(from the Greek amnestia, oblivion) is a legislative or executive act by which a state restores those who may have been guilty of an offense against it to the positions of innocent people. It includes more than pardon, in as much as it obliterates all legal remembrance of the offense. The word has the same root as amnesia."
The Pennsylvania legislature has authorized a tax amnesty period from April 26 to June 18, 2010. During this limited, 54-day time frame, the Pennsylvania Department of Revenue will waive 100% of penalties and half of the interest for anyone who pays his or her delinquent state taxes.
Any PA taxes delinquent as of June 30, 2009, and any non-filed PA returns overdue as of June 30, 2009, are eligible for tax amnesty. Individuals and businesses are included.
All taxes administered by the PA Department of Revenue are eligible for the tax amnesty program. There are many state taxes. Here are a few: Personal Income Tax, Inheritance Tax, Capital Stock Tax, Sales and Use Tax, Corporate Net Income Tax. The tax amnesty does not include Unemployment Compensation because it is administered by the PA Department of Labor and Industry. The program does not apply to any tax administered by another state, the federal government or Internal Revenue Service.
To obtain tax amnesty, you must do the following between April 26 and June 18, 2010:
file an amnesty return online with the PA Department of Revenue (taxpayers will only be able to apply online; no paper application will be available);
file tax returns for periods for which returns were not filed, or file amended returns for all underreported tax; and
pay all delinquent taxes plus 50 percent of the interest due with the amnesty return that is filed.
No extensions to file or to pay are available. Penalty and interest paid before the tax amnesty program begins are non-refundable.
If you are reporting and paying taxes which are completely unknown to the Department – meaning you have not registered, filed or paid the state taxes, nor have you been contacted by the department about the taxes – you could qualify for a limited filing period. In this case, only undisclosed tax delinquencies dating back to July 1, 2004, will be required to be filed and paid under the amnesty program.
If you are reporting and paying taxes which are known to the department, you must file tax returns or amended returns for all tax periods and pay all taxes due to the department.
Taxpayers with known delinquencies will receive notices from the DOR informing them about the amnesty program. The notice will include a Personal Identification Number (PIN) to be used in the application process. For delinquencies that the department does not know about, taxpayers will have to register and get a PIN online in order to file.
A business or individual currently under criminal investigation for violation of a tax law, or named as a defendant in a criminal complaint alleging a violation of a PA tax law is not eligible to participate in the amnesty.
After the amnesty period closes, a 5% non-participation penalty will be imposed on all un-paid tax, penalty and interest not paid in full during the amnesty period. Existing deferred payment plans, active appeals and entities in bankruptcy will not be assessed the additional 5% penalty.
In addition, if within two years after the end of the program a taxpayer that is granted amnesty becomes delinquent for certain periods in payment of any taxes that are due or in the filing of any required returns, the Department of Revenue may assess and collect all penalties and interest waived through the amnesty program.
You only get one shot at Pennsylvania tax amnesty. If another Amnesty Program is held in the future, a taxpayer participating in the 2010 Amnesty Program will be prohibited from participating in future Amnesty Programs.
The amnesty is projected to generate an additional $190 million for the state to help offset spending in the fiscal year that began July 1, 2009. Last year New Jersey had a hugely successful amnesty program which collected $725 million in six weeks.
Pennsylvania’s last tax amnesty was 14 years ago. The 1995-96 amnesty waived penalties but required full payment of taxes and interest. This year’s amnesty is better. It will waive penalties and 50% of the interest. The extra incentive for taxpayers previously unknown to state officials to come forward is that they will not be held responsible for taxes due before July 2004. The theory is that they will have to supply the department with the information it needs to tax them in the future.
While there is no question that tax amnesties work, it can provide a negative incentive to tax payers. As Kail Padgitt of The Tax Foundation in Washington D.C. says a tax amnesty is essentially "rewarding people that have not paid their taxes and have been out of compliance. So really what it does is it provides a perverse incentive to not pay your taxes."