Tax Amnesty

FTB/CPA Liaison Meeting

October 28, 2004

Tax Amnesty is

A limited-time opportunity for

Individuals and businesses to

Pay past-due income, sales or use taxes, and the related interest

For tax year 2002 and prior

Avoiding most penalties and fees, and criminal prosecution.

Revenue Estimates2004-05

millions

Gross Revenue 555$ Collections absent Amnesty from participants (355)$ Net 200$

Amnesty Eligible Universe

Who Benefits?

Did not file required franchise or income tax returns

Underreported income on previously filed franchise or income tax returns

Claimed excessive deductions

Did not pay previously assessed taxes, interest, penalties, or fees

Who Qualifies?

Individuals Fiduciaries Estates and Trusts Partnerships Limited Liability

companies Corporations Exempt organizations with

unrelated business taxable income

Excluded Taxpayers/Transactions

Those under criminal investigation or prosecution on tax-related matters

Abusive tax shelter transactions

Pre-Amnesty TimelineDecember 2004 - January 2005

Taxpayer & tax preparer outreach

Mail 2.2 million amnesty letters (applications)

Amnesty Media Campaign

Media--Network TV--Billboards--Radio--Public Service Announcements

Amnesty TimelineFebruary 2005 – March 2005

File an application February 1, 2005 - March 31, 2005Postmarked by April 1, 2005, due to the holidayPostmarked by April 1, 2005, due to the holiday

Most penalties and fees waived for taxable years 2002 and older

Amnesty Timeline April 2005 – May 2005

By May 31, 2005:

Underreporters and nonfilers must file returns

Pay in full taxes and interest or initiate an installment agreement

Final payment on an installment/payment agreement Final payment on an installment/payment agreement due by June 30, 2006 (amnesty years only).due by June 30, 2006 (amnesty years only).

Special Filing Requirements

Bankruptcy StatusBankruptcy Status – Court Approval Required

Notice of Proposed AssessmentNotice of Proposed Assessment – FTB will finalize assessment

Pending ProtestPending Protest – FTB will dismiss protest

Pending AppealPending Appeal – FTB will finalize assessment

Partial ParticipationPartial Participation – Amended return required

Under Audit Under Audit – Amended return required

General Amnesty Information

No refunds allowed on taxpayer balances paid prior to amnesty

Taxpayers waive their rights to claims for refund or credit for amounts paid in connection with amnesty

IRS Information Exchange Agreement

Compliance Period2005- 2006

FTB will revoke amnesty, reinstate the penalties and fees, and assess the new

amnesty penalty for the failure to file and pay any amount of tax, including

penalties and fees, for the 2005 or 2006 taxable years.

Amnesty Penalty

Penalty equal to: 50% of the post-amnesty unpaid interest amount on

any tax year eligible for amnesty 50% of the unpaid interest subsequently assessed on

deficiency amounts

Penalty would not apply to a taxpayer that: Initiates and is compliant with an installment/payment

agreement under amnesty Has an existing (“grandfathered”) installment

agreement and does not participate in amnesty (PIT only)

Accuracy Related Penalty Increase

An increase in the penalty for a taxable year eligible for amnesty from 20% to 40% of the understatement for any assessment issued post amnesty

Increase does not apply to: A taxpayer in audit, protest, appeal, settlement, or

litigation as of the start of amnesty Understatements relating to tax shelter items

Tax Professional Services

FTB Amnesty Mailings - Copy to Power of AttorneyPractitioner HotlineAmnesty Application provided to CTPs Tax News ArticlesSpecial Fax Number BOE and FTB Amnesty Portal www.taxes.ca.gov

Where can I obtain the latest information? www.ftb.ca.gov

Thank you for your time and attention..