Va. offering amnesty for delinquent taxpayers
State plans to collect about $90 million in program running through Nov. 14
For most people and businesses that owe back taxes to Virginia, now is the time to pay up.
The Virginia Department of Taxation is offering an amnesty program for delinquent taxpayers through Nov. 14. Taxpayers can pay the tax and half the interest, and the state will waive any remaining interest and all penalties.
Tax amnesty programs don’t roll around often. This one is the fourth since the first program was offered in 1990. The second was in 2003 and the third in 2009.
Postcards for delinquent taxpayers started showing up last week in mailboxes, said Paige Tucker, a spokeswoman for the Virginia Department of Taxation.
The state mailed a total of 900,000 postcards addressed to “occupants”
in targeted ZIP codes — in areas where a high number of delinquent taxpayers reside.
Not every recipient who gets a postcard owes back taxes, since ZIP codes were the determining factor for this mailing.
“While people who get the postcards may not owe back taxes, they may know someone who does,” Tucker said.
However, people and businesses that received mailers last month are on the state’s list of delinquent taxpayers — and interest and penalties are piling up. More than 300,000 mailers — representing $725.6 million in past-due taxes and split about evenly between individuals and businesses — were sent in early September.
“As of Sept. 29, we’ve received about 32,000 phone calls about tax amnesty,” Tucker said. “We’re pleased with taxpayers’ responses so far to this opportunity to clear up the taxes they owe. From previous amnesty programs, we know that most taxpayers will wait closer to the Nov. 14 deadline to file and pay.”
The program has been in effect since Sept. 13.
Virginia expects to collect $89.5 million from the amnesty program — an amount included in the 2017 Appropriations Act, which will go into the general fund, Tucker said. The tax department is embarking on a broad awareness campaign to spread the word and ensure the public that the program is legitimate.
“We think it is a very good program and taxpayers that have unpaid or unfiled taxes should take advantage of the program,” said Terry Barrett, a certified public accountant specializing in state and local taxes at Keiter, an accounting firm in Henrico County. “It may be many years before we see such an amnesty program again.”
Taxpayers who participate in the program may be able to save hundreds if not thousands of dollars in interest and penalties, depending on their situations, she said.
However, amnesty may not be the best answer for all taxpayers, Barrett said. Other alternatives may be more appropriate to the taxpayer’s specific situation to resolve outstanding tax liabilities with the
state. “We suggest taxpayers who are unsure about what to do reach out to a tax adviser for help.”
Taxpayers who participate in amnesty, for example, give up their rights to file appeals or litigate for taxes or assessments paid during the amnesty period, Barrett said.
The deadline for a similar tax amnesty program offered by the city of Richmond is Monday. People owing back taxes on real estate, business personal property (excluding vehicles), business license, admission, meals and lodging have had the opportunity since Aug. 15 to pay the original tax amount owed — with all penalties and interest waived.
“This is a great opportunity to get right with the city,” Mayor Levar Stoney said. “Richmond is the only city in the commonwealth that can offer amnesty for both penalties and interest.”
The city to date has received commitments for $1 million of outstanding tax debts.
The state is offering amnesty on all taxes collected and administered by the Virginia Department of Taxation. These include income, retail sales and corporate taxes, but it could be on any of 42 state taxes, including aircraft consumer use tax, soft drink excise tax, estate and inheritance taxes, motor vehicle rental tax — and the list goes on.
Each tax type eligible for tax amnesty has specific liability periods to qualify.
“If you pass up this limited-time opportunity to clear up your tax debt, the commonwealth of Virginia will add a penalty of 20
percent of the unpaid tax to any bill or delinquent period for which the full ‘amnesty amount due’ has not been paid,” the mailer says.
To participate, taxpayers must file tax returns with payments due for the delinquent periods and pay 100 percent of the tax due and 50 percent of the interest due. Even if they cannot pay the full amount due for each period, they can still participate in the program on a period-by-period basis, paying as much as possible to reduce potential penalties.
The total amount of taxes owed is a moving target, Tucker said. Some people appeal or contest the amount the state says they owe. Or, taxpayers often pay back taxes through a payment plan and they may go on and off the plans, depending on their financial conditions. Also, the state can’t collect from delinquent taxpayers who are in bankruptcy.
It’s challenging as well to collect on older bills due to people who have died or moved away without providing address changes, Tucker said.
“We use our resources to collect as much of the current and past taxes that are owed, and the tax amnesty program gives eligible taxpayers a great opportunity to clear their tax debt with the benefit of half the interest and all of the penalties waived,” she said.
The General Assembly decides when tax amnesty programs will be offered. No dates have been set for another program.