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Jordan Goodman is the author of Everyone's Money Book, available at 888-201-6300. This is the third edition of the book. You can also visit his Web site at www.moneyanswers.com. He talks with us on Thursday mornings.
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October 10, 2002
"Tax Amnesty Programs"
As states become more and more desperate to raise tax revenue any way
possible, more and more of them are rolling out tax amnesty programs. What
is tax amnesty? It’s a temporary period —- usually two to three months -— in which
taxpayers can come forward and pay any back taxes due, with no questions
asked. The state gets a surge of revenue and taxpayers get any tax monkeys
off their backs. After the amnesty period is over, the state comes after
delinquent taxpayers with renewed vigor, hopefully giving people incentive
to come out of hiding during the amnesty period.
Here are just a few of the states that are now conducting tax amnesty
programs:
- Massachusetts (until December 2)
- South Carolina (starts October 15)
- New York (date not yet set)
- Connecticut (ongoing now)
- Oklahoma (ongoing now)
- Missouri (ongoing now, over at the end of October)
Each amnesty program is a bit different. In some cases, like Missouri, all
penalties and interest charges are waived, no matter how long ago you missed
paying your taxes. In other cases, like Connecticut, the interest rate is
reduced on back taxes from the usual level, but you still have to pay some
interest.
Should you take advantage of tax amnesty if it is offered in your state and
you have the money to participate? Absolutely. It is a good way to avoid
penalties and interest, and come clean without fear of lawsuits or hassles
from the state treasury department.
Speculation continues about whether Uncle Sam would ever try a tax amnesty
program at the federal level. It would make sense because of huge federal
budget deficits and a huge amount of uncollected back taxes. But no one is
actively speaking about it at the IRS or Treasury because it would be
extremely complex to take on at the federal level. IRS officials think a
federal amnesty gives the wrong message that you can evade taxes and get
away with it, if you wait long enough. So, for now, be thankful your state may
offer such a program -- don’t count on getting amnesty from the Big Uncle in
Washington anytime in the foreseeable future.
For More Financial Tips From Jordan Goodman
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