The Pennsylvania Tax Amnesty Program closed its doors on June 18, 2010. This was the last chance to take advantage of the program's benefits, which included abatement of penalties and reduced interest on delinquent tax accounts.
Right after the Amnesty Program ended, the Pennsylvania State Budget was passed. In the budget was a provision for the creation of an Enhanced Revenue Account and had an initial funding of $4.3 million. The Department of Revenue will use these funds for administrative costs in increasing tax collection enforcement and reducing tax refund errors. The activity funded by this account could lead to additional scrutiny of returns requesting refunds and the initiation of additional audits. Governor Rendell believes that there is a significant amount of tax delinquencies still out there and he intends to step up collection efforts.
Additionally, there is a 5% non-participation penalty for all tax delinquencies that were eligible for the Tax Amnesty Program but did not come forward. This penalty will be assessed on the tax in addition to normal penalties and interest.
However, there is another opportunity to come forward and report tax delinquencies and still receive some relief for penalties. Pennsylvania has decided to reinstitute the Voluntary Disclosure Program, which had been discontinued during the Amnesty Program. The terms of the program will be similar to what they were before and the program will begin accepting applicants on August 1, 2010.
There will be a limited look back period (usually 3 to 5 years) and abatement of penalties. The taxpayer will still be liable for the full amount of interest due, unlike the Amnesty Program which abated half the interest. Also, the taxpayer would still be subject to the 5% non-participation penalty enacted after the Amnesty Program.
The Voluntary Disclosure Program would provide a great opportunity to come forward anonymously prior to the state discovering your tax delinquency. Depending on the liability, the look back period could go many years back and there would not be an opportunity to have penalties abated.
If you are interested in applying for the Voluntary Disclosure Program or would like additional information, please contact me.
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