A limited tax amnesty program was enacted recently in Alabama. The program seems useful mainly for taxpayers who have been “off the radar” in recent years, non-filers who have had no contact with the Alabama Department of Revenue for the last 5 years. The program will be of limited benefit to taxpayers who have been in communication with the Department during that period, and of no benefit to taxpayers already in an audit or who have received payment notices.
Taxpayers eligible for the amnesty program will have all penalties and half of the interest waived, if they pay their back taxes and the remaining interest for the 3 previous tax years. But taxpayers will have to wait until 2016 to apply. The Alabama Tax Delinquency Amnesty Act (Act No. 2015-555) opens a brief window for taxpayers (individuals and businesses) to “come clean” and apply for the relief. The window (of at least 2 months) will be scheduled by the Department during 2016.
Taxpayers must pay all taxes that were owed during a 3-year “look-back period” and one-half of the interest on those taxes. Payment must be made at the time of the application, and any unfiled tax returns likely will be required. No appeal of the tax liability is allowed.
Amnesty is available for most types of taxes, with limited exceptions. However, amnesty covers only taxes due before January 1, 2015 or taxes for tax periods that began before January 1, 2015. For example, income taxes for calendar year 2014 can qualify, and the look-back period would include taxes for 2012 and 2013.
Amnesty is not available:
- To taxpayers “contacted” by the Department about the taxes within 5 years of the application. Contact includes audits and receipt of a notice or questionnaire about the taxes identified in the application. Taxpayers who made payments of estimated tax, filed tax returns, or requested an extension of time to file a return at any time during the last 5 years are deemed to have been “contacted.”
- To parties being investigated or prosecuted for an Alabama tax crime or who file a fraudulent application or related document.
- For motor fuel tax, for penalties for failure to withhold and pay over taxes (e.g., payroll taxes), or for penalties for failure to submit information returns.
If amnesty is received and the taxpayer then fails to comply with Alabama tax filing or payment requirements during 2016 - 2023, an automatic negligence penalty will be applied.