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California Launches Amnesty Program for Tax Dodgers

August 15th

This week, the California Franchise Tax Board announced a new amnesty program for tax dodgers. The program applies specifically to those people who used abusive tax shelters or offshore financial arrangements to conceal or underreport income. This is the third amnesty program offered by the Tax Board since 2004.

The program stipulates that candidates can avoid most IRS penalties if they voluntarily amend their 2010 and earlier tax returns to include any undeclared income. Candidates must also pay back any taxes and interest owed. If these conditions are met, the program also provides that candidates may avoid criminal prosecution so long as they are not the current subject of a criminal investigation or complaint.

The penalties on unpaid taxes can be high. A person who owes $100,000 in state income tax from an offshore account could owe more than $184,000 in additional interest and penalties. However, under the amnesty program, tax dodgers may avoid penalties and reduce the total payment by a significant margin.

Who Should Consider Applying?

The California Franchise Tax Board has already contacted approximately 47,000 taxpayers who may be eligible for the program, though others are also encouraged to apply.

This program comes in association with a similar program offered in 2009 by the Internal Revenue Service. The IRS plan also offers amnesty from prosecution, though not from penalties, to taxpayers with undeclared offshore accounts and assets.

California residents who already participate in this federal program should consider applying for the state version. For those who are already a part of the IRS program the process will be slightly expedited, since the IRS will pass along any information on offshore income to the state authorities.

However, any interested Californians must apply to the program and amend their returns between August 1 and October 31. They must also pay any outstanding taxes and interest by October 1, or by June 15 if they qualify for an installment agreement.


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