Jul 15, 2016

Tax Amnesty for Delinquent Alabama Taxpayers – Limited Window of Opportunity Requires Immediate Action

Tax AmnestyFor the first time ever, the Alabama Department of Revenue (ADOR) is offering taxpayers a formal amnesty program for resolving delinquent taxes administered by the ADOR. In the past, taxpayers with delinquent taxes could attempt to negotiate, on a case-by-case basis, a voluntary disclosure arrangement with the ADOR, but a formal program did not exist.  For two months, June 30th through August 30th, taxpayers have the opportunity to apply for amnesty for delinquencies of most taxes administered by the Alabama Department of Revenue, with the exception of motor fuel taxes.  For a full listing of eligible and ineligible taxes, you can click on Eligible Taxes.

The benefits to be granted under a successful application to the 2016 Amnesty Program include:

  • Generally, a limited look-back period of 3 years for eligible taxes.
  • The ADOR will not seek to collect tax, penalties or interest for tax periods prior to the look-back period
  • Waiver of penalties related to taxes determined to be due
  • Waiver of ½ of interest related to taxes determined to be due
  • The Department will not seek criminal prosecution so long as there are no false representations made.

However, not everyone will be able to take advantage of this offer.  There are some conditions that may prohibit a taxpayer from being eligible for the amnesty.  Taxpayers that do not qualify for the 2016 Amnesty Program include:

  • Taxpayers who have been contacted by the Department within the last 5 years.
  • Taxpayers with an outstanding debt shown on the Department’s records in the form of a bill, assessment, or civil collection action (for example, garnishment).
  • Any taxpayer who has been scheduled for an audit or is currently under investigation.
  • Taxpayers who have entered into a Voluntary Disclosure agreement with the Department before 6/30/16.
  • Taxpayers who are a party to a criminal investigation or litigation in any court of the United States or the State of Alabama.
  • Taxpayers who have filed a return for the tax types included in his/her application or be under an audit or have received a notice of audit for taxes

Once an application for amnesty is approved, the taxpayer must pay what is deemed owed within ninety (90) days of ADOR approval.  Because the amnesty does not follow the normal voluntary compliance program, a taxpayer’s identity will be disclosed so it may be wise to consult with your financial advisor regarding approaching self-administered cities and counties if taxes are owed to these entities as well. Delinquent federal income taxes should also be considered if amnesty for Alabama income taxes is sought. A representative of the ADOR recently indicated that the ADOR would not initiate sharing of tax information with the IRS regarding tax amnesty program participants, but that they would share such information if requested by the IRS or other taxing authorities.

For more information, you can go to the State of Alabama’s Tax Amnesty website or contact your BMSS tax professional to help clarify the provisions surrounding this amnesty at (205) 982-5500 or go to www.bmss.com.