Multistate Voluntary Disclosure Program?

Are you aware that a taxpayer with potential tax liability in multiple states could negotiate a settlement using a uniform procedure coordinated through the National Nexus Program of the Multistate Tax Commission (MTC)?

According to the MTC, this service is to encourage taxpayers to start filing and paying taxes in states where taxpayers have substantial nexus. The MTC believes this process is faster, more efficient, and less costly for taxpayers who have potential tax exposure in more than one state. There is no charge for participation in the program.

The program generally allows taxpayers to file a voluntary disclosure agreement for tax types such as sales/use tax, and income/franchise tax (including the Hawaii GET and Washington B&O tax). 

Prior contact between a state and the taxpayer for a specific tax type disqualifies the taxpayer from participation in the program for that tax type. "Contact" includes filing a tax return, paying tax, or receiving an inquiry from the state regarding the tax type. 

Once a taxpayer enters the program, the taxpayer is required to file returns, pay the tax due, and register with the state. In return, the state waives penalties for the duration of the look-back period. Interest is still due on unpaid tax obligations during the look-back period, unless waived by the state.

The look-back period includes the number of prior tax years, and the incomplete current tax year for which taxes and interest will be due and paid under the agreement. The look-back period is determined by the state and specified in the agreement. The look-back period is generally three or four years.

The MTC claims that it keeps the identity of the taxpayer confidential during the process. The MTC only discloses the taxpayer's identity to a state after the taxpayer has entered into an agreement with the state. 

The MTC also claims that it does not disclose the agreement or any of its terms to any other state.

An applicant is not required to disclose any information that would reveal its identity prior to the execution of an agreement.

For more details on the program, go here.

Were you aware of the MTC's Multistate Voluntary Disclosure Program?

Have you used the MTC's Multistate Voluntary Disclosure Program?

If yes, was it a good experience? Pros and cons?

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