The New York State Department of Taxation and Finance (“Department”) recently enacted the “Penalty and Interest Discount” (PAID) program that will eliminate up to 80 percent of the interest and penalties for older tax liabilities. The program will begin January 15, 2010, and will run to March 15, 2010, the date by which payment in full must be made to receive the benefits of the program.
Under the PAID program:
- For taxes assessed (or for which a final determination was issued) on or before December 31, 2003, 80 percent of the interest and penalties are eliminated — taxpayers pay tax plus 20 percent of the interest and penalties.
- For taxes assessed (or for which a final determination was issued) between January 1, 2004 and December 31, 2006, 50 percent of the interest and penalties are eliminated — taxpayers pay tax plus 50 percent of the interest and penalties.
Virtually every type of taxpayer and tax is eligible for the PAID program, with the exception of taxpayers convicted of a crime under the Tax Law or the Penal Law, and subject to a court order to pay a tax liability as a result of that conviction.
Tax liabilities that include certain types of penalties are excluded from the program; among these are (i) a fraud penalties, (ii) the penalty imposing personal liability for failure to pay withholding taxes, (iii) substantial understatement penalties, and (iv) penalties relating to reportable transactions. The penalties which most taxpayers face — for late filing or late payment — are covered by the program.
Taxpayers who have entered into installment payment agreements with the Department for eligible liabilities may participate in the program if full payment is made by March 15, 2010.
The Department intends to mail letters in January, 2010, to taxpayers who qualify for PAID discounts, inviting them to participate in the program. The Department’s website will be updated as of January 15, 2010, to permit its use in the program.
The PAID program is separate and distinct from New York’s voluntary disclosure program, which permits a taxpayer to come forward and report and pay an unassessed tax, with full payment of interest and abatement of all penalty.
The PAID program offers eligible taxpayers a chance to pay past due tax liabilities at substantially reduced rates. Taxpayers can save 80 percent of the penalties and interest on assessments or determinations issued on or before December 31, 2003 and 50 percent of interest and penalties on assessments or determinations issued from January 1, 2004 to December 31, 2006.