State tax amnesty time in La., Ore., Vt.
Friday, July 17, 2009
The tax amnesty train just keeps chugging along.
Earlier this year, several states allowed their tax delinquents to pay their overdue bills and, in most cases, avoid at least some of the associated penalties and interest.
Now amnesties are coming up in Louisiana, Oregon and Vermont.
But before I get to the specifics, allow me a moment to rant.
Bad tax "parents:" The states reason that they don't have the money to effectively operate programs to collect money they are owed. It's easier to at least get some of the money, the actual taxes owed, forgo the penalty costs and just move on.
Essentially, these state tax officers are like parents who are tired of yelling at their kids and who, for the most part, simply decide to cut a deal with their recalcitrant children.
Unlike some parents -- many of whom are my relatives! -- my mother always seemed to find the energy to make me and my brother do what needed to be done. I expect no less from state officials.
It always ticked me off when I was a kid and my mother demanded her rules be followed while my cousins got away with (or so it seemed to my young eyes) so much more.
As an adult, it ticks me off when my state officials decide to let my bratty taxpaying cousins -- and, dear family members, I'm just using the adjective as a figure of speech (for the most part!) -- off the hook when it comes to tax payments.
Sure, I know things happen. Some folks who don't pay their tax bills have good reasons for not doing so. Jobs are lost. Major illnesses strike. Catastrophes occur.
But when they do, the affected taxpayers can contact their revenue officials, explain the situation and make arrangements to pay their taxes, and interest and penalties, in a manner that's acceptable to all parties.
With amnesties, though, all taxpayers, deadbeats along with those who have legitimate excuses, are treated like toddlers who know if they scream long enough, Mom and Dad will give in. The kid is focused, while the parents have lots of other things to deal with.
The Tax Foundation reached the same conclusion, noting that one of the problems with frequent tax amnesties is that people simply decide to just not pay, figuring they can escape penalties and interest when another tax amnesty rolls around. In essence, states create a tax collection Catch-22, by which they encourage bad tax-paying (or non-tax-paying) habits.
Alas, bad tax collecting, like some bad parenting, is around to stay. And more tax amnesties are on the way.
Bad policy gets rewarded: The main reason for such bad tax practices by states is money.
States always tout the success of the programs once they're done. And those dollar signs are a big attraction to other officials.
New Jersey, for example, announced collection of a record $725 million in delinquent taxes during its tax amnesty that concluded earlier this month.
Other state tax collectors look at that figure and say let's give it a try. And so the trend continues
Next in line are Vermont, Oregon and Louisiana tax departments. As promised, here are details on those upcoming amnesties.
An estimated 50,000 Green Mountain State residents owe back taxes and Vermont is allowing them to make good on those bills during an amnesty that starts July 20 and runs through Aug. 31.
"We wanted to offer taxpayers who have fallen behind in a tough economy an opportunity to pay their taxes and forgive the late payment penalties which can add up to 25 percent of your tax liabilities, so they can be significant, " said Vermont Tax Commissioner Ellen Tofferi. "And it's also an opportunity to bring in dollars to the state itself which is facing some challenges."
And as a sop to cranky complaining fairness-fixated taxpayers like me, Vermont tax officials promise that the amnesty program will be "followed by increased compliance efforts" using additionally-hired department personnel.
Amnesty specifics can be found at the Vermont Department of Taxes' special Web page.
The Pelican State's 2009 tax amnesty program is scheduled for Sept. 1 through Oct. 31.
The tax-payback period applies to all taxes, except motor fuel levies, administered and collected by the Louisiana Department of Revenue.
During the amnesty, eligible taxpayers can settle account balances, overdue audit assessments and certain tax disputes with no penalties and only half of the interest on what they owe.
The amnesty is open to resident and nonresident individuals and in-state and multistate businesses that owe overdue Louisiana taxes.
The Louisiana Department of Revenue issues an announcement about the amnesty and created a special Web page with details on this year's program.
Thanks to a bill passed by Oregon legislators in the closing hours of their session, the Beaver State will allow delinquent taxpayers to make good on their taxes from Oct. 1 through Nov. 19.
Under the bill, the Oregon Department of Revenue will waive penalties and half of the interest payments that otherwise would be due from amnesty-eligible taxpayers.
The amnesty offer applies to corporation excise (income) taxes, personal income taxes, inheritance taxes and the mass transit district tax on self-employment. State officials estimate the program will raise $16.2 million in overdue taxes.
Any Oregon taxpayer who participates in the amnesty, however, cannot seek a refund of any tax paid under the program. Amnesty recipients also waive the right to appeal any such tax.
The Oregon Department of Revenue's amnesty Web page has not been updated to reflect the governor's signing of the bill into law. The state has, however, a few months to get the word out, so keep checking.
And if your state hasn't held a tax amnesty yet, stay tuned. They just might.
My practice speciality is delinquent taxpayers, and the problem I see most frequently is that someone thought they had met all the compliance regulations, and later discovered they hadn't, often to the tune of thousands of dollars and sometimes tens of thousands. They now are afraid to come forward because of all the penalties, and so they let the problem lie another few months or years while they try to figure some way around it, or hope it will go away on it's own.
In many cases, even without an amnesty programme, the IRS and the state governments will waive penalties when there is "Reasonable Cause". Reasonable Cause includes obvious things like medical incapacitation and disasters, but it also can include a surprising number of other situations, including you made money that you didn't know about (this happens more often than you'd think, and how I wish it would happen to me), incorrect tax advice, legal problems in accessing records, and the mistaken belief that you thought it had already been done.
When a tax amnesty arises, many people come out of the woodwork who would have been exempt from penalites under Reasonable Cause. Plus actual guilty folks go free.
Instead of tax amnesties, they should focus their efforts on publicizing the penalty waiver programmes already in place for people who have made honest mistakes. Make it easy - create a form for penalty waiver requests listing the ten most common Reasonable Causes and an explaination section for greater detail (and those other good excuses). The number of people that will come forward year-round will be increased, and we won't have to let the guilty go free along with them.
Posted by: Liz Zitzow, EA | Saturday, August 01, 2009 at 04:59 AM