:
Disclaimer: This article is designed to provide information in regard to the subject matter and has been prepared with the understanding that neither the Illinois CPA Society nor the author of this article is providing accounting, tax or legal advice or is performing any legal, accounting or other professional service. If accounting, tax or legal advice or other expert assistance is required, the services of a competent professional person should be sought.
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Maine Adopts Tax Amnesty Program
July 17, 2009
Brad Greenberg
Silver, Lerner, Schwartz & Fertel
bgreenberg@slsf.com
Maine has enacted a tax amnesty program called the "Tax Receivables Reduction Initiative" (TRRI). The program grants qualified delinquent taxpayers a waiver of 90% of the penalties otherwise due on taxes assessed as of September 1, 2009. The program requires participating taxpayers to sign a TRRI program application and pay the outstanding tax liability, interest, and 10% of the penalties assessed. The program will run from September 1, 2009, until November 30, 2009, and no extension will be granted for payment after November 30. Qualifying taxpayers will be sent program applications in early September and early November.
TRRI is open to delinquent taxpayers without regard to whether the delinquency is subject to a pending administrative or judicial proceeding. Participants would have to withdraw from such proceedings and not claim a refund for amounts paid under the program. Taxpayers currently charged with a violation of the state's tax laws, or taxpayers seeking relief for a liability that is the result of a criminal conviction, are not qualified to participate in the program. Similarly, taxpayers are not eligible for the program if applying for relief concerning a liability for which the state has secured a warrant or civil judgment in its favor in a Maine superior court.
Disclaimer: This article is designed to provide information in regard to the subject matter and has been prepared with the understanding that neither the Illinois CPA Society nor the author of this article is providing accounting, tax or legal advice or is performing any legal, accounting or other professional service. If accounting, tax or legal advice or other expert assistance is required, the services of a competent professional person should be sought.
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Illinois Ends Deduction for Reasonable Compensation Paid to Partners
August 4, 2009
Deb Rood
Blackman Kallick, LLP
drood@blackmankallick.com
Key Highlight: For 2009 tax year, Illinois has eliminated the deduction for reasonable compensation paid to partners
On July 15, 2009, Illinois Governor Pat Quinn signed SB 1912 into law, which ends the deduction for the greater of personal service income or a reasonable allowance for the compensation of partners on Illinois partnership returns for tax years ending on or after December 31, 2009. To soften the blow of this change, the bill also contains a provision that ends the requirement for partnerships to add back their federally deductible guaranteed payments for services (guaranteed payments for use of capital are still required to be added back).
Historically, Illinois has disallowed the federal deduction of guaranteed payments paid to partners in the calculation of Illinois replacement tax. In an effort to level the playing field for service providers who typically have large guaranteed payments, the state introduced a deduction for the greater of personal service income or a reasonable allowance for compensation of partners.
The definition of personal service income is spelled out in a now defunct section of the Internal Revenue Code (IRC Section 1348(b)(1)). However, the definition of a reasonable allowance for compensation of partners is far more ambiguous. It is defined by Illinois as "a reasonable allowance for compensation paid or accrued for services rendered by partners to the partnership" (IITA Section 203(d)(2)(H)). Illinois has not set forth specific methods for calculating the amount and there is no corresponding federal deduction.
Entities with partners who provide significant services to the partnership and are not provided with guaranteed payments will be hardest hit. The elimination of the add-back of federally deductible guaranteed payments in the calculation of Illinois income will likely have little effect when combined with the elimination of the deduction for the greater of personal service income or a reasonable allowance for compensation of partners.
Partnerships who have previously paid little to no tax in Illinois may see significantly higher tax liabilities beginning in 2009 as a result of these changes.
Disclaimer: This article is designed to provide information in regard to the subject matter and has been prepared with the understanding that neither the Illinois CPA Society nor the author of this article is providing accounting, tax or legal advice or is performing any legal, accounting or other professional service. If accounting, tax or legal advice or other expert assistance is required, the services of a competent professional person should be sought.
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New Illinois Sales Tax Law
July 21, 2009
Joe Bigane
Wolf & Company
Joe.Bigane@wolfco-fs.com
Key Highlight:
A new tax bill has been passed which reclassifies certain items that were previously taxed at the "low" rate so that they are now taxed at the normal or "high rate." The change takes place on September 1, 2009.
Body:
Soft drinks are redefined and the correct tax will be determined by their labels. The law was
changed to increase the tax on flavored coffees, teas, waters and other drinks. Candy is now
a high-rate food. Grooming and hygiene products were previously at the low rate if they
claimed medicinal or healing qualities. They are all now taxable at the high rate unless they are only available by prescription.
Effective September 1, 2009 the following definitions have been changed and those items that fall into the revised definitions will be taxed at the higher state and local tax rate (rather than the lower rate):
SOFT DRINKS
All non-alcoholic beverages that contain natural or artificial sweeteners.
Does not include beverages that contain milk or milk products, soy, rice or similar milk substitutes or more than 50% vegetable or fruit juice by volume.
FOOD
Food for human consumption that is to be consumed off the premises where it is sold no longer includes candy.
Candy means a preparation of sugar, honey or other natural or artificial sweeteners in combination with chocolate, fruits, nuts or other ingredients or flavorings in the form of bars, drops or pieces.
Candy does not include any preparation that contains flour or requires refrigeration.
NONPRESCRIPTION MEDICINES AND DRUGS
Nonprescription medicines and drugs do not include grooming and hygiene products. This includes but is not limited to soaps and cleaning solutions, shampoo, toothpaste, mouthwash, antiperspirants, and sun tan lotions and screens, unless the product is available by prescription only.
Disclaimer: This article is designed to provide information in regard to the subject matter and has been prepared with the understanding that neither the Illinois CPA Society nor the author of this article is providing accounting, tax or legal advice or is performing any legal, accounting or other professional service. If accounting, tax or legal advice or other expert assistance is required, the services of a competent professional person should be sought.
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States Enact 2009 Amnesty Programs
July 17, 2009
Brad Greenberg
Silver, Lerner, Schwartz & Fertel
bgreenberg@slsf.com
Following the trend of state and local governments seeking to collect unreported and delinquent taxes, Vermont, Louisiana, and Wisconsin recently enacted amnesty programs which will waive penalties for late filing and forego criminal prosecutions for delinquent tax filers who come forward and pay what they owe in state and local taxes.
Vermont
The Vermont Department of Taxes announced that the state's tax amnesty program will run from July 20 through August 31, 2009. Under the program, participating taxpayers will receive a waiver of penalties. Interest will not be waived. The amnesty program applies to tax liabilities for any type of tax, so long as (1) the return was due before January 26, 2009; and (2) the Tax Commissioner has the sole authority to waive the tax. As such, the amnesty program does not apply to fuel taxes administered under the International Fuel Tax Agreement or the local option portion of taxes.
Louisiana
The Louisiana Department of Revenue announced a tax amnesty program under which participants will receive a waiver of penalties and one-half of the interest due. The amnesty program will run from September 1 through October 31, 2009 and will apply to all taxes administered by the Department, except for motor fuel taxes and penalties for failure to submit information reports that are not based on an underpayment of tax. Specifically, amnesty will apply to taxes:
• That became due on or after July 1, 2001, and before January 1, 2009;
• Due prior to January 1, 2009, for which the Department has issued a billing notice or demand for payment on or after July 1, 2001, and before May 31, 2009;
• For which the taxpayer and the Department have entered into an agreement to interrupt or suspend the running of prescription until December 31, 2009; or
• That became due on or before July 1, 2001, if the taxpayer was ineligible for an earlier amnesty program due to having a matter in civil litigation.
Amnesty will not be granted to taxpayers that are parties to any criminal investigation or litigation in any federal or state court.
Wisconsin
The Wisconsin Department of Revenue announced that from July 1, 2009 to September 30, 2010, it will offer a sales tax amnesty program to businesses that are not registered to collect the sales tax. Participants must voluntarily register to collect and remit sales tax to Wisconsin and to any other state in compliance with the Streamlined Sales and Use Tax Agreement for at least 36 months after registration. Eligible taxpayers that register will not be liable for any Wisconsin sales tax on sales made prior to the registration.
Disclaimer: This article is designed to provide information in regard to the subject matter and has been prepared with the understanding that neither the Illinois CPA Society nor the author of this article is providing accounting, tax or legal advice or is performing any legal, accounting or other professional service. If accounting, tax or legal advice or other expert assistance is required, the services of a competent professional person should be sought.
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California Issues Guidance on LLC Refund Claims and Changes 2009 LLC Fee
June 8, 2009
John Bird
McGladrey & Pullen, LLP
John.Bird@RSMI.com
Key Highlight:
- For taxable years beginning on or after January 1, 2009, the LLC fee is required to be estimated and remitted on Form 3536 by the 15th day of the 6th month of the current taxable year (June 15, 2009 for calendar year 12/31/09). A 10% penalty will apply if the estimated fee is understated.
- California recently issued FTB Notice 2009-04 on the procedures for filing refund claims pursuant to the Ventas court decision that ruled the LLC fee is unconstitutional for entities doing business within and without the state since the LLC fee was based on the total income of Ventas as opposed to income derived from or attributable to California.
Body:
For taxable years beginning on or after January 1, 2009, the annual LLC fee must be estimated and paid by the 15th day of the 6th month of the current taxable year. For calendar-year LLCs, June 15, 2009 is the first due date for the new estimated fee for LLCs.
LLCs are subject to an annual fee based on their total California annual income. Total California annual income, for purposes of the LLC fee, means gross income plus the cost of goods sold that are paid or incurred in connection with the trade or business of the taxpayer derived from or attributable to California. If an LLC has a total California annual income of $250,000 or greater, the LLC must make an estimated LLC fee payment. A new penalty of 10% of the underpayment will apply if the estimated LLC fee is underpaid. A penalty will not be imposed if the estimated fee paid by the due date is equal to or greater than the total amount of the fee paid for the preceding taxable year.
LLC's will use new form FTB 3536, Estimated Fee for LLCs, to remit the estimated fee. LLCs will also use form FTB 3536 (or FTB 3588 for an e-filed return) to pay by the due date of the LLC’s return, any amount of the LLC fee due which was not paid as an estimated fee payment.
Continue to use form FTB 3522, LLC Tax Voucher, to pay the annual tax of $800 for taxable year 2009.
LLC Fee Refund Claims
The California Franchise Tax Board issued FTB Notice 2009-4 on May 22, 2009. This notice addresses several cases involving LLC fees, of most particular interest currently, would be computing refunds based on apportioned gross receipts. If you have filed and paid the California LLC fee in prior years based on total gross receipts, you should review FTB Notice 2009-4 to determine if you are eligible for a refund.
The notice can be downloaded from the following link.
http://www.ftb.ca.gov/law/notices/2009/2009_4.pdf
John Bird is a member of the ICPAS State & Local Tax Committee. John can be contacted at John.Bird@rsmi.com
Disclaimer: This article is designed to provide information in regard to the subject matter and has been prepared with the understanding that neither the Illinois CPA Society nor the author of this article is providing accounting, tax or legal advice or is performing any legal, accounting or other professional service. If accounting, tax or legal advice or other expert assistance is required, the services of a competent professional person should be sought.
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Additional States Enact 2009 Amnesty Programs
May 22, 2009
Brad Greenberg
Silver, Lerner, Schwartz & Fertel
bgreenberg@slsf.com
Following the trend of state and local governments seeking to collect unreported and delinquent taxes, Maryland, New Jersey, and the City of Los Angeles recently enacted amnesty programs which will waive penalties for late filing and forego criminal prosecutions for delinquent tax filers who come forward and pay what they owe in state and local taxes.
Maryland
Maryland enacted an amnesty program running from September 1 through October 30, 2009, during which participants may receive a waiver of penalties and 50% of the interest imposed. Amnesty applies to the state and local individual income tax, corporate income tax, withholding tax, sales and use tax, and admissions and amusement tax. The tax must have been due for a return due prior to December 31, 2008.
Eligible taxpayers will not be subject to any civil or criminal penalties. Additionally, any taxes owed under the program must be paid in full no later than December 31, 2010. Full interest will be charged during the collection period.
The amnesty does not apply to taxpayers and taxpayer groups with more than 500 US employees, participants in the state’s 2001 amnesty program, or taxpayers that were eligible to participate in the state’s 2004 amnesty with respect to intangible holding companies.
New Jersey
New Jersey enacted a tax amnesty program that will run from May 4 through June 15, 2009. Amnesty applies to state tax liabilities incurred for tax returns due on or after January 1, 2002 and prior to February 1, 2009. Eligible tax payers who participate in the amnesty program will pay only the amount of tax they owe and 50% of the interest due as of May 1, 2009, without any penalties or referral recovery fees. Taxpayers with outstanding liabilities for taxes eligible for amnesty that do not participate in the tax amnesty program will be subject to an additional penalty of 5% of the tax. This additional penalty will not be subject to waiver or abatement. The state has created a website dedicated to the amnesty program, including additional details and an FAQ: http://www.taxamnesty.nj.gov
Los Angeles
The City of Los Angeles enacted a tax amnesty program that will run from May 1 through July 31, 2009, under which taxpayers can receive a waiver of penalties for nonreporting, underreporting, underpayment, or nonpayment of the following taxes: business; telephone, electricity, and gas users; commercial tenants occupancy; transient occupancy; and parking occupancy. The program applies to tax periods ending on or before July 31, 2009.
Other States
There are a number of other states which have proposed amnesty programs. The list below summarizes the states currently proposing an amnesty program and the estimated date and duration of each proposed program.
Kansas October 1, 2009 to December 1, 2009
Louisiana Up to 60 days between July 1, 2009 through June 20, 2010
New Mexico A 90-day period in 2010
Vermont Up to 60 days in 2009
Virginia A 60-to-75 day period between July 1, 2009 and June 30, 2010
Disclaimer: This article is designed to provide information in regard to the subject matter and has been prepared with the understanding that neither the Illinois CPA Society nor the author of this article is providing accounting, tax or legal advice or is performing any legal, accounting or other professional service. If accounting, tax or legal advice or other expert assistance is required, the services of a competent professional person should be sought.
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Come Clean with Illinois Use Tax!
January 31, 2009
Deborah K. Rood
Blackman Kallick, LLP
drood@blackmankallick.com
Key Highlight: Voluntary disclosure for Illinois use tax limits exposure to four years and abates all penalties.
The Illinois Department of Revenue (IDOR) has initiated an aggressive approach to collect unreported use tax. Taxpayers that may have unreported use tax liability will be contacted by IDOR and allowed to voluntarily report its use tax liability within 60 days of being notified. By participating in this program and timely paying all Illinois use tax and interest owed for the past four years, all penalties will be abated and any tax and interest owed for the fifth and sixth years will be forgiven.
What is use tax?
Use tax is imposed on use, storage or other consumption in Illinois of tangible personal property purchased at retail. Generally, sales tax (Retailers Occupation Tax) is paid to your supplier at the time goods are purchased. However, if the vendor does not charge sales tax, you are responsible for self-assessing use tax on taxable purchases. The Illinois use tax rate is 6.25%, even though Illinois vendors may be required to charge you a higher tax rate that includes local taxes.
Why would I owe use tax?
There are many reasons why you may not have paid use tax on your purchases. The most common examples include:
• Internet purchases
• Purchases of inventory (items purchased for resale) that are removed from inventory and used as samples
• Purchases of promotional items such as pens or t-shirts
• Items purchased from out-of-state vendors where the purchase is taxed at less than 6.25% (the Illinois use tax rate). For example, if you purchase and pick-up computers outside Illinois and the vendor charges a 5% sales tax, an additional 1.25% would be due to Illinois.
How will Illinois find me?
IDOR is matching its income and withholding tax databases to its sales/use tax databases. By doing this, businesses that are paying income tax or withholding Illinois income tax from employees but are not filing use tax returns will be identified and contacted by the IDOR. IDOR is currently sending letters to these taxpayers offering voluntary disclosure.
Moreover, IDOR has unofficially stated that it intends to contact individuals with incomes over $1,000,000 and encourage them to voluntarily file use tax returns.
What is voluntary disclosure?
If you file Illinois use tax returns and pay the applicable tax and interest under voluntary disclosure, IDOR will only pay tax and interest for the past four years. Typically, for non-filers, IDOR requires payments for the past six years and assesses penalties.
What if I don’t do anything?
If IDOR identifies your business as a non-filer, it may conduct an audit and you will be charged tax, penalties and interest for six years. The difference? Penalties and two years of tax and interest.
Is there anything else I should know?
If your business is located in Chicago, you may owe Chicago use tax (1%) in addition to Illinois use tax. The Chicago Department of Revenue also offers a voluntary disclosure program.
Disclaimer: This article is designed to provide information in regard to the subject matter and has been prepared with the understanding that neither the Illinois CPA Society nor the author of this article is providing accounting, tax or legal advice or is performing any legal, accounting or other professional service. If accounting, tax or legal advice or other expert assistance is required, the services of a competent professional person should be sought.
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Alabama, Connecticut, and Massachusetts Announce Tax Amnesty Programs Effective Early 2009
January 28, 2009
Brad Greenberg
Silver, Lerner, Schwartz & Fertel
bgreenberg@slsf.com
Three states recently enacted amnesty programs which will waive penalties for late filing and forego criminal prosecutions for delinquent tax filers who come forward and pay what they owe in state taxes.
Alabama
The program, called Operation Clean Slate, runs from February 1, 2009 through May 15, 2009. Eligible taxpayers to participate include those who did not file a required return or report, understated or omitted any tax liability on a filed return, or erroneously claimed credits or deductions. The amnesty program does not apply to taxpayers scheduled for audit or currently under investigation; taxpayers who have entered into a Voluntary Disclosure Agreement prior to February 1; and taxpayers who have otherwise been contacted by the Department as to their proper tax liability.
The program is available for most Department-administered state taxes. This includes, but is not limited to, individual and corporate income, business privilege, severance, tobacco, gasoline, consumer use, and, if unregistered with the department, sales and use taxes.
During this period, taxpayers that voluntarily come forward and file past-due returns or amend their returns to properly report their tax liabilities will be granted a waiver of penalties and a limited three-year lookback in most cases.
Connecticut
From May 1, 2009 through June 25, 2009, Connecticut will offer a tax amnesty program for individuals, corporations, or other taxpayers who owe Connecticut state taxes for tax periods ending on or before November 30, 2008. To qualify for amnesty, the taxpayer (1) must have not filed a required return and the Commissioner did not file on the taxpayer’s behalf; (2) filed a return that underreported taxes and the return has not been examined by the Department of Revenue; or (3) must not have received a tax bill from the Department of Revenue.
All state taxes administered by the Connecticut Department of Revenue other than motor carrier road taxes are eligible under the amnesty program
Eligible taxpayers will be able to pay their back taxes to the state while avoiding penalties and criminal prosecution. Its also offers a 25% reduction in interest charged: in the case of taxes due for an affected taxable period that is paid in full on or before June 25, 2009, interest is computed at the rate of 0.75% per month or fraction thereof from the date such taxes were originally due to the date of payment or June 25, 2009, whichever is earlier. The regular interest charge is 1%.
Massachusetts
Massachusetts has enacted a two month tax amnesty program. The Department of Revenue has not yet set a start date, but the program will end no later than June 30, 2009. The amnesty program will apply to tax liabilities for periods that began before January 1, 2007. All taxpayers are eligible for the program unless the have been the subject of a tax-related criminal investigation or prosecution. Additionally, taxpayers who have delayed payment due to a pending abatement application or appeal must waive the right to delay payment, and pay all assessed tax and interest, in order to participate in the amnesty program.
All Department-administered taxes are eligible for amnesty. Excluded from the program are penalties that the Commissioner does not have the sole authority to waive, including penalties applicable to fuel taxes administered under the International Fuel Tax Agreement and local option portions of taxes collected for the benefit of cities, towns, or state governmental authorities.
The amnesty program permits the Commissioner to waive all penalties, but not interest, for failure to timely file or pay, report the full amount of, or pay the full amount of any required estimated payment toward, any state taxes. Amnesty will be considered provided the taxpayer files proper returns for all tax types and for all periods for which the taxpayer has or had a filing obligation, and pays, or provides security for, all tax and interest due.
Disclaimer: This article is designed to provide information in regard to the subject matter and has been prepared with the understanding that neither the Illinois CPA Society nor the author of this article is providing accounting, tax or legal advice or is performing any legal, accounting or other professional service. If accounting, tax or legal advice or other expert assistance is required, the services of a competent professional person should be sought.
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Illinois Treasurer Announces Abandoned Property Voluntary Disclosure Program
December 8, 2008
David A. Hughes
Horwood Marcus & Berk Chartered
dhughes@saltlawyers.com
Key Highlight: Opportunity for holders of Illinois unclaimed property to remit without payment of penalties or interest.
The Illinois Treasurer, Alexi Giannoulias, has announced that that his office will join seventeen other states and offer a Voluntary Disclosure Program for delinquent holders of unclaimed property. Unclaimed property consists generally of intangible property which has not been claimed by its owners or has remained dormant for one to seven years. Included are such items as uncashed payroll and commission checks; uncashed payable or other vendor checks; customer credits; uncashed dividend checks and unclaimed stock certificates. This type of property must be reported to Illinois if the owner’s last known address was in Illinois or, if there is no last known address, the holder’s state of incorporation is Illinois.
Unclaimed property has become a trap for the unwary due to the fact that a number of business organizations are either unaware of the reporting requirements or the extent of those requirements. As a result, a number of business organizations might be delinquent in their filing obligations and should consider taking advantage of the Voluntary Disclosure Program. To qualify for the Program, a business organization must:
1. Not be under examination by the Treasurer’s Office or an agent of the Treasurer’s Office;
2. Conduct a self-audit and remit the finding of that audit within six months of executing the Voluntary Disclosure Agreement;
3. Provide the supporting documentation for the estimation method used to perform the self-audit; and
4. Accept the Voluntary Disclosure Agreement without modifications.
To initiate the process, the business organization must submit a signed Voluntary Disclosure Agreement to the Treasurer’s Unclaimed Property Division. A blank agreement is available on the Treasurer’s web site (www.treasurer.il.gov) under the “Cash Dash” section.
Under the terms of the Agreement, the look back period will generally be 14 years. In exchange for filing the Voluntary Disclosure, the Treasurer will waive all penalties and interest attributable to the failure to report the property for the Voluntary Disclosure period. By entering into the Agreement, the business organization agrees to comply with the Illinois Uniform Disposition of Unclaimed Property Act for all future reporting periods.
Dave Hughes is a member of the ICPAS State & Local Tax Committee. Dave could be contacted at dhughes@saltlawyers.com
Disclaimer: This article is designed to provide information in regard to the subject matter and has been prepared with the understanding that neither the Illinois CPA Society nor the author of this article is providing accounting, tax or legal advice or is performing any legal, accounting or other professional service. If accounting, tax or legal advice or other expert assistance is required, the services of a competent professional person should be sought.