It’s no secret that when the tax collector finds out that you haven’t been paying your taxes, you’ll owe a lot more than if you’d simply filed on time.
Just ask Ty Warner, the Beanie Babies billionaire. He’s now facing a $53.5 million payment to the Internal Revenue Service to settle an old offshore tax bill that was less than $1 million.
And it’s not just Uncle Sam who can whack you for unpaid taxes. State tax collectors are always looking for ways to shore up their treasuries.
Some states, however, have determined that it’s better to get back taxes paid via amnesties instead of standard collection processes.
That’s the good news now for taxpayers who owe in Connecticut, Louisiana and Arkansas. Each state is providing some of its taxpayers a chance to come clean about unpaid taxes and face less severe penalties than they would if the states find out on their own.
Arkansas business amnesty
Arkansas businesses have until Dec. 31 to catch up on delinquent franchise taxes and have penalties and interest forgiven on up to three years’ worth of payments.
To take advantage of this offer, Arkansas business owners must submit the proper paperwork and payment, in person or by mail, to the Secretary of State office.
Note that this opportunity is only for older tax bills. Tax, penalties and interest due for 2013 are not eligible.
Connecticut business amnesty
Connecticut tax officials are being more proactive in their tax amnesty efforts, which kicked off Sept. 16. The Connecticut Department of Revenue Services has mailed amnesty information to around 80,000 tax delinquents, both individuals and businesses, who owe a combined $400 million.
If these taxpayers remit the income, sales and corporation taxes due, Connecticut tax officials will not attempt to collect any civil penalties that would have applied. In addition, the state won’t go after the tax delinquents for possible criminal prosecution. Eligible tax amnesty participants also might qualify for a 75 percent reduction in the amount of interest they owe.
Nutmeg State taxpayers have until Nov. 15 to take advantage of the amnesty.
Louisiana business amnesty
Louisiana’s tax amnesty started Sept. 23 and runs through Nov. 22.
The amnesty applies to all taxes administered by the Louisiana Department of Revenue except motor fuel taxes. Those eligible for tax forgiveness can avoid all penalties and have half of the interest they owe cut in half.
Taxpayers must apply to participate and be approved by the state’s tax officials. Once Louisiana taxpayers are accepted for what the state has dubbed the Fresh Start amnesty program, they will get a letter from the Department of Revenue. That follow-up will include a voucher showing the tax periods and amounts owed by the taxpayer, along with account numbers needed to expedite payment to state treasury.
Pelican State tax officials are urging taxpayers who are approved for amnesty participation to pay off their old tax bills electronically. But if you prefer, the state will take tax payments by mail.
Amnesty benefits for individuals or businesses are obvious. Eligible taxpayers typically avoid at least some of the penalties and interest that they otherwise would owe. The possibility of civil or criminal prosecution also is usually waived for delinquent filers who make their tax balance right.
States get the taxes they are owed and at least some of the interest. Plus, states don’t have to spend money tracking down and prosecuting taxpayers who come clean during an amnesty period.
Of course, residents who’ve been paying their taxes on time over the years are not fans of amnesties. There is a general sense that the bad sibling is getting off the hook while the good kid, who has been diligently toeing the tax line, essentially is punished by having paid for the services the nonpayers also enjoyed. And now those tax delinquents are getting away with just a slap on the wrist.
Even Louisiana’s treasurer John Kennedy thinks amnesties send a bad message. Kennedy, during a speech to the Baton Rouge Better Business Bureau earlier this month, said he was “always uncomfortable” with tax amnesty programs because, “You’re telling taxpayers who obey the rules, ‘Well, thank you, but we’re going to do something for someone who didn’t.'”
As an on-time taxpayer, I can’t disagree with Kennedy and other amnesty opponents. But not all delinquent taxpayers are plain old, “in your face, tax man” scofflaws.
People often fall behind on their taxes for good reasons, such as a job loss, a serious illness or the sudden expenses of taking care of an aging parent. They truly want to get their situation cleared up, but are afraid that by acknowledging their overdue tax status, things would get worse because of the added penalties and interest.
With an amnesty, these unexpectedly delinquent taxpayers get a chance to get back on the same tax track as those of us who’ve been paying regularly. Let’s welcome them back into our taxpayer club.
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Veteran contributing editor Kay Bell is the author of the book “The Truth About Paying Fewer Taxes” and a co-author of the e-book “Future Millionaires’ Guidebook.”