Michigan 2011 Tax Amnesty Update

The Michigan Department of Treasury (MDT) has recently issued details relating to the 2011 Tax Amnesty Program which runs from May 15, 2011, through June 30, 2011.

The tax amnesty allows Michigan taxpayers a process to resolve tax liabilities with the MDT for return periods ending on or before December 31, 2009, and avoid the typical penalty payments associated with under or non-reported tax liabilities. Taxpayers accepted into the program also avoid civil and criminal penalties and possible prosecution by the MDT. To participate in the program, qualified taxpayers must complete amnesty application and make full payment of the tax liability, including interest, by June 30, 2011, to be eligible. The following provides some additional details regarding the program.

Program Eligibility

Tax amnesty is available to both individual and business taxpayers who have tax liabilities for eligible taxes for return periods ending on or before December 31, 2009. Tax liabilities include under or non-reported tax liabilities, overstated deductions, credits or exemptions, unregistered taxpayers who have failed to file Michigan tax returns, delinquent payment of past due taxes and taxpayers who have received a final tax due notice. Individuals and business taxpayers are not eligible for the amnesty if they are:

  1. eligible to enter into a Voluntary Disclosure Agreement (VDA) with the state;
  2. the subject of a current tax-related Court of Claims case;
  3. under criminal investigation or involved in a civil action or criminal prosecution for that tax; and/or
  4. convicted of a felony under the Revenue Act or the Internal Revenue Code.

Program Eligibility - Audits, Informal Conferences and Litigation

To participate in the program if taxpayers are under audit, taxpayers must remit the full amount of the tax due, including interest, and submit a completed application to MDT during the specified amnesty period. Although the audit will include any applicable penalty, it will be waived at the time the audit is processed. For audits that will not be completed by the end of the amnesty period, taxpayers may prepare and submit amended returns and an application and remit full payment of the tax and interest due to the auditor during the tax amnesty period. Applicable penalty would only be applied to any additional tax determined due upon completion of the audit.

Tax amnesty is also available for taxpayers who are in the informal conference process. Taxpayers must submit the application and full payment of the tax and interest by June 30, 2011; the informal conference process will proceed as it normally would.

Taxpayers can also participate if they are litigating a case before the Michigan Tax Tribunal or the Appellate Courts by submitting the application and the full tax and interest by June 30, 2011. Taxpayers may continue litigating their case before the Michigan Tax Tribunal or their appeal before the Appellate Courts if the tax amnesty is granted. However, taxpayers that have already paid the tax, interest and penalty that they are contesting in order to litigate in the Court of Claims is not eligible for the amnesty.

Qualifying Taxes

Taxes covered by the amnesty program include all state taxes administered under the Revenue Act (PA 122 of 1941). These include: the income tax; the Michigan Business Tax; the Single Business Tax; sales and use taxes; withholding tax; fuel and motor carrier taxes; IFTA fuel tax; airport parking tax; convention facilities tax; cigarette and tobacco taxes; tobacco equity assessments; estate tax; inheritance tax; intangibles tax; retaliatory tax; severance tax; and the real estate transfer tax.

Tax obligations not covered by the amnesty include the above taxes for return periods ending after December 31, 2009, and local taxes (e.g., city, county), including real and personal property taxes. Furthermore, amnesty is not available if the tax is attributable to income derived from a criminal act.

Participation Requirements

In order to participate in the Michigan Tax Amnesty Program, taxpayers must submit: a completed Tax Amnesty Application (Form 3855); all un-filed or amended tax returns for which the taxpayer is requesting amnesty; a completed Registration for Michigan Taxes (Form 518), if the applicant is a business taxpayer and the business is not registered; and full payment of all tax and interest due. The Tax Amnesty Application, applicable returns, and full payment (including interest) must be postmarked no later than June 30, 2011, to qualify.

The Department of Treasury will notify taxpayers in writing if the request for amnesty has been denied. Tax amnesty may be denied for:

  1. not filing the required returns or remitting the required payment of tax and interest; and/or
  2. not submitting returns and payments for periods covered by the amnesty; and/or
  3. not filing the Tax Amnesty Application by the deadline of June 30, 2011; and/or
  4. not fully completing a Tax Amnesty Application.

If amnesty is denied, civil penalties will not be waived and criminal prosecution may be sought.

WTAS professionals can assist Michigan taxpayers during the amnesty period by assessing qualification for the program, preparing the relevant amnesty applications, quantifying exposures, preparing tax returns and in some cases even attempting to settle issues directly with the Michigan Department of Treasury. Likewise, our professionals can also assist companies for which a VDA may be more beneficial choice. If you or your company may benefit from the Michigan Tax Amnesty, please contact your WTAS advisor as soon as possible.