Tax regulations can be tricky especially true when dealing with sales, use and other taxes assessed on businesses, and in some cases, individuals. If a taxpayer is unaware a tax liability exists it may take years before they are alerted and it’s often by the state Department of Revenue. The good news for taxpayers is that the Indiana Department of Revenue offers a voluntary disclosure program for business and individuals. This program provides benefits for qualifying taxpayers to step forward, reveal discrepancies and come into compliance with existing state regulations. To help our clients, prospects and others understand the eligibility rules and other terms of the VDA program, Barnes Dennig has provided the key details below.
Indiana Voluntary Disclosure Agreement Details
To become compliant, an Indiana taxpayer agrees to the basic terms and conditions of the voluntary disclosure program for the specific type of tax reported as follows:
- Income Tax: A full three-year look-back period for income tax for years already past the original filing due date. Return due dates are the 15th day of the fourth month after the end of the reporting period. Returns, not work papers, must be filed. Net operating losses or any other losses incurred prior to the look-back period may not be carried forward into the look-back returns.
- Sales and Use/Withholding Tax: A full three-year look-back beginning with January 1 each year, plus the most current monthly period to bring the account as current as possible. If a taxpayer has collected and not remitted Indiana sales/use tax or withholding taxes, or any other tax termed to be a “trust” tax is collected, the look-back period will be extended to include all periods that Indiana taxes were collected and not previously remitted.
Unfortunately, the Indiana disclosure program does not provide a waiver of interest due. All delinquent payments will be first applied to interest and then tax, beginning with the oldest periods going forward.
In exchange for a taxpayer coming forward voluntarily to pay their delinquent taxes, the Indiana Department of Revenue will:
- Waive all penalties applicable to taxes and returns filed for the required look-back periods reported
- Waive the filing requirements for periods prior to the look-back period
- Waive audits prior to the look-back period, unless it is determined that the taxpayer is subject to disqualification as noted below
To be eligible for the full disclosure program, generally a taxpayer must not have brick-and-mortar nexus – or substantial physical presence – in Indiana. However, all delinquent taxpayers are encouraged to submit a VDA request for consideration, as the Department of Revenue will offer an alternative proposal for those that do not qualify for the full program unless they are disqualified for other reasons as stated above.
It’s important to note however that a taxpayer will be disqualified from participating in the voluntary disclosure program if:
- Previous contact of any kind was made by the Indiana Department of Revenue related to the specific tax type in the VDA request
- There is any misrepresentation or omission of material facts set forth in the VDA request
- The taxpayer fails to comply with and follow the terms of the VDA
The voluntary disclosure program is an effective method to come into compliance with state regulations. However, it’s important to have a qualified professional review your situation before communicating with state officials. If you have questions about the VDA or need assistance with tax planning or compliance, Barnes Dennig can help. For additional information, please call us 317.572.1130 or click here to contact us. We look forward to speaking with you soon.