What exactly is tax amnesty?

On Behalf of | Nov 17, 2021 | Tax Law |

When taxes become problematic, there are sometimes cases where specified groups can obtain tax amnesty. Tax amnesty is when a specific group of taxpayers is given an opportunity to obtain forgiveness if they are able to pay a defined amount in taxes. This forgiveness includes forgiving tax penalties and interest that may have accrued over time.

The reason that some people would like amnesty is that it helps protect them against criminal prosecution. The possibility of obtaining amnesty normally ends as soon as an investigation begins, and the courts may be harsher on those who do not take the amnesty option when it’s open to them.

Tax amnesty: Not a standing offer

Tax amnesty isn’t a standing offer, which means that you can’t take that offer at any time or if you think that your case isn’t going to go your way after refusing it in the past. Instead, think of tax amnesty as a one-time, limited-time offer. Usually, you have fewer than 60 days to review the offer (and sometimes 30 days or fewer).

The Department of Revenue normally waives all penalties and at least part of the interest owed by someone who chooses to participate in the amnesty offer. With the offer, the kinds of taxes that will be covered and eligible will be noted. Personal income tax, for example, is often included in amnesty programs. In other cases, sales taxes or corporate taxes may be eligible.

Why would the government allow people to seek tax amnesty?

Tax amnesty is beneficial because it allows the government to collect money that taxpayers might otherwise try to withhold. When people know that they will avoid penalties by going through an amnesty program, they’re more likely to comply.

Tax amnesty isn’t right for everyone. Sometimes, especially if you owe a larger amount of money, it could be better to try to negotiate an individual settlement with the government, whether that’s the state or federal government. If an amnesty program is available, though, it is worth looking into. It may be a good opportunity for you to repay what you owe the government for less and without risk of prosecution.