Due to the success of the tax amnesty (recovery) program in 2015, HB 2708 has been approved to establish another tax amnesty period in 2016. A tax amnesty program, or tax recovery program, gives taxpayers the opportunity to file incomplete or unfiled tax returns for the periods specified and to pay their tax liabilities without interest or penalties or fear of criminal prosecution. The amnesty period will start September 1, 2016 and end October 31, 2016. During this period the Arizona Department of Revenue (ADOR) will be required to abate or waive civil penalties and interest on unpaid tax liabilities; as long as they conform to the requirements of the program. This applies to all tax liabilities administered by ADOR except withholding and luxury tax.
The tax amnesty applies to corporate, individual and TPT (sales) tax returns for certain periods. For annual filers, this program applies to all periods ending before January 1, 2014. For all other taxpayers, the program applies to periods ending before February 1, 2015.
Taxpayers who are interested in participating in the tax recovery program must first meet the requirements. A complete and correct application must be submitted before being considered. On the application the claimant must list the tax liability and the qualifying period in question. You must also include the tax return and any reports, the amended return and reports (if applicable), and the latest billing notice, if available. The application must be submitted during the two month amnesty period in order to be considered for the program. Credits and refunds are not available for penalties and interest that have already been paid. Those who decide to apply will also forfeit all rights to appeal the tax liability in question. This program restricts certain taxpayers from being eligible to participate. Those restrictions apply to taxpayers that have entered into a closing agreement with ADOR, who are subject to a criminal investigation or proceeding that was pending on January 1, 2016 or have any connection to past tax-related criminal investigations that resulted in a conviction, a guilty plea or a plea of no contest.
There have been two major changes to this year’s tax amnesty program.This year, taxpayers who participate now have the option to pay their tax liabilities over a three year period. At least 30% of the taxes due must be paid by October 31, 2016, 60% must be paid by October 31, 2017 and the remaining balance must be paid by October 31, 2018. ADOR, however, will not abate or waive any penalties and interest until the tax is paid in full. Another change is that the amnesty program will not be awarded for any periods under audit or audit recommendation. If the audit is complete before the amnesty deadline, the taxpayer may still be able to apply.
The Arizona Tax Amnesty program can be inviting but may not be beneficial in every situation. There are other alternatives to consider when faced with an outstanding tax liability. Before making any decisions when confronted with an unresolved tax liability, consult your tax professional.