Tax AmnestyTax Amnesty

California Society of Enrolled AgentsCalifornia Society of Enrolled Agents

September 17, 2004September 17, 2004

Tax AmnestyTax Amnesty

Tax amnesty is a limited-time Tax amnesty is a limited-time opportunity for individuals and opportunity for individuals and

businesses to pay past-due income, businesses to pay past-due income, franchise, sales or use taxes, and the franchise, sales or use taxes, and the related interest - avoiding most of the related interest - avoiding most of the

associated penalties and fees, and associated penalties and fees, and criminal prosecution.criminal prosecution.

Revenue EstimatesRevenue Estimates2004-052004-05

millionsmillions

Gross Revenue 555$ Collections absent Amnesty from participants (355)$ Net 200$

December 2004/January 2005December 2004/January 2005

Public Education Media CampaignPublic Education Media Campaign

FTB Amnesty Mailings – 2.4 Million Direct FTB Amnesty Mailings – 2.4 Million Direct MailingsMailings

Amnesty Eligible UniverseAmnesty Eligible Universe

Allowed Participants Allowed Participants

– PIT and Corp PIT and Corp

– NonfilersNonfilers

– Accounts ReceivableAccounts Receivable

– Bankruptcy Bankruptcy

– Audit/Protest/AppealAudit/Protest/Appeal

– SettlementSettlement

Excluded Excluded Taxpayers/TransactionsTaxpayers/Transactions

– Those under criminal Those under criminal investigation or investigation or prosecution on tax-prosecution on tax-related matters.related matters.

– Abusive tax shelter Abusive tax shelter transactionstransactions

General Amnesty InformationGeneral Amnesty Information

File an application February 1, 2005 - March 31, 2005.File an application February 1, 2005 - March 31, 2005.– Postmarked by April 1, 2005, due to holiday.Postmarked by April 1, 2005, due to holiday.

Most penalties and fees waived for taxable years 2002 Most penalties and fees waived for taxable years 2002 and older.and older.

Within 60 days of the conclusion of the amnesty period, Within 60 days of the conclusion of the amnesty period, May 31, 2005:May 31, 2005:– Underreporters and nonfilers must file returns.Underreporters and nonfilers must file returns.– Pay in full taxes and interest or initiate an Pay in full taxes and interest or initiate an

installment/payment agreement.installment/payment agreement. Final payment on an installment/payment agreement due Final payment on an installment/payment agreement due

by June 30, 2006 (amnesty years only).by June 30, 2006 (amnesty years only).

General Amnesty InformationGeneral Amnesty Information

No refunds allowed on taxpayer balances paid No refunds allowed on taxpayer balances paid prior to amnesty.prior to amnesty.

Taxpayers waive their rights to claims for refund Taxpayers waive their rights to claims for refund or credit for amounts paid in connection with or credit for amounts paid in connection with amnesty.amnesty.

Probation PeriodProbation Period

Must remain compliant for 2005 and 2006Must remain compliant for 2005 and 2006

FTB will revoke amnesty, reinstate the penalties and FTB will revoke amnesty, reinstate the penalties and fees, and assess the new amnesty penalty for the fees, and assess the new amnesty penalty for the

failure to pay any amount of tax, including failure to pay any amount of tax, including penalties and fees, for the 2005 or 2006 taxable penalties and fees, for the 2005 or 2006 taxable

years.years.

Amnesty PenaltyAmnesty Penalty

Penalty equal to:Penalty equal to:– 50% of the post-amnesty unpaid interest amount on any 50% of the post-amnesty unpaid interest amount on any

tax year eligible for amnesty.tax year eligible for amnesty.– 50% of the unpaid interest subsequently assessed on 50% of the unpaid interest subsequently assessed on

deficiency amounts.deficiency amounts.

Penalty would not apply to a taxpayer that:Penalty would not apply to a taxpayer that:– Initiates and is compliant with an installment/payment Initiates and is compliant with an installment/payment

agreement under amnesty.agreement under amnesty.– Has an existing (“grandfathered”) installment Has an existing (“grandfathered”) installment

agreement and does not participate in amnesty (PIT agreement and does not participate in amnesty (PIT only).only).

Accuracy Related Penalty IncreaseAccuracy Related Penalty Increase

An increase in the penalty for a taxable year eligible for An increase in the penalty for a taxable year eligible for amnesty from 20% to 40% of the understatement for any amnesty from 20% to 40% of the understatement for any assessment issued post amnesty.assessment issued post amnesty.

Increase does not apply to:Increase does not apply to:– A taxpayer in audit, protest, appeal, settlement, or litigation A taxpayer in audit, protest, appeal, settlement, or litigation

as of the start of amnesty.as of the start of amnesty.

– Understatements relating to tax shelter items.Understatements relating to tax shelter items.

Tax Professional ServicesTax Professional Services

FTB Amnesty Mailings - Copy to Power of FTB Amnesty Mailings - Copy to Power of AttorneyAttorney

Practitioner HotlinePractitioner Hotline Amnesty Application provided to CTPs Amnesty Application provided to CTPs Tax News ArticlesTax News Articles Special Fax Number Special Fax Number 60 Day Extension to File and Pay60 Day Extension to File and Pay BOE and FTB Amnesty Portal BOE and FTB Amnesty Portal www.taxes.ca.govwww.taxes.ca.gov

Where can I obtain the latest Where can I obtain the latest information? information? www.ftb.ca.govwww.ftb.ca.gov

Services on FTB Amnesty WebsiteServices on FTB Amnesty Website

Information for Tax ProfessionalsInformation for Tax Professionals Amnesty Application - pdf form Amnesty Application - pdf form Tax Forms/Tax Rate Schedules Tax Forms/Tax Rate Schedules Balance & Payment OptionsBalance & Payment Options Amnesty PIT Installment Agreement Amnesty PIT Installment Agreement Amnesty Tax Balance CalculatorAmnesty Tax Balance Calculator FAQs in English & SpanishFAQs in English & Spanish Payment OptionsPayment Options

Questions?Questions?