U.S. States Voluntary Disclosure Program Introduction
To keep taxpayers in compliance with State tax laws, most States in U.S. have introduced voluntary disclosure programs. The program encourages taxpayers to proactively file previously delinquent tax returns and pay previously delinquent taxes and interest to exempt penalties and receive other benefits. Eligible taxpayers will need to apply for the program and then get State approval to exempt penalties and get other benefits. This article will use California State, New York State, Texas State, and Washington State as a template to introduce the voluntary disclosure program application requirements, required forms, and application procedures.
To qualify for the California Out-of-State Voluntary Disclosure Program, taxpayers must meet the following five criteria:
- The taxpayer voluntary registers an account with the California Department of Tax and Fee Administration.
- The taxpayer was previously located outside of California State and has not previously registered an account with the California Department of Tax and Fee Administration.
- The taxpayer’s business activities in California State must comply with the provisions of California State Section 6203.
- The California Department of Tax and Fee Administration or its agent has not previously contacted the taxpayer regarding its California State business activities.
- Failure to file tax returns or pay taxes on time is for legitimate reasons other than negligent, willful disregard of the law or attempted tax evasion by the taxpayer.
To apply for the Voluntary Disclosure Program, taxpayers are required to submit the following three forms to the California Department of Tax and Fee Administration:
- Form CDTFA-38. This form certifies that the taxpayer understands the voluntary disclosure program requirements and acknowledges that they are eligible.
- Form CDTFA-82. This form indicates that the taxpayer allows the California Department of Tax and Fee Administration to disclose their tax information to a specific person or agency.
- Form CDTFA-392. This power of attorney gives the appointee the authority to act solely on behalf of the taxpayer in relation to Voluntary Disclosure program applications.
Applications for the California State Voluntary Disclosure Program generally follow three steps:
- Taxpayers need to register an account on the official website of the California Department of Tax and Fee Administration or register an account at the office of the California Department of Tax and Fee Administration.
- Within 30 days of registration, complete the Out-of-State Voluntary Disclosure application form and mail it to the address designated by the California Department of Tax and Fee Administration. In addition, when taxpayers want to appoint a third party to process their voluntary disclosure program applications, they need to fill out Form CDTFA-82 and Form CDTFA-392 and submit them to the California Department of Tax and Fee Administration by email or mail.
- After the California Department of Tax and Fee Administration has processed the voluntary disclosure program application submitted by the taxpayer, the taxpayer will receive an approval notice or denial letter. When the taxpayer receives the approval notice, it is required to submit the tax return required by the Voluntary Disclosure Program and pay the corresponding arrears of tax and interest within 30 days of receiving the approval notice.
Compared with California State, the New York State Voluntary Disclosure Program application must meet the following four conditions:
- The taxpayer has not previously received a corresponding bill for the overdue tax disclosing by the taxpayer.
- New York State agency or New York State political subdivision is not currently conducting a criminal investigation of the taxpayer.
- There is currently no audit of the tax types and tax years disclosing by taxpayers by the New York State Department of Taxation and Finance.
- The taxpayer cannot have a tax avoidance-related transaction that falls under the federal or New York State list.
To apply for the New York State Voluntary Disclosure Program, taxpayers are required to complete the Voluntary Disclosure Program application form. The application form can be completed and submitted online, or a paper version can be filled out and mailed to the designated address. The application form mainly includes the following information:
- The taxpayer describes its business activities in New York State and New York City, including the number of employees, when the business activities began, etc.
- Explain why the taxpayer has previously failed to file tax returns and pay taxes on time.
- The taxpayer makes a rough estimate of the amount of tax that it has owed in each of the past years.
- When taxpayers consider applying for a limited look-back clause, they need to explain why they are eligible for the clause. The limited look-back clause is primarily for taxpayers who are more than three years in arrears on taxes.
Compared with California State, the New York State Voluntary Disclosure Program follows three steps:
- The taxpayer completes and submits the Voluntary Disclosure Program application form. The New York State Department of Taxation and Finance may request additional information from taxpayers if required.
- When the Taxpayer Voluntary Disclosure Program application is approved, the New York State Department of Taxation and Finance will mail a Voluntary Disclosure Agreement letter to the taxpayer. The taxpayer must sign the agreement and mail it back to the address specified on the agreement, along with a copy of the signed tax return. This signed copy of the tax return accurately shows how much tax and interest is owed by the taxpayer.
- Taxpayers are required to pay the tax and interest shown on the Voluntary Disclosure Program. If the taxpayer cannot pay the tax in full, instalment payments can be used. The New York State Department of Taxation and Finance must evaluate the taxpayer’s current financial situation information before deciding whether to allow the taxpayer to use the instalment payment method.
Compared with California State and New York State, Texas State and Washington State Voluntary Disclosure Program application requirements, required forms, and application procedures are shown in the following figure:
|
State
|
Texas State
|
Washington State
|
|
Application Requirements
|
1. The taxpayer has not been previously notified of an audit or examination.
2. The Texas Comptroller has not previously contacted the taxpayer, either verbally or in writing. This contact mainly concerns taxpayer liabilities or estimated liabilities.
3. The taxpayer is in arrears for the taxes and fees due to the Texas Comptroller.
|
1. The taxpayer did not misrepresent or evade tax when filing prior tax obligations.
2. The Washington State Department of Revenue has not previously contacted taxpayers regarding issues such as corporate audits or corporate compliance.
3. The taxpayer has not previously registered or filed taxes with the Washington State Department of Revenue.
|
|
Required Form
|
1. The taxpayer provides a written request form
2. The Texas Comptroller prepares a Voluntary Disclosure Agreement
|
1. Online Voluntary Disclosure Program application form
2. Specific gross income spreadsheet
|
|
Application Procedure
|
1. To initiate the Voluntary Disclosure Program process, the company representative is required to provide a written request to the Texas Comptroller.
2. After preliminary review and approval, the Texas Comptroller will issue a voluntary disclosure agreement to the company. The company needs to sign and return it back to Texas Comptroller.
3. The Texas Comptroller reviewed and obtained
signature of the Audit Division director.
4. Within the specified time, the taxpayer is required to submit the tax return under the Voluntary Disclosure Program and pay the corresponding arrears of tax and interest.
|
1. Complete the Voluntary Disclosure Program application form online and submit.
2. After the application is approved, sign the Voluntary Disclosure Agreement and mail it back to the Washington State Department of Revenue.
3. In accordance with the Voluntary Disclosure Agreement, submit a specific gross income spreadsheet.
4. Within the specified time, the taxpayer is required to submit the tax return under the Voluntary Disclosure Program and pay the corresponding arrears of tax and interest.
|
Reference:
https://www.cdtfa.ca.gov/taxes-and-fees/out-of-state.htm
https://www.tax.ny.gov/enforcement/vold/program-info.htm
https://www1.nyc.gov/assets/finance/downloads/pdf/sap/pp_2021_01.pdf
https://www.tax.ny.gov/enforcement/vold/lookback.htm
https://dor.wa.gov/open-business/apply-business-license/voluntary-disclosure-program
https://comptroller.texas.gov/taxes/publications/96-576.php |
