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California Tax Amnesty Program Enacted into Law

The first phase of the California Tax Amnesty program has ended. If you did not file an amnesty application, you have missed the deadline. If you did file for amnesty, but have not filed your tax returns, you have a deadline of May 31, 2005 to get those returns in. If you need help filing those returns, please contact us immediately at info@eTaxes.com.

If you missed the deadline, but still need help with delinquent California state taxes, contact us immediately.

Updated – April 26, 2005

Recent legislation authorized the Franchise Tax Board and the Board of Equalization to administer a Tax Amnesty Program in early 2005. The following provides some preliminary information about the program, who is eligible to participate, and when to apply. We will update this page as details become available.

What is tax amnesty?

Tax amnesty is a limited-time chance for individuals and businesses to pay past-due income, franchise, sales, or use taxes and the related interest penalty-free and without the fear of criminal prosecution. It runs from February 1, 2005, through March 31, 2005. Taxpayers eligible to participate in amnesty but choose not to do so will be subject to additional penalties.

Who is eligible?

Amnesty is open to both individuals and businesses for taxable years 2002 and prior, if they did any of the following:

  • Did not file the required California tax returns
  • Underreported income on a previously filed tax return
  • Claimed excessive deductions
  • Did not pay income/franchise, sales, or use taxes on time

The following taxpayers or transactions are not eligible for amnesty:

  • Taxpayers currently under criminal investigation or prosecution on tax-related matters
  • Abusive tax shelter transactions that were eligible for relief under California’s Voluntary Compliance Initiative or the 2003 IRS Offshore Voluntary Compliance Initiative – These initiatives applied to taxpayers with nonreported or underreported tax liability amounts attributable to an investment in an abusive tax shelter. Note: These taxpayers are eligible for amnesty for non-abusive tax shelter items..

How and when do I apply?

  • Complete and return a signed amnesty application by March 31, 2005. Amnesty runs from February 1, 2005, through March 31, 2005. (Since March 31 is a state holiday, we will accept applications postmarked April 1, 2005.)
  • File all missing income tax returns for amnesty years by May 31, 2005.
  • File amended income tax returns for taxable years where you underreported your income for tax amnesty years by May 31, 2005.
  • Pay all outstanding tax liabilities and interest by May 31, 2005. Or, set up an installment payment agreement that will be fully paid by June 30, 2006.

Where do I get forms?

  • It is too late to get California tax amnesty forms. If you filed for amnesty, you can get the tax forms from the Franchise Tax Board.
  • Tax forms for years 1994-2002 are currently available on the Franchise Tax Board website under Forms and Publications.
  • Tax forms for years before 1994 are available by phone order at (800) 852-5711.

Can I delay filing and paying past-due taxes until the amnesty period begins?

No. The State will continue its normal compliance, enforcement and collection efforts to enforce the tax laws. This means that new audits will be conducted, and nonfiler enforcement efforts will proceed as planned. It also means that normal billing and collection actions will continue. This can result in a levy against your bank account, garnishments of wages, filing of a tax lien and other actions allowed by law.

What if I don’t file for amnesty?

Amnesty legislation provides for increased enforcement actions for years 2002 and prior:

  • The accuracy-related penalty increases from 20 to 40 percent on new tax assessments. This penalty is assessed for negligence or disregard of rules or regulations, any substantial understatement of income tax (10 percent), and other reasons.
  • An amnesty penalty is imposed at the rate of 50 percent of the existing unpaid interest amount on years for which you could have applied for amnesty.
  • An amnesty penalty is imposed at the rate of 50 percent of unpaid interest on tax assessments that become final after the amnesty ending date.

Can I apply for amnesty if I am in bankruptcy?

Yes. However, if you are in an active bankruptcy, you will need the approval of the Court/Trustee to participate in the amnesty program.

Can I file an extension for amnesty?

No. Amnesty applications must be postmarked by March 31, 2005. (Since March 31 is a state holiday, we will accept applications postmarked April 1, 2005.)

If I file an application during amnesty, can I file my returns and pay after the deadline?

Yes, but you must file returns and make payments by May 31, 2005. If you enter into an installment payment plan you can pay the taxes and interest over time, but you must pay the entire balance by June 30, 2006.