In concert with the IRS’ Voluntary Disclosure Program discussed here and here, California is also keenly interested in offering some amnesty to taxpayers who “avoided tax bills” if it mean capturing further state tax revenue. However, the program starts today and the deadline of October 31, 2011 to participate in California’s Voluntary Compliance Initiative is quickly approaching. The benefit of avoiding criminal prosecution and avoiding most penalties is well worth serious consideration and the sooner you get started, the better. If you would like to discuss whether participation in the program is the correct option for you, please give us a call at 415-781-4000 and we can help you better understand your options.
Franchise Tax Board News Releasetel 916.845.4800 | Public Affairs Officecell 916.502-2587 | Daniel TaharaDaniel. Tahara@ftb.ca.govNew Opportunity for Taxpayers Who Avoided Tax BillsSacramento –The Franchise Tax Board (FTB) officially launched its second Voluntary Compliance Initiative by contacting 47,000 taxpayers who may have underreported their tax liabilities through the use of tax avoidance transactions or who may have unreported offshore income.The voluntary program, directed by recent legislation (SB 86, chaptered March 24, 2011) is an opportunity for these taxpayers to step forward and voluntarily amend their 2010 and prior income tax returns. Participating taxpayers must pay both the tax and interest in full. In return, taxpayers will obtain a waiver of most penalties and avoid potential criminal prosecution.An abusive tax avoidance transaction includes either a ‘tax shelter’ defined under Internal Revenue Code Section 6662(d)(2)(c), an undisclosed reportable transaction, a listed transaction, a gross misstatement, or a noneconomic substance transaction as defined in Revenue and Taxation Code Section 19774.An offshore financial arrangement is generally any transaction designed to avoid or evade California income or franchise tax through the use of offshore entities or payment cards, such as debit or credit cards issued by foreign financial institutions.The FTB strongly encourages taxpayers who qualify for this initiative to participate. Advancements in technology, reporting requirements, and the data sharing between agencies (including the IRS) has allowed the FTB to better identify taxpayers who may have underreported their income due to these schemes.The voluntary program runs from August 1 to October 31, 2011.