If you are a Michigan resident, keep this date: June 30, 2011. That’s when Michigan Department of Treasury’s Tax Amnesty program for both individual taxpayers and businesses ends. According to the State, “Whatever your excuse for not paying state taxes, now you can settle up without paying any penalties.” In their unique campaign the State declares “All excuses welcome.” Regardless of whether your dog ate it or you couldn’t find any pens with ink, Michigan state encourages all taxpayers who are delinquent in paying their state taxes under the Revenue Act (PA 122 of 1941) to ante up now for all taxes due through December 31, 2009 and the penalty will be waived. In addition, the State will not pursue criminal prosecution for any taxes paid under the amnesty program. But time is running out!
In order to encourage businesses to self-audit and either register or begin to pay sales and use taxes without penalty, states have the option to enact a Voluntary Tax Amnesty Program (VTAP) such as Michigan’s. A voluntary program usually goes as follows: businesses (or residents) have a certain amount of time, usually 30-45 days, to determine if they owe sales and use taxes; if they determine liability, they are given certain incentives to begin reporting and paying that liability. Sometimes, states will relieve the business of interest, penalties and fees as well as prosecution if they deliver before the expiration date of the voluntary program.
In 2009, Vermont gave businesses a little over 30 days to fill out a self-audit form and deliver any back taxes due through January of that year. However, a business must meet certain criteria–they can’t be in an audit or on the list for an audit.
Tax amnesty programs are not uncommon. In today’s environment you might see an increase of voluntary programs to encourage businesses and residents to bring their tax liabilities up to date and move forward with a clean slate. Even businesses that have been sent to collections might qualify for a voluntary program.
Recently, at the end of 2010, Illinois instituted a unique version of use tax amnesty. According to Internet Retailer, “Illinois is offering an amnesty program to individual consumers for unpaid taxes on Internet purchases.” This program is currently still in effect for residents of Illinois–it expires October 15, 2011. Participants in this use tax program can step up and pay use taxes on purchases made from June 30, 2004 through December 31, 2010 and the state “…will waive all penalties and interest on payments individual taxpayers pay the state.” In addition to the voluntary program, Illinois is giving their residents an opportunity to guess and pay an estimate of use tax liability on their income tax returns or pay $3 per $10,000 of adjusted gross income. According to one spokesperson, “If everyone pays their $3 per $10,000, it’s a lot of money for the state.”
Oklahoma opted to develop an online calculator to assist their residents to calculate their own use tax and pay online. They opted to work with “…online retailers to get them to inform their Oklahoma residents about their responsibility for paying use tax. Retailers including Amazon.com have cooperated.”
Other states that have insituted amnesty programs are Washington, Florida, Arizona, California, Connecticut and more. If your state has recently joined the Streamlined Sales Tax (SST), it will offer an amnesty period that allows businesses and residents to become current without prosecution. If you are wondering if your state currently offers an amnesty program, go directly to the state’s Department of Revenue website and search for “sales and use tax amnesty.”