Tax Amnesty FTB/CPA Liaison MeetingOctober 28, 2004

Tax Amnesty is A limited-time opportunity for Individuals and businesses to Pay past-due income, sales or use taxes, and the related interest For tax year 2002 and prior Avoiding most penalties and fees, and criminal prosecution.

Revenue Estimates2004-05millions

Sheet1

Gross Revenue$555

Collections absent Amnesty from participants$(355)

Net$200

&LQ/rads/data/04/Ty/Amnesty-BreakdownTable&R&D &T

Sheet2

Sheet3

Amnesty Eligible UniverseWho Benefits?

Did not file required franchise or income tax returnsUnderreported income on previously filed franchise or income tax returnsClaimed excessive deductionsDid not pay previously assessed taxes, interest, penalties, or fees

Who Qualifies?

IndividualsFiduciariesEstates and TrustsPartnershipsLimited Liability companiesCorporationsExempt organizations with unrelated business taxable income

Excluded Taxpayers/Transactions

Those under criminal investigation or prosecution on tax-related matters

Abusive tax shelter transactions

Pre-Amnesty TimelineDecember 2004 - January 2005

Taxpayer & tax preparer outreach

Mail 2.2 million amnesty letters (applications)

Amnesty Media Campaign

Media--Network TV--Billboards--Radio--Public Service Announcements

Amnesty TimelineFebruary 2005 March 2005

File an application February 1, 2005 - March 31, 2005Postmarked by April 1, 2005, due to the holiday

Most penalties and fees waived for taxable years 2002 and older

Amnesty Timeline April 2005 May 2005By May 31, 2005:

Underreporters and nonfilers must file returns

Pay in full taxes and interest or initiate an installment agreement

Final payment on an installment/payment agreement due by June 30, 2006 (amnesty years only).

Special Filing RequirementsBankruptcy Status Court Approval RequiredNotice of Proposed Assessment FTB will finalize assessment Pending Protest FTB will dismiss protestPending Appeal FTB will finalize assessmentPartial Participation Amended return requiredUnder Audit Amended return required

General Amnesty InformationNo refunds allowed on taxpayer balances paid prior to amnesty

Taxpayers waive their rights to claims for refund or credit for amounts paid in connection with amnesty

IRS Information Exchange Agreement

Compliance Period2005- 2006 FTB will revoke amnesty, reinstate the penalties and fees, and assess the new amnesty penalty for the failure to file and pay any amount of tax, including penalties and fees, for the 2005 or 2006 taxable years.

Amnesty PenaltyPenalty equal to:50% of the post-amnesty unpaid interest amount on any tax year eligible for amnesty50% of the unpaid interest subsequently assessed on deficiency amounts

Penalty would not apply to a taxpayer that:Initiates and is compliant with an installment/payment agreement under amnestyHas an existing (grandfathered) installment agreement and does not participate in amnesty (PIT only)

Accuracy Related Penalty Increase

An increase in the penalty for a taxable year eligible for amnesty from 20% to 40% of the understatement for any assessment issued post amnesty

Increase does not apply to:A taxpayer in audit, protest, appeal, settlement, or litigation as of the start of amnestyUnderstatements relating to tax shelter items

Tax Professional ServicesFTB Amnesty Mailings - Copy to Power of AttorneyPractitioner HotlineAmnesty Application provided to CTPs Tax News ArticlesSpecial Fax Number BOE and FTB Amnesty Portal www.taxes.ca.gov

Where can I obtain the latest information? www.ftb.ca.gov

Thank you for your time and attention.