VSCPA Comment Letter on 2009 Tax Amnesty Program

April 10, 2009


Office of the Commissioner
Virginia Department of Taxation
Post Office Box 1115
Richmond, VA 23218-1115

Re: 2009 Amnesty Tax Program Guidelines

Dear Commissioner Bowen,

Thank you for the opportunity to comment on the guidelines and rules governing taxpayer participation in the 2009 Virginia Tax Amnesty Program. As the Virginia Society of CPAs (VSCPA) Taxation Advisory Task Force, we are offering the opinion of our expert group only, not a position of the VSCPA or its membership.

We have the following comments and questions regarding the proposed guidelines:

1. Amnesty Period:  The legislation stipulates a period of no less than 60 days and no more than 75 days. The Task Force recommends a 75 day period, if at all possible.
2. Imposition of 20% Penalty on Unpaid Tax: Does TAX plan to include exceptions for taxpayers affected by economic turmoil? We are in a much different climate than during the 2003 amnesty period. Under certain circumstances, some taxpayers could be in mortgage default, but not filed for bankruptcy protection. Others could enter into agreements with TAX and then lose a job. How will TAX handle these situations? The IRS is mitigating collection activities for taxpayers in these types of positions.  We are asking TAX to include exceptions to the penalty for taxpayers in these situations.
3. The legislation limits the amnesty periods to, generally, years prior to 2008 — yet the greatestlosses for taxpayers occurred last year. While the legislation timeframe is beyond TAX’s control, how will the amnesty program interface with potential net operating loss carrybacks?
4. How will the Virginia Tax Amnesty Program rules for tax returns filed with missing or insufficient payment account for those taxpayers who suffered extreme losses due to the economy or Ponzi schemes and have little or no knowledge about the potential for recovering the lost assets for which they may be responsible for paying taxes? Will these taxpayers be included in payment plans?
5. Taxpayers falling under No.10 under The Virginia Tax Amnesty Program rules must make a difficult decision — either acquiesce on a technical issue so they may apply for amnesty or forgo the amnesty program to retain appeal rights. We recommend rectifying this language so taxpayers can retain all options.
6. How will TAX handle those taxpayers who file early under the Amnesty Program, but wait to pay until the end of the amnesty period? Will they be subject to collection activity? Are they required to send payment with the application in order to avoid being subject to collection activities?