The Pennsylvania Department of Revenue (the Department) has just released details of the tax amnesty authorized by the 2016-2017 Budget passed in July 2016. The tax amnesty is a tremendous opportunity for taxpayers who owe Pennsylvania taxes, including corporate taxes, flow through entity taxes, personal income taxes, realty transfer taxes and inheritance taxes, to settle their tax liabilities without penalties and with reduced interest.
When Will The Program Take Place?
The amnesty program will take place for 60 days between April 21, 2017 and June 19, 2017.
How Will It Work?
As with prior amnesty programs, a taxpayer can settle outstanding Pennsylvania tax liabilities by paying the full amount of outstanding tax and one-half of the interest that would otherwise be due on tax underpayments. The Department will waive all penalties and the other half of the interest otherwise due. To qualify for amnesty, tax and reduced interest must be paid in full by the end of the amnesty period. A taxpayer who is eligible to participate, but chooses not to, is subject to a 5 percent non-participation penalty.
What Taxes Are Covered?
Virtually all tax liabilities due to the Commonwealth of Pennsylvania and that are delinquent as of December 31, 2015 are covered by the amnesty. This includes taxes that have been assessed by the Department but not paid, as well as tax liabilities that the Department does not know about.
What Is Not Covered?
The amnesty will not be available in the following situations:
A taxpayer who participated in the 2010 amnesty program.
Unpaid taxes due after December 31, 2015.
A taxpayer who is currently under criminal investigation, or is a defendant in a pending criminal action, for an alleged violation of any tax law.
A taxpayer currently in bankruptcy protection or who has received a discharge determination of Pennsylvania tax liabilities.
A taxpayer who has entered into a voluntary disclosure agreement with the Commonwealth.
Taxes due to the Department of Labor and Industry (unemployment compensation tax).
Taxes due local jurisdictions, other states or the IRS.
What Does It All Mean?
The amnesty is a tremendous opportunity for taxpayers with outstanding tax liabilities owing to Pennsylvania. Taxpayers who have received tax assessments should not agree to settle unless they are offered terms comparable to those available under the upcoming amnesty. This is also the time for taxpayers who have not filed all required tax returns, who have under-reported the taxes due to the Commonwealth, or who have not paid all reported taxes, to come forward and clean up their non-filing, under-reporting or under-payment.