Good News! Tax Amnesty for Virginia Residents

If you owe Virginia back taxes, tune-in for the upcoming Tax Amnesty Program 2017.

The Virginia General Assembly recently enacted provisions approving a tax amnesty program. However, the Virginia Department of Taxation has not yet announced the full details nor the relevant dates. Based upon the past two programs, we expect the program to begin sometime in October, 2017, for a limited time ranging between 60 and 75 days.

Why is this amnesty program so beneficial? This ‘savings’ program allows Virginians to bring their state taxes up-to-date more economically. All penalties and 50 percent of the interest will be waived for those who settle their remaining balance within the duration of the program.

Now, here is the kicker. At the conclusion of the amnesty period, Virginia will impose an additional 20 percent penalty if you qualified but you do not participate in the program — even if you are otherwise qualified.

Virginia Tax Amnesty Programs do not come around very often. The last one was in 2009. Currently the Virginia Department of Taxation is in the process of developing guidelines for the procedures regarding participation in the Program. Assuming it will be similar to the last amnesty program in 2009, Virginia’s Taxation Department will notify residents and businesses that qualify shortly before the program starts. (The last time was October 7, 2009.) Waivers for penalties and interest were provided for those who paid the balance in full by the last date of the program, which was December 5, 2009.

Due to the short window of opportunity, we suggest that you prepare your documents and start your funding process NOW.

If you set up a payment plan before or during the program, no additional penalties will be added. Those who do set up a payment plan, however, will not be able to take advantage of the 100% penalty – 50% interest waiver. But, they will avoid the additional 20% penalty.

The interest rate on unpaid Virginia tax debt has averaged about 5.5 % over the past five years. Taxpayers are then also charged penalties of 6 percent per month after the first month of delinquency up to a maximum of 30 percent of the total tax bill.

For any tax year administered by the Virginia Department of Taxation, any taxpayer who currently has an outstanding assessment, or has not filed a return, may apply for amnesty, with certain exceptions. Even those who took advantage of previous tax amnesty programs in 1990, 2003, or 2009 qualify.

The following taxpayers would NOT be eligible to participate in the tax amnesty program:

  • Any taxpayer with an assessment date or due date for an unfiled return less than 90 days prior to the first day of the amnesty program;
  • Any taxpayer with an individual, fiduciary, or corporate income tax liability for ‘Taxable Year 2016’ or after;
  • Any taxpayer currently under investigation or prosecution for filing a fraudulent return or failing to file a return with the intent to evade tax; and
  • Any taxpayer with respect to a tax liability attributable to an issue that is the subject of a decision of a Virginia court rendered on or after January 1, 2016.

To find out what you owe for each tax period, go online and search “Virginia Tax QuickPay.” You will need a 5-digit bill number and your social security number or your business EIN to access the system.

For further inquiries on participation in the program or assistance in resolving a tax burden, contact the Sodowsky Law Firm at (703) 968-8000.

— Sammy Kim