If you missed the April 18th deadline for filing your New York State tax return, you could face serious penalties. Even if your case is not as egregious as the latest politician to be arrested for tax evasion, nonfilers are subject to monetary penalties and possible criminal charges. However, New York offers a way to become compliant by applying to the NYS Department of Taxation and Finance’s Voluntary Disclosure and Compliance Program. As provided under the program, “eligible taxpayers who owe back taxes and haven’t filed related returns can avoid penalties and criminal charges by:
- telling the Department what taxes they owe;
- paying those taxes; and
- entering an agreement to pay all future taxes.
The program is open to any eligible taxpayer, including individuals and businesses, for all types of tax administered by the NYS Department of Taxation and Finance. However, taxpayers must act quickly. The program is available to those who have not yet been contacted by the State with respect to the tax type and period being disclosed. If the State has already started an investigation or audit, then the taxpayer won’t qualify.
If the State accepts the taxpayer’s application, all penalties are waived. As an added incentive, the taxpayer may qualify for a three-year or six-year limited look-back period and protection from criminal referral.
The taxpayer must pay the tax and interest due for the agreed periods. Taxpayers who can’t pay in full at the time of acceptance may qualify for an Installment Payment Agreement to pay overtime, with interest continuing to accrue. The taxpayer also agrees to remain in compliance with tax laws in the future.
Voluntary disclosure can be especially useful for taxpayers who have not filed NYS tax returns in many years and would like to become compliant. For example, individuals and businesses who were overwhelmed with other problems, or made mistakes on their returns have a way to get back on track without penalties or prosecution.
The NYS program may also be available for taxpayers participating in the IRS Offshore Voluntary Disclosure Program (OVDP), regarding foreign bank accounts. For these taxpayers, the State’s look-back period will be for the same number of years as required by the IRS.
There are risks associated with a voluntary disclosure, and it may not be the best course of action for some taxpayers.
If you failed to file returns and owe back taxes to NYS, contact us about whether the NYS Voluntary Disclosure and Compliance Program is the right option for you.