As a follow-up to the Franchise Tax Board’s recent press release, I wanted to follow up with the details of California’s Voluntary Compliance Initiative 2 (VCI 2) that began August 1, 2011, and runs through October 31, 2011. If you’ve already taken part in the IRS’ Voluntary Disclosure program, or are considering doing so before the August 31, 2011 deadline, this is the California equivalent and I strongly recommend taking advantage of this opportunity while you can. Once you’ve completed your disclosure with the IRS, the feds will let California know that a federal adjustment has taken place. It will be better to volunteer this information to California before October 31, 2011 than to have them come asking after the FTB has been informed by the IRS.
You are eligible to participate in California’s VCI 2 if you filed a tax return that underreported your income or tax liability through the use of abusive tax avoidance transaction or an offshore financial arrangement. The nice thing about the California program is that it is available even if you are already under examination by the Franchise Tax Board (the FTB). I’m not sure if the auditors are volunteering this information, but participation should help you avoid some penalties.
Participation in the program will help you avoid litigation with the FTB, potential criminal prosecution by the state and penalties. The penalties you can avoid by participation include the
- Noneconomic Substance Transaction Understatement Penalty
- Accuracy Related Penalty
- Interest Based Penalty
- Fraud Penalty
Please give us a call to discuss your options – 415-781-4000.