When taxpayers do not file their returns or are unable to settle tax debt, the amount owed accrues penalties and interest and a New York Voluntary Disclosure may help them. This can lead to enforcement actions by the New York State Department of Taxation and Finance meaning possible tax warrants, tax liens, levies, seizures of property, and income executions, all in an effort to collect the back taxes from you.
The New York State’s Department of Taxation and Finance will realize that returns are unfiled and back taxes are due. For this reason, it is important for taxpayers to be proactive and contact a New York tax settlement attorney if they have unfiled returns and owe back taxes to examine whether a New York Voluntary Disclosure program may assist them. There are many options available, but the best choice is unique to each individual situation. An experienced tax attorney may be able to settle tax debts or negotiate an affordable payment plan.
One tax settlement option for back taxes owed is the New York Voluntary Disclosure Program. Under this program, eligible taxpayers who have not filed returns and owe back taxes can avoid penalties and criminal charges. In order to do this, taxpayers must:
- Disclose to the Tax Department the amount of taxes owed and past returns not filed
- Pay the amount of tax owed (lump sum or payment plan)
- Enter into an agreement to pay all future taxes
The New York Voluntary Disclosure is not for taxpayers who filed timely for 2012 but are unable to settle tax debt in full. It is also not available for taxpayers who have already been contacted by the department. Taxpayers who filed returns but were not able to pay in full are not eligible for this program either. They must wait for a bill for the tax debt owed, and request a tax settlement though an installment agreement for the balance owed. Therefore, this program has strict eligibility requirements, and all applicants must meet the following criteria:
- Not currently under an audit by the Tax Department for the tax type and tax years they are disclosing
- Not currently under criminal investigation by New York State or a District Attorney
- They have not received a bill for the taxes being disclosed
- They are not seeking to disclose participation in a tax shelter
The program is not limited to solely income taxes. Taxpayers who meet the eligibility criteria can apply for income taxes, corporate taxes and sales taxes.
The New York Voluntary Disclosure Program encourages taxpayers who have unfiled returns and back taxes owed to voluntary come forward and pay outstanding balances. If a taxpayer choosing to participate in this program the Tax Department will not impose penalties or file criminal charges, which is a very significant benefit.
For some taxpayers past tax nonpayment can be the result of fraudulently filed returns or criminal conduct. For this program, the Tax Code has provisions that protect the taxpayer. Information provided in a voluntary disclosure cannot be used against a taxpayer. The Tax Department is also prohibited from sharing the information disclosed with other government agencies at any level. However, actual returns and reports can be shared with the IRS and other agencies in which the Tax Department has established exchange agreements.
The New York Voluntary Disclosure Program is initiated when a taxpayer completes the online Voluntary Disclosure Program application. This application will ask for taxes owed, reasons why these taxes were not reported or paid, and if you are applying for a limited look-back clause, why you believe that you are eligible.
After the application is complete, the Tax Department will review the application and determine eligibility. Until you receive an acceptable letter with an agreement, you should not file the returns.
If your application is approved, the Tax Department will send you a Voluntary Disclosure Agreement. This tax settlement agreement is only for the taxes and tax years that were listed on the application. After you review the document, you will need to sign it and mail back the agreement to the Tax Department. Along with the agreement, you are required to send copies of the tax returns that show the amount of taxes owed for the period on the agreement. These documents must all be mailed together.
Along with sending in the New York Voluntary Disclosure Program Agreement and previously unfiled tax returns, the taxpayer is required to pay back taxes owed, and interest for the tax years disclosed. For some individuals, this amount can be large. The Tax Department allows installment payments to pay the taxes owed. Installment agreements are monthly payments made to the Tax Department to pay off a balance. They can be difficult to negotiate and the taxpayer should seek the help of an experience New York tax attorney. Taxpayers will want to be able to make payment amounts that they can actually afford.
Taxpayers accepted into the program must follow the terms in the agreement or risk violating the agreement. Taxpayers can be found in violation of the agreement if they intentionally:
- Provide false information in the disclosure
- Omit information
- Fail to pay back taxes and interest that was agreed to as part of the agreement
- Violate the tax law in the future
If any of the above listed terms were violated, the Tax Department is no longer bound by the agreement. This means that they can use the information disclosed could be used against you or a civil and criminal penalties might apply.
The New York Voluntary Disclosure Program greatly benefits taxpayers who have unfiled tax returns with back taxes owed and reach a tax settlement. The Tax Department does not impose penalties on participants in the program, nor do they prosecute participants whose failure to pay taxes was a criminal offense. Applicants need to understand that these benefits only apply to taxes and tax years that were disclosed in the application. Other taxes owed that were not disclosed can still be collected and the taxpayer may face penalties and criminal tax prosecution.