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SALT TALK: Pennsylvania Tax Amnesty - The I Forgot to Pay Taxes Strategy Works if Timing is Right

Posted by Wayne Berkowitz CPA, J.D., LL.M. on Mar 27, 2017 11:00:00 AM
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Who knew the comedian, actor, and musician Steve Martin was also prophetic?  Back in the seventies (sorry again, millennials) Mr. Martin had a plan to be a millionaire and never pay taxes[1].  When the tax man issued a friendly reminder regarding your newly found million, Mr. Martin simply suggested two simple words, “I forgot,” as the remedy to get back on good footing with the government.            

Mr. Martin must have fans at the Pennsylvania Department of Revenue (“Department”).  Their newly issued amnesty program, beginning April 21, 2017 and ending June 19, 2017 (the “Amnesty Period”) is quite generous in scope.  Not only does the program waive penalties on past due taxes, but 50% of the interest as well.  All taxes administered by the Department, whether applicable to individuals or businesses, are eligible.

Eligible taxes include known and unknown delinquencies existing as of December 31, 2015.  Let’s assume a nonresident individual has a PA tax liability unknown to him (or the Department), as long as it is for the tax year ended 2014 or prior (a 2015 delinquency won’t exist until April 2016), amnesty may apply. 

Certain taxpayers are not eligible including those that are under some type of criminal investigation or judicial proceeding involving tax matters.  Additionally, taxpayers that participated in the 2010 amnesty program also need not apply.

Taxpayers with “unknown” liabilities are effectively getting a “limited look-back” as part of the program since upon acceptance into the program they will not be liable for any taxes of the same type that were due prior to January 1, 2011.  While full payment is generally expected at the program’s end, June 19, 2017, a two payment program exists for those who can demonstrate serious financial hardship.

The ins and outs of the program are complicated and if you think you might qualify, your Berdon Advisor can certainly guide you through the process.  Remember, the benefit here extends not only to penalties, but to one half of all interest.  Additionally, those eligible for the program but failing to participate will be assessed an additional 5% penalty if and when additional tax liabilities arise.

If you think you might qualify and require some guidance, contact me at WBerkowitz@BerdonLLP.com or your Berdon advisor.

Wayne Berkowitz, a tax partner and head of the State and Local Tax Group at Berdon LLP, advises on the unique requirements of governments and municipalities across the nation.

[1] OK millennials, here is how the routine went (in part):  You can be a millionaire and never pay taxes! You can be a millionaire and never pay taxes!  You say "Steve how can I be a millionaire and never pay taxes?" First get a million dollars. Now you say, "Steve what do I say to the tax man when he comes to my door and says, 'You have never paid taxes?" Two simple words. Two simple words in the English language: "I forgot!" How many times do we let ourselves get into terrible situations because we don't say "I forgot"?

Topics: SALT TALK

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