Tax Amnesty Programs: The Complete Guide
JW
Last updated 03/19/2024 by
Jessica WalrackSummary:
Tax amnesty programs provide taxpayers with an opportunity to file and pay for outstanding tax debts without paying a penalty. Most tax amnesty programs are set up by states. They are a fast way to generate revenue and they also help out taxpayers. A win-win for everyone. Find out which tax amnesty programs are available and how they work.
Is tax amnesty really possible? Will the IRS or state governments simply forgive unpaid tax you legitimately owe? While it may seem too good to be true, there have been numerous occasions where state and local governments launch programs offering just that. It’s often a last-ditch effort to boost their budgets and bring people into compliance with current tax laws.
Let’s take a closer look at tax amnesty programs and how they have worked in the past.
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What is a tax amnesty program?
A tax amnesty program is an opportunity for a certain group of taxpayers to pay a smaller lump sum amount in exchange for forgiveness of the rest of their tax liability. The types of taxes can range from income tax to sales tax for businesses.
The forgiven amount can include tax debts, civil penalties, and interest. Additionally, it often removes the risk of being criminally prosecuted if you come clean during the amnesty period. These programs can actually help to boost state tax revenues by enticing taxpayers to come forward (rather than continue with noncompliance and/or tax evasion). Although they sometimes sound similar, tax amnesty programs are not to be confused with tax credits, such as the Pennsylvania Tax Forgiveness credit.
While not currently offered on the federal level, states and cities have periodically opened up these programs for amnesty applications. They can help the governments to raise money because they entice a population of taxpayers to pay something when they would otherwise have paid nothing. It also helps people to resolve their understated tax liabilities, late tax returns, and income tax owed.
Current tax amnesty programs in 2021
| State | Status | Amnesty Filing Dates | Inclusion Periods | Tax Types and Conditions | Benefits |
|---|---|---|---|---|---|
| Alabama | Active | Active without an end date | Prior to 10/01/2019 | The program forgives any uncollected simplified sellers use tax that may have been due on sales made to purchasers in the state for all periods preceding October 1, 2019 | Waives interest and penalties and prevents class action lawsuits |
| Nevada | Active | February 1, 2021 – May 1, 2021 | Your tax had to be due and payable on or before 6/30/2020 | Qualifying types of tax for the program include: “Sales & Use Tax, Modified Business Tax, Cigarette Tax, Other Tobacco Products Tax, Liquor Tax, Bank Branch Excise Tax, Insurance Premium Tax, Tire Tax, Live Entertainment Tax (non-gaming), Short Term Lessor (Passenger Car), and Exhibition Facilities Fees, Commerce Tax, Transportation Connection Tax, Wholesale Marijuana Excise Tax, Retail Marijuana Excise Tax, Property Tax that are Centrally Assessed, and Net Proceeds of Mineral Tax, | Waives interest and penalties for qualifying tax debts |
| Pennsylvania | Active | February 8, 2021 – May 8, 2021 | Taxes owed prior to 01/01/2019 | Sales and income tax on businesses | Waives taxes and penalties |
| Tennessee | Active | October 1, 2005 – 12 months after becoming a full member of SSTP | Up to the date of your application. | Sales tax | Waives all sales tax, penalties, and interest for all periods prior to the date on your amnesty application. |
What tax amnesty programs are currently available?
Alabama’s amnesty program for retailers (Simplified sellers use tax)
Tax amnesty period: Active without an end date
Alabama’s current amnesty deal is provided to qualifying sellers who apply and are accepted into the Simplified Seller’s Use Tax (SSUT) program. It forgives all uncollected simplified sellers tax that was due on or before October 1, 2019. This program will also waive interest and penalties. Further, it prevents a class action lawsuit from being brought against sellers by the customers for an overpayment of the SSUT.
Nevada’s tax amnesty program for individual and business taxes
Tax amnesty period: February 1, 2021 – May 1, 2021
The Nevada Department of Taxation has enacted a bill that includes a one-time tax amnesty program for individuals and businesses that conduct business in the state and have an outstanding tax liability. It will waive interest and penalties for qualifying tax debts.
The qualifying requirements include:
- Your tax had to be due and payable on or before 6/30/2020.
- You have to pay the delinquent tax before and/or during the amnesty period.
Qualifying types of tax for the program include: “Sales & Use Tax, Modified Business Tax, Cigarette Tax, Other Tobacco Products Tax, Liquor Tax, Bank Branch Excise Tax, Insurance Premium Tax, Tire Tax, Live Entertainment Tax (non-gaming), Short Term Lessor (Passenger Car), and Exhibition Facilities Fees, Commerce Tax, Transportation Connection Tax, Wholesale Marijuana Excise Tax, Retail Marijuana Excise Tax, Property Tax that are Centrally Assessed, and Net Proceeds of Mineral Tax,” according to the Nevada Department of Taxation.
Pennsylvania tax amnesty program for businesses (sales and income tax)
Tax amnesty period: February 8, 2021 – May 8, 2021
Pennsylvania is offering a voluntary tax amnesty program over a 90-day period for businesses. To qualify, your business should have property or inventory in the state but not be registered to collect and pay taxes. If you participate, you will not be liable for taxes owed prior to January 1, 2019. Additionally, there will be a waiver of penalties.
Tennessee sales tax amnesty
Tax amnesty period: October 1, 2005 – 12 months after becoming a full member of SSTP
Tennessee‘s tax policy has an active voluntary disclosure program for businesses that register under the Seller’s Use Tax Program (SSTP). Once you do, you have a year to file for the amnesty relief. It will waive all sales tax, penalties, and interest for all periods prior to the date of your amnesty application form.
Expired 2019-2020 tax amnesty programs
Let’s take a look at a few of the 2019-2020 tax amnesty programs that were put in place to give you a better idea of how amnesty programs work:
| State | Nature of Amnesty | Authority | Status | Time Period | Taxes Covered | Applicable Tax Years | Penalties Waived | Interest Waived | Special Provisions | Back Taxes Collected |
|---|---|---|---|---|---|---|---|---|---|---|
| Santa Monica, CA | Administrative | City Finance Department | Ended | 5/27/19 – 7/12/19 | City’s business license taxes | All tax periods prior to 1-May-19 | 90% | No | Unlicensed businesses that voluntarily register will receive a 90% penalty waiver | Est. $200k |
| San Jose, CA | Administrative | City Finance Department | In Progress | 10/1/19 – 3/27/20 | City’s business license and certain other taxes | Tax liabilities between 10/1/2016 – 3/27/2020 | Yes | Yes | ||
| IL | Statutory | Tax Delinquency Amnesty Act | Ended | 10/1/19 – 11/15/19 | All taxes administered by the Illinois Department of Revenue | All tax periods ending after June 30, 2011, and prior to July 1, 2018 | Yes | Yes | Est. $175 million, Act. $237 million | |
| IL | Statutory | Tax Delinquency Amnesty Act | Ended | 10/1/19 – 11/15/19 | Franchise tax or license fee | Tax periods ending after March 15, 2008, and on or before June 30, 2019 | Yes | Yes | ||
| NE | Administrative | DOR General Information Letter (GIL) 1-19-2 | Ended | till 1/20/2020 | State and local sales and use taxes | State and local sales taxes due since April 1, 2019 | Yes | Yes | Does not apply to sellers who are physically present in NE |
California Amnesty Programs for Businesses
Santa Monica, California’s City’s Business License Taxes Amnesty Program ran from May 27, 2019, to July 12, 2019. It allowed unlicensed businesses to voluntarily register, have the city’s business license taxes covered, and receive a 90% penalty waiver. Further, it applied to all tax periods prior to May 1, 2019. The City Finance Department of Santa Monica ended up collecting $200,000 in back taxes.
Additionally, the City Finance Department of San Jose, California has been running an amnesty program since October 1, 2019, and until March 27, 2020. It waives the penalties and interest on the city’s business license and certain other taxes.
Illinois Tax Delinquency Amnesty Act
As for a program targeted at individuals, Illinois ran the Tax Delinquency Amnesty Act from October 1, 2019, until November 15, 2019. It covered all taxes administered by the Illinois Department of Revenue for all tax periods that ended before July 1, 2018, and after June 30, 2011. All interest and penalties were also waived. The results? The state recovered an estimated $175 million in back taxes.
New Jersey Amnesty Act
New Jersey also ran a program from November 15, 2018, until January 15, 2019, which covered state tax liabilities for returns that had been due after February of 2009 but prior to September of 2019. The program waived half of the interest owed and all penalties.
What to look for in a tax amnesty program
If your state or city is running a tax amnesty program, there are a few main factors to look for:
- The taxes covered: What type of taxes are being forgiven and under what conditions?
- Penalties and interest: What portion of the penalties and interest will be forgiven?
- Amnesty filing dates: When do you have to apply for the program?
- Inclusion periods: What tax periods qualify for the program?
Be sure to look at these details carefully. You may also want to consult a trusted legal or financial advisor to determine if the program is a good fit for you.
How to find tax amnesty programs in your state
The IRS does not provide a tax amnesty program for Americans on a federal level. Instead, the programs are issued and managed on a state level. You can search for them by state or city. The Council on State Taxation and Sales Tax Institute are good sources for up-to-date information. It’s also a good idea to check with your state and local authorities.
What if you don’t qualify for tax amnesty?
If you have tax debt but don’t qualify for a tax amnesty program, you may still qualify for a tax relief program. Tax relief programs are provided by the IRS and offer many ways to settle your debt. You may find a short- or long-term installment plan that works well for you. On the other hand, if there’s no way you can repay your debt, an offer in compromise might be the right option. Or if you just can’t pay anything now due to economic hardship, you may be able to qualify for currently not collectible (CNC) status. Further, you should check with your state for relief programs. For example, Pennsylvania offers special tax forgiveness to help PA residents reduce their tax liability.
Hire a tax debt relief expert
Taxes can be complicated and when you fall behind, the situation only gets more difficult. It can help to have a tax relief company on your side. The best tax relief companies have tax lawyers and enrolled agents on staff, provide a money-back guarantee and charge competitive rates.
Tax relief firms exist just for that purpose. They work with taxpayers to understand their options and find the best solution. Oftentimes, they can help you save and ensure your interests are protected. If you’re not sure who to contact, review and compare our top recommended debt relief firms above. Learn more about tax relief.
JW
Jessica Walrack is a personal finance writer at SuperMoney, The Simple Dollar, Interest.com, Commonbond, Bankrate, NextAdvisor, Guardian, Personalloans.org and many others. She specializes in taking personal finance topics like loans, credit cards, and budgeting, and making them accessible and fun.
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