If you owe back taxes in Rhode Island, you may be able to become current while paying significantly less than you owe. To generate revenue Rhode Island is offering the state’s roughly 90,000 delinquent taxpayers a brief amnesty period during which their uncollected taxes, interest and fines may be reduced.
The cost of unpaid taxes can be steep, so taking advantage of Rhode Island’s tax amnesty could save delinquent taxpayers some money.
How amnesty benefits the state
Uncollected taxes are subject to fines and other late-payment penalties. They also accrue interest. In Rhode Island, interest is accrued at 12 percent for periods prior to Sept. 30, 2006, and 18 percent for periods after that date. There’s no limit to how long a look-back period regulators will consider if a state tax auditor uncovers nonfiled returns. So, if unpaid taxes go back several years, businesses and individuals may have a high tax liability.
States periodically offer amnesty programs to reduce the costs of getting into compliance. Amnesty programs help bring additional revenue to the state, and Rhode Island’s amnesty program may be particularly beneficial for the state, which reported an approximately $60 million shortfall in its 2016-17 budget. It anticipates another shortfall in 2017-18. During a previous amnesty program, Rhode Island collected $22.4 million of its outstanding balances. The total for this amnesty period is not expected to be as high.
What Rhode Island is offering
The R.I. Division of Taxation Tax Amnesty Program began Dec. 1 this year and will run through Feb. 15, 2018. The program waives fines and penalties and reduces the interest on the unpaid taxes by 25 percent, regardless of the reason for the delinquency.
Taxpayers with unpaid taxes accrued before Dec. 31, 2016, who are not currently in bankruptcy, the subject of a criminal investigation or any civil or criminal proceedings involving fraud or tax compliance are eligible for the program.
Eligible businesses and individuals will be able to take advantage of the program to get some relief for a variety of state and local taxes, including:
• Corporate income tax
• Estate tax
• Fiduciary income tax
• Personal income tax
• Sales tax
• Use tax
• Cigarette and tobacco products taxes
• Employer taxes
How to take advantage
To participate in the tax amnesty program, taxpayers must complete a Tax Amnesty application. The return asks for information about the type of delinquent tax, the period of delinquency and the interest accrued on the delinquent tax. Taxpayers may also need to file personal income tax returns from a prior year.
Once amnesty has been approved, taxpayers should receive a Statement of Accounts Eligible for Amnesty 2017 from the Division of Taxation. The statement includes an invoice number and will allow taxpayers to begin paying their bill using an online system.
Getting back into compliance can be burdensome, but it reduces the expenses associated with delinquent taxes. It also offers a reprieve from other consequences of not paying taxes. The state may use civil or criminal prosecution to recover taxes. It may also suspend professional licenses, driver’s licenses, motor vehicle registration and sales tax permits.
Tarra Curran is leader of the New England State and Local Tax Practice at CBIZ Tofias.