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New amnesty program provides break on taxes

Tax scofflaws, listen up: You’ll soon have one month to file those past-due state tax returns and get your bills paid up.

Arizona recently announced an amnesty program for individuals and businesses that will feature waived penalties, no threat of prosecution and a reduced interest rate of 3 percent on back taxes.

The official goal of the program: offer relief and a fresh start to people who, for whatever reason, underreported taxes or failed to file their returns, including those who weren’t aware of the need to file.

The unofficial goal: raise more money for Arizona during a time of budget pressures.

“Obviously the state is seeking money,” said Steve Newmark, a tax attorney at Jennings Strouss in Phoenix. “It’s also a rare opportunity that taxpayers who qualify should take advantage of.”

The amnesty will run from May 1 through June 1 and cover individual and corporate income, withholding, luxury, sales, use and a few other taxes but not property levies.

It will cover the years 2002 through 2007 for income and other tax returns filed annually. The amnesty covers the period 2003 through 2007 for sales and other tax data filed monthly or quarterly.

This isn’t the first time Arizona has offered a tax amnesty. Six years ago, at the tail end of another recession, the state collected $70 million, or nearly three times the expected amount, said Anthony Forschino, assistant director at the Department of Revenue.

This time, the state has lowered its expectations to a loose estimate of $5 million in anticipated revenues. Officials don’t know how many people might apply or how much will be collected, Forschino said.

Amnesty seekers must pay any tax bills in full with their application.

“One downside is that taxpayers are giving up all rights to contest whether the tax is due,” Newmark said. “But in most cases, I suspect it’s clearly due.”

The state’s plan was adopted by the legislature in late January.

Arizona is one of eight states with an amnesty in the works this year, according to Kathleen Thies, a writer, attorney and analyst at tax researcher CCH Inc. The others are Alabama, Connecticut, Massachusetts, New Jersey, Nevada, Virginia and Wisconsin. In a couple cases including Nevada, which doesn’t impose an income tax, the amnesty is focused around sales taxes.

Legislation to create an amnesty is pending in five other states.

“We’re starting to see more tax-amnesty legislation come up,” Thies said. “We see more of these efforts during periods of budget shortfalls.”

Even some cities are joining the movement, with Phoenix unveiling a sales-tax and license-fee amnesty for businesses that will run from April 15 to June 15.

An application and additional details about Arizona’s program can be viewed at ww.azdor.gov/taxamnesty.

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