NYS Voluntary Disclosure [ 5 Must Know FAQs ] to Protect Yourself

It is NOT a 'Do it Yourself" project or a matter that is handled by an accountant.

The NYS Voluntary Disclosure Program may help you avoid large penalties and criminal prosecution if you have unfiled tax returns  or unreported income.  

The NYS Disclosure Program applies to income tax, sales tax, as well as withholding taxes.

A NYS Voluntary Disclosure is a legal matter that requires proper guidance pertaining to removing criminal risk as well as monetary issues. 

It is NOT a 'Do it Yourself" project or a matter that is handled by an accountant.

This article addresses the most common questions about the NYS Voluntary Disclosure Program as well as the pitfalls of having unfiled New York State tax returns or undeclared income. 

Experienced tax attorney Charles Rosselli can tailor the correct strategy to help you achieve the best possible outcome and protect your interests. Contact us today. We can assist you regardless of location. 

Not Filing or Paying New York State Taxes is a Crime

Not  filing a tax return in New York may be considered a crime and in certain circumstances may rise to the level of tax fraud.

 §1801 of Article 37 of The New York Tax Law defines a number of instances :

1. Failing to file a tax return or report;

2. Filing a false statement;

3. Making false promises to the government in connection to a tax;

4. Not paying any taxes owed;

5. Evading taxes

The Benefits of NYS Voluntary Disclosure

The NYS Voluntary Disclosure may be the right fit for you if you have unfiled New York State taxes, whether income, sales, or payroll taxes.  

As you may be aware, you are subject to two substantial penalties if you have not filed your New York State taxes. 

You are typically hit with two penalties by New York State if you have unfiled taxes: a failure to file penalty and a failure to pay penalty. 

One of the most significant benefits of the New York Voluntary Disclosure Program is that you will receive a waiver of those above two penalties for the tax years that are disclosed in the application. 

In summary, you avoid the imposition of large civil penalties that will have accumulated as a result of your non filings as well as the additional rate of interest prescribed under Section 1145 of the NYS tax law.

There are certain exceptions to this rule so please consult a tax attorney prior to filing any documents. 

The second large benefit of the NYS Voluntary Disclosure Program ( if accepted ) is that you will receive protection for criminal prosecution for the tax years in question.  

In other words, the New York State Department of Taxation and Finance will not pursue a criminal tax prosecution against you for unfiled taxes.

Any taxpayer who meets the eligibility criteria can participate, even if their nonpayment was the result of fraudulent or criminal conduct.  

Further, no New York State prosecutor or District Attorney will be able to prosecute you for any tax crime for the conduct that you have  disclosed.

NYS will not use the information that you have disclosed as evidence in any proceeding against you and will not reveal the contents of your disclosure or any returns to any other agency ( such as the IRS).

New York Voluntary Disclosure Mistakes NOT to Make

The New York Voluntary Disclosure Agreement is a LEGAL document. 

The process begins with the FILING of an application.

The most important part of the NYS Voluntary Disclosure Agreement is the filing of the application. 

The most common mistake that I see in the application is that either the client or his accountant does not put the appropriate “legal language” in the application to protect you, the taxpayer, from criminal prosecution.

A mistake in the application can result in the NYS Disclosure not being effective for you, the client.

The second most common mistake that I see taxpayers or their accountants make is not developing the most beneficial strategy PRIOR TO  submitting the NYS Disclosure Application. 

The strategy typically needs to incorporate both the federal and the New York State tax laws. 

The NYS Voluntary Disclosure is a tool, but it is not appropriate in every situation. 

As such, contact experienced NY and IRS tax attorney Charles Rosselli prior to taking any action.

Are You Eligible for NYS Voluntary Disclosure

There are four criteria that you must need to be eligible:

1. You must not be currently under audit by the New York State Tax Department for the tax type and tax years that you are disclosing.

2. You must not have received a bill from NYS for the past due taxes that you are disclosing.

3. You must not be under criminal investigation by a New York State agency or political subdivision of the State. 

4. You must not be seeking to disclose participation in a tax shelter that is a federal or New York State reportable or listed transaction.

Your Obligations  under NYS Voluntary Disclosure

1. Be Truthful

With a voluntary disclosure, you are certifying that everything that you are disclosing to the Department of Taxation and Finance is true and accurate and that you have not left out any material information. 

This includes all the statements that you have made in your application; in the tax returns that you file with the agreement; and all other documents and statements that you have submitted to the Department.

Given the possible ramifications, It is important that a tax attorney prepare and review all of your submissions.

2. File Your Past Due Returns

You must file your past due returns for all the tax periods and tax types that are covered by the agreement. 

You must submit those returns to the NYS tax department along with the executed agreement by the date specified in the paperwork.

3. Pay the Back Taxes + Interest ( Not Penalties)

You will need to pay the back taxes and interest in a timely matter. Failure to do so will result in a termination of the agreement with NYS. 

As such, it is important that a tax attorney negotiate payment terms that you do not default. If you default on the payment terms, the NYS Voluntary Disclosure Agreement will be voided.

4. Comply with the tax laws in the future

You essentially get one bite at the apple. You cannot default payment terms and you must:

• File truthful, accurate, and timely tax returns
• Pay all taxes you owe that are administered by the Tax Department
• Comply with any other requirements imposed by the NYS tax laws

If you intentionally attempt to defeat or evade any tax that you owe during the period of the agreement or in the future, you will be in violation of your agreement with New York State.

What if You Also Have Unfiled Taxes with the IRS

Most taxpayers that have unfiled taxes with New York State also have unfiled taxes with the IRS. 

It is important that a tax attorney coordinate your disclosures to the federal government as well as the Department of Taxation and Finance.

As indicated above by the NYS tax law, the New York State Department of Taxation and Finance defines tax evasion or tax fraud  as when a taxpayer intentionally tries to avoid taxes they owe. 

As per New York State,  tax evasion and fraud may look like:

• failing to file a return,
• failing to report total income,
• failing to remit monies collected

 As such, if you have unfiled NY state tax returns , you have possible criminal as well as civil exposure. 

As such, having unfiled tax returns is a serious legal problem that requires the assistance of a tax attorney.

1. You only have attorney client privilege with an attorney. 

An accountant or CPA does not maintain that privilege.

An accountant can be called to testify against you.

Also, many accountants do not have the requisite amount of experience to guide you through the maze of non-filer issues.

2. A tax attorney that focuses on NY tax problems can help you negotiate the best deal.

The worst thing that you can do if you have unfiled taxes is to hide your head in the sand.

The best way to avoid criminal prosecution and large penalties is to be proactive in dealing with the situation with the help of an experienced New York tax attorney. 

With so much on the line, you don’t want to make the mistake of dealing with the landmines of criminal and civil exposure on your own or an accountant.  

A mistake by you or your accountant can result in an investigation by the NY Civil Enforcement Division. 

Getting Tax Help [ the first step ] 

There are certain issues and pitfalls that you MUST be aware of prior to disclosing any information to the taxing authorities [ IRS & NYS]. 

Experienced tax attorney Charles Rosselli can tailor the correct strategy to help you achieve the best possible outcome and protect your interests.

 Contact us today.