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 Estimates millions

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 Timeline December 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 Timeline February 2005 – March 2005 File an application February 1, March 31, 2005 Postmarked 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 due by June 30, 2006 (amnesty years only).

Special Filing Requirements Bankruptcy Status Bankruptcy Status – Court Approval Required Notice of Proposed Assessment Notice of Proposed Assessment – FTB will finalize assessment Pending Protest Pending Protest – FTB will dismiss protest Pending Appeal Pending Appeal – FTB will finalize assessment Partial Participation Partial 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 Period 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 Attorney Practitioner Hotline Amnesty Application provided to CTPs Tax News Articles Special Fax Number BOE and FTB Amnesty Portal

Where can I obtain the latest information?

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