On July 13, 2016, Pennsylvania signed into law Tax Act 84 of 2016. One very important piece of the bill states Pennsylvania will institute a period of Tax Amnesty during 2017.
So what do they mean by Tax Amnesty?
Tax Amnesty refers to a period of time where penalties and interest will be partially forgiven if all outstanding state tax liabilities are paid in full.
What exactly will the state forgive?
The State will forgive all penalties associated with the outstanding liabilities and half of all interest that has accrued on the liabilities. Will PA forgive any of the actual tax liability itself? No, PA will not forgive any of the original tax liability owed as a result of this amnesty program.
Not only will they not forgive any of the original liability, they will ONLY forgive the penalties and half of interest if all outstanding liabilities are paid during the amnesty program. That means if you owe $5,000 to the state in tax liability, $1,000 in penalties and $1,000 in interest, you would have to pay $5,500 to the state during the amnesty program for your entire liability to be forgiven. That $5,500 is made up of the entire $5,000 original liability and $500 (50%) of the interest owed. So $1,500 has been forgiven but the rest is due immediately. There are no payment plans under the PA Tax Amnesty program of 2017. The entire balance is due by the end of the program or no amnesty is offered.
So, what is the time frame of the PA Tax Amnesty Program?
The PA Tax Amnesty Program runs from April 21, 2017 through June 19, 2017.
What taxes are eligible?
All taxes owed to the Commonwealth of Pennsylvania are eligible, but only through the 2015 tax year.
For example, the amnesty program only applies to Personal Income Taxes owed for the 2015 tax year and prior. No taxes assessed for a period after December 31, 2015 are eligible. However, all tax returns must be filed and taxes paid for any period after December 31, 2015 for the prior liabilities to be eligible for tax amnesty. This means that if you do not file and pay your 2016 Tax return before the amnesty program, you are not eligible for amnesty. There is an online Amnesty Return that must be filed in order to claim amnesty. All unfiled tax returns must also be filed by the end of the Tax Amnesty period (June 19, 2017).
Pennsylvania previously had a similar Tax Amnesty program during 2010. Anyone who participated in the 2010 program is not eligible to participate in the 2017 program. Please note that the Tax Amnesty Program cannot lead to any original tax liability being forgiven. Only the penalties and half of the interest owed on the original liability will be forgiven. Amnesty will only occur if all outstanding returns, the amnesty return, and payment are sent to PA within the 60 day window (April 21 through June 19, 2017).
If you have delinquent Pennsylvania taxes, the PA amnesty program is worth considering. Make sure to read over the amnesty guidelines prior to the program and consider using a professional to help with the process. A link to the PA Tax Amnesty Program Guidelines is included below.
