Pennsylvania 2017 Tax Amnesty – Discount Tax Relief

January 30, 2017
By S. John Kelly
Posted in Business Services

During the 60-day period from April 21 to June 19, 2017, the Pennsylvania’s Department of Revenue (“PA DOR”), will offer Tax Amnesty for pre-2016 taxes.  Taxpayers owing PA state taxes (such as PA employer payroll tax, corporate income tax, personal income tax, sales and use tax, hotel occupancy tax, and inheritance and estate tax) are eligible for Tax Amnesty.  In addition, certain specialized industry taxes (such as, state gross receipts, gross premium, fuel taxes, vehicle rental tax, and the PA portion of Motor Carriers taxes) are eligible for Tax Amnesty.  However, local taxes assessed by PA school districts, counties, and municipalities  are not eligible for Tax Amnesty.

Quick Summary of Tax Amnesty

The Tax Amnesty Program has a “carrot and stick.”  The “carrot” is that taxpayers can avoid paying penalties, have the interest reduced, and avoid paying pre-January 1, 2011 unassessed PA state taxes.  The “stick” is that that taxpayers have to make full payment of post-2010 Tax Amnesty taxes by June 19, 2017.

Risks for Taxpayers that do not participate in Tax Amnesty

Even taxpayers that do not participate in Tax Amnesty risk a “stick.”  Under the program, taxpayers that do not participate in Tax Amnesty, but are assessed pre-2016 PA state taxes in the future, will have to pay a new five percent penalty in addition to the tax, penalty, and interest otherwise due.

What are the Financial Advantages of Tax Amnesty?

  1. Avoid all PA late filing or late payment penalties that otherwise would be due.
  2. Pay only one-half the interest otherwise due.
  3. Avoid paying a five percent (5%) Tax Amnesty penalty on any pre-2016 tax assessed against non-participants in the 2017 Tax Amnesty.
  4. Obtain forgiveness for unknown tax liabilities of the same type of taxes for which Tax Amnesty is claimed for all periods before January 1, 2011 (e.g. claim Tax Amnesty for February 2014 PA sales taxes and obtain forgiveness for unreported June 2009 PA sales tax).  However, taxpayers still have to pay all the taxes they owe for post-December 2010 periods.

What Happens to Taxpayers that do not Participate in Tax Amnesty?

  1. Will continue to owe all the pre-2016 tax otherwise due.
  2. Will owe an additional five percent penalty because they did not participate in Tax Amnesty, if the PA DOR assesses taxes for pre-2016 periods. However, the five percent penalty will not apply to those taxpayers with an active deferred payment plan or those taxpayers with timely administrative or judicial appeals.
  3. Will owe PA late filing and late payment penalties otherwise due.
  4. Will owe all the interest otherwise due.

How does a Taxpayer Claim the Tax Amnesty?

  1. File a Tax Amnesty return by June 19, 2017, but not before April 21, 2017. Sales tax and payroll tax returns should be filed electronically.
  2. If possible, obtain a PA DOR account number (file the PA-100 on-line) before filing Tax Amnesty returns. Obtaining an account number allows the PA DOR to track payments and returns.
  3. Pay 100% of the tax and one-half the interest due by June 19, 2017, but not before April 21, 2017. Payment is timely if the payment is received electronically or postmarked, on or before, June 19, 2017.  If this payment would trigger a significant financial hardship, a limited installment payment plan is available.
  4. File amended tax returns to correct underreported tax by June 19, 2017. File original tax returns for all required periods if the taxpayer has not filed returns previously. PA DOR intends to alert taxpayers to any unpaid tax liabilities.
  5. Close all administrative or judicial appeals relating to taxes and periods accepted into the 2017 Tax Amnesty Program. Appeals of unrelated taxes, for which the taxpayer is not seeking Tax Amnesty, do not have to be withdrawn.
  6. File all post-2015 PA tax returns and pay the taxes due. Even though no Tax Amnesty for those periods is available, those returns must be filed by June 19, 2017.

Which Taxpayers or Periods are Not Eligible Tax Amnesty in 2017?

  1. Taxpayers that participated in the 2010 Tax Amnesty Program. However, taxpayers that participated in the 1996 Tax Amnesty Program are eligible to participate in the 2017 Tax Amnesty program.
  2. Taxpayers that have signed a voluntary disclosure agreement for pre-2016 taxes.
  3. Taxpayers under criminal investigation or with pending criminal charges.
  4. Taxpayers currently in bankruptcy, unless the Bankruptcy Court gives permission.
  5. Taxpayers that obtained Tax Amnesty in 2017 but subsequently become delinquent for three consecutive periods within 24 months of June 19, 2017 and failed to contest those assessments.
  6. Taxpayers that obtained Tax Amnesty in 2017 but subsequently become delinquent in payments within 24 months of June 19, 2017 and became eight or more months late in payment of taxes due.

Should You Claim Tax Amnesty?

Any taxpayer or business that has tax exposures for pre-2016 PA state tax liabilities associated with tax nexus, mistakes, or accounting system problems, may wish to consider the 2017 Tax Amnesty Program.   However, there are some downsides to claiming Tax Amnesty.  Claiming Tax Amnesty for a tax period means the taxpayer waives any appeal rights for liabilities paid under the Tax Amnesty program.   In addition, claiming Tax Amnesty likely means that the taxpayer cannot participate in a future PA DOR Tax Amnesty programs, say five years from now.

Strassburger McKenna Gutnick & Gefsky can help you to decide whether you or your business should claim PA Tax Amnesty in 2017. Please contact John Kelly,  or Dave Pollack,  at (412) 281-5423 to talk about your tax planning needs.   This post is provided for informational purposes only. Nothing in this post creates an attorney client relationship.

Source Document: Notice “2017 Tax Amnesty Guidelines”