Tax Shelter Participants: October 1st is Deadline for Multistate Voluntary Compliance Program
For Release: September 10, 2007
Contact: Meredith Helgerson, Communications Officer, (608) 261-2271
MADISON - If an individual or corporation has used a tax shelter to avoid Wisconsin income or franchise taxes, an audit could result in costly penalties. Through October 1, 2007, the Multistate Tax Commission (MTC) is administering a nationwide program to encourage taxpayers to voluntarily disclose their participation in tax shelters in order to avoid penalties.
"This effort ties in nicely with Governor Doyle's Tax Shelter Compliance Initiative that is in his proposed budget", stated Department of Revenue (DOR) Secretary Roger M. Ervin. "This is an opportunity for taxpayers to come clean without penalties. It benefits both the individual taxpayer and taxpayers across the state".
The DOR will waive all civil and criminal penalties on tax that is attributable to tax shelters disclosed in this program. This waiver is only valid for transactions disclosed on or before October 1, 2007.
Any taxpayer who has used a tax shelter (also known as a "tax avoidance transaction") to reduce or eliminate Wisconsin income or franchise tax liability for any tax year beginning before January 1, 2006, is eligible. A "tax avoidance transaction" is a plan or arrangement devised for the principal purpose of avoiding federal or Wisconsin income or franchise taxes.
Additionally, a taxpayer must meet the following criteria to participate in the program:
- The taxpayer has not been informed by the department that an audit or criminal investigation is being conducted or will be conducted relating to the tax avoidance transaction;
- The taxpayer has not received a federal audit report which is final from the Internal Revenue Service (IRS), if the changes or corrections on that report relate to the tax avoidance transaction and are required to be reported to the department (Exception: If the federal audit report is under appeal with respect to the tax avoidance transaction, the taxpayer is still eligible to participate in this program);
- The taxpayer has not misrepresented facts relating to the tax avoidance transaction.
For each year the tax avoidance transaction was used, taxpayers should do the following:
- Complete an amended Wisconsin income or franchise tax return, or if no Wisconsin income or franchise tax return was previously filed because of the tax avoidance transaction, complete an original return;
- Write "MULTISTATE VCP" boldly and conspicuously at the top of the first page of the return;
- Complete IRS Form 8886 http://www.irs.gov/formspubs/index.html?portlet=3 (2005 or later version). If the transaction affected Wisconsin tax liability without affecting federal tax liability, complete Form 8886 as if the transaction affected federal tax liability;
- Complete Form VCP-1. Form VCP-1 is available on the MTC's website at www.mtc.gov/Resources.aspx?id=2394;
- Send all of the above items, with payment of the tax due (payable to the Wisconsin Department of Revenue), to the Multistate Tax Commission, Multistate Tax Shelter Voluntary Compliance Program, 444 North Capitol Street, NW, Suite 425, Washington , DC 20001. These items must be received by the MTC, not merely postmarked, on or before October 1, 2007. The MTC will then forward them to the Wisconsin Department of Revenue.
For More Information:
The MTC's website www.mtc.gov/Resources.aspx?id=2390 has further details of the program's policies and procedures, a list of participating states, and the benefits offered by each state.
If you have questions about the Multistate Tax Shelter Voluntary Compliance Program, please contact the MTC by e-mail at VCP@mtc.gov or by telephone at (202) 624-8699.
Last updated September 10, 2007