October 21, 2013 | Tax Debt
NYS Voluntary Disclosure Program
New York’s Voluntary Disclosure Program is designed to encourage taxpayers who have not filed and paid their taxes to voluntarily file their back tax returns and pay what taxes they owe. This program applies to all taxes administered by the NY State Tax Department including income tax, corporate tax, and sales taxes. It also applies to taxes handled by the NYC Finance Department. The significant advantage to this program include no penalties or criminal charges. Please note that this program does not apply to taxpayers who have filed their tax returns but did not pay in full, and a tax representative uses a NYS POA form to represent you.
There are several eligibility criteria that must be met including: there must be no current tax audit for the tax type and tax year(s) that the taxpayer is disclosing; the taxpayer must not have received a tax bill for the past due taxes that they are disclosing to the State; the taxpayer must not being under a criminal investigation by New York State; the taxpayer must not be seeking to disclose participation in a tax shelter that is a federal or New York State reportable or listed transaction.
How does the process actually work? The process begins with an online application where the taxpayer will disclose the taxes owed and the reason why they failed to report the income or file the tax returns. It is important that the taxpayer applying for the program to withhold from filing tax returns during the waiting period since they have to be filed with a certain section of the tax department. The taxpayer needs to wait until they receive an acceptance letter and an agreement requiring that the taxpayer file all returns owed in the future and pay all taxes owed on time. If accepted, the taxpayer must sign the agreement mail it back along with the tax returns. The taxpayer must then pay any tax and interest disclosed in the agreement. If the taxpayer cannot afford to pay the taxes due in full, they may be able to make payments in installments. However, in order to allow for installment payments, NYS may request additional financial information.
As mentioned, the benefits of the program include no penalties or criminal prosecution. However, it is important to note that this only applies to the taxes and tax period that the taxpayer disclosed in their application. For other taxes and tax years not disclosed, NYS may still impose penalties and prosecute criminally. It is important to remember that if the taxpayer violates any terms of the agreement, NYS does not need to honor these benefits and may use the information disclosed against you as well as possible civil or criminal penalties.
Compliance is essential to maintaining the benefits of this agreement. If the taxpayer intentionally provides false material information or omits material information in their application or other disclosure documents, they will be in violation of the agreement. If the taxpayer intentionally discontinues making payments as part of the agreement they will be in violation. Finally, the taxpayer will be in violation of the agreement if they intentionally fail to pay any taxes in the future or violate any of the tax laws.
This is a great program, especially for those taxpayers who simply failed to file for several years and may be facing significant penalties or those taxpayers who would ordinarily be facing criminal charges. Just remember, if you are going to participate and receive such benefits, you must be compliant otherwise the agreement will backfire and work against you.