Virginia Tax has a program to encourage businesses that are not properly registered and that have unreported tax liabilities to come forward voluntarily and "catch up" on their tax responsibilities. This is an on-going program and is not related to any tax amnesty program.
Who is eligible?
The typical candidate is an out-of-state business that has enough activity in Virginia to establish nexus for sales and use tax and/or income tax, but has not yet registered with us or filed returns. To be eligible for the Voluntary Disclosure program, a business must not already be the subject of any compliance inquiry from us. Of course, in-state businesses may be eligible as well. Other situations will be considered on a case-by-case basis.
Who is not eligible?
A taxpayer is probably not eligible for the program if:
- The taxpayer is under audit by Virginia Tax,
- The taxpayer is already registered for the tax type in question, or
- The taxpayer has received bills, nonfiler notices or any inquiries about a potential tax liability
The program is usually not appropriate for a taxpayer with just a delinquent individual income tax return unrelated to a business. (These taxpayers may, however, seek penalty waiver or other relief through other channels, such as a regular offer-in-compromise.)
What are the terms of a voluntary disclosure agreement?
A typical agreement requires that the business:
- Register with us
- Commit to future compliance
- Perform a self-audit for a three-year look-back period, and
- Pay the tax and interest due for the look-back period
In exchange, we may waive some or all late penalties for the look-back period and waive older periods entirely. When sales tax has been collected but not properly remitted, the required look-back period may be longer and penalty waiver more limited. Terms, including the exact look-back period, may vary depending on the facts of each case.
What is the procedure?
The offer may be submitted by a third-party representative, and the taxpayer may remain anonymous while terms are negotiated. We evaluate each offer, and if willing to proceed,the taxpayer is asked to report and pay its past due tax within 30 days. A voluntary disclosure case begins when a signed agreement and nexus questionnaire are received by the Department. Offers may be submitted by third party representatives. Voluntary disclosure of periods less than 36 months (3 years) are not eligible to receive a limited look-back period; however, each offer is evaluated for waiver of penalty. All returns and payments are due within 30 days after the agreement is authorized by the Department. Failure to file the returns within the specified date will nullify the penalty abatement. A taxpayer interested in a disclosure agreement should consult with the Voluntary Disclosure Program office before sending returns or payments for the delinquent tax, because premature action may disqualify a taxpayer from the Program.
Are tax returns for past periods required?
For income tax, complete returns are required. For sales and use tax, a spreadsheet may be acceptable.