State Tax Advisors December Newsletter
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Looking to 2010, we at State Tax Advisors hope to continue to add quality to your business with our many state and local tax consulting services.
Till then, may you and your family have a merry Christmas and blessed New Year.
All About Voluntary Disclosures
Writen by Senior Knowledge Specialist, Carrie Nebgen
With the current status of the economy, states are becoming more aggressive in their attempts to locate all businesses that owe them tax by becoming more stringent in their enforcement of nexus. (For more about nexus, please see our August Newsletter)
Meanwhile, many companies are unaware of what constitutes nexus in a state. Therefore they can unknowingly create tax liabilities for themselves and discover that they have a past filing obligation and liability for state and local taxes. In this situation, the business should consider entering into a voluntary disclosure agreement (VDA) with that state.
Most states provide VDA programs for many different types of taxes. The programs promote compliance and offer benefits to the taxpayer that would not normally be allowed. While the benefits of entering into a VDA may vary by state, they usually include limitation of the look back period and waiver of penalties. The look-back period for VDA is usually limited to that state's statute of limitations, whereas there is often no limit to this period if a taxpayer is audited prior to entering into a VDA. Furthermore, states will often waive penalties and sometimes interest on tax due. If sales tax has been collected by a taxpayer, most states will not allow waiver of penalty and interest.
If a taxpayer wishes to voluntarily disclose taxes, they must send a formal proposal to the state. However, the company should remain anonymous throughout negotiations, since the quality of the state's offer can be affected if they have identified the taxpayer. Therefore, many companies have chosen to outsource VDA negotiations with State Tax Advisors. Throughout the process, we ensure the state adequately reviews and executes the VDA. We also help file the applicable returns required by the state, and register the client with the Secretary of State so in the future they will be qualified to conduct business in the state.
Do you Qualify for a Voluntary Disclosure Agreement?
1. The taxpayer can't have outstanding liabilities for other taxes.
2. The taxpayer must agree to pay the tax due plus any applicable penalties and interest that is not waived under the agreement.
3. Subsequent to the disclosure, the taxpayer must remain in compliance for all taxes due to the state.
These are a few general guidelines. A State Tax Advisors' Knowledge Specialist can help you better determine if you qualify for a VDA.
Coming in December: Voluntary Disclosures