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Even if you have been a bad taxpayer, California is willing to give you a break.
Voluntary Compliance Initiative 2 (VCI 2) is an opportunity for taxpayers who underreported their California income tax liabilities, through the use of abusive tax avoidance transactions (ATAT) or offshore financial arrangements (OFA), to amend their returns for 2010 and prior tax years and obtain a waiver of most penalties.
Filing period: August 1, 2011 to October 31, 2011
Applicable tax years: 2010 and prior
You are eligible to participate in VCI 2 if you (or one of your related entities):
- Filed a tax return that underreported your income or tax liability through the use of an ATAT or OFA.
You are eligible even if you:
- Are currently under FTB examination for an ATAT or OFA.
- Are currently under administrative protest or appeal for an ATAT or OFA.
- Participated in the IRS’s Offshore Voluntary Disclosure Initiative.
You must take the following steps to participate:
- File a completed Participation Agreement form with us between August 1, 2011 and October 31, 2011.
- Attach the form to your amended return to report all income from all sources, without regard to the ATAT and including all income from the OFA.
- Pay all tax and interest by October 31, 2011. See payment options for more information.
Participation in VCI 2 will allow you to avoid:
- The cost of litigation.
- Certain penalties and the associated interest.
- Criminal prosecution.
You can avoid the following penalties under VCI 2:
- Noneconomic Substance Transaction Understatement Penalty
- Accuracy Related Penalty
- Interest Based Penalty
- Fraud Penalty
If you are eligible but do not participate, you will be subject to the full range of penalties and interest, and may be subject to criminal prosecution.
The Large Corporate Understatement Penalty (LCUP) and the Amnesty Penalty cannot be waived under this initiative.
By Stacie Clifford Kitts, CPA
Tax preparers heads up, according to the new IRS rules, you have until January 1, 2011 to register for your PTIN (preparers tax identification number). I’m getting a little concerned about the IRS’s ability to GET IT DONE by the January 1, 2011 due date.
Robert Flach of the Wondering Tax Pro, describes his frustration with trying to register on line in his post WHAT A MUCKING FESS!
Before I could submit the PTIN application I first had to create an “account”. I completed this process and was “told” that I would receive an email from the IRS with a temporary password for my account.
It never came!
Two hours later I went online to try again, stating that I needed help with my password when “logging in”. After properly answering the security question I had established in my initial try I was again “told” that I would receive an email with a new password.
It never came!
I gave up for the day.
Ultimately Robert decided to mail in a Form W-12 IRS Paid Preparer Tax Identification Number (PTIN) Application, the alternative to applying on line. If you choose this option beware, the IRS indicates that it could take 4 to 6 weeks to process. The IRS has also posted the following warning on their site:
**The PTIN sign-up system and toll-free number are experiencing high volumes of users. We appreciate your patience and encourage you to try again later if you encounter delays.**
Good luck preparers, and my advice, don’t wait to GET IT DONE!