Understanding Voluntary Disclosure in Georgia
If you are a business owner in the State of Georgia and want to know how to come forward with a Voluntary Disclosure of unreported or underreported sales tax, then you may want to read this blog. Most of our clients are not as worried about paying the underlying tax as they are paying the penalties associated with the sales tax.
Georgia Department of Revenue’s Voluntary Disclosure Agreement (VDA) Program
The Georgia Department of Revenue’s Voluntary Disclosure Agreement (VDA) program encourages taxpayers who have unfiled or underreported tax liabilities and have not yet been contacted by the Department to voluntarily come forward.
Benefits of the VDA Program
Qualified participants will usually receive:
- A waiver of all penalties
- A limit of the length of time the taxpayer must disclose and pay previous liabilities
This length of time, called the “look-back” period, is generally three years but can be shorter or longer depending upon a taxpayer’s particular circumstances.
How to Qualify for the VDA Program
To qualify for the VDA program, the taxpayer (individual or business) must submit an application form and:
- Have not been contacted by the Department for enforcement purposes about that tax obligation (e.g., audit or compliance contact regarding registration or reporting requirements)
What Happens Under the VDA
- Penalties will generally be waived for all periods included in the VDA agreement.
- Interest will still be imposed on all amounts due.
The Look-Back Period
The Department will normally require a look-back period of a certain number of prior periods during which the taxpayer will pay taxes. The length of the look-back period will depend on several factors, including:
- The nature of the taxpayer’s activities
- The size of past years’ potential tax liabilities as submitted in the application
The look-back period will usually be for a minimum of three years for all tax types.
Look-Back Period by Tax Type
- Individual Income Tax: The Department may extend the look-back period up to five years for those taxpayers who filed their federal income tax returns yet failed to file Georgia income tax returns for those years.
- Sales and Use Tax or Withholding Tax: The look-back period is usually thirty-six months but will be extended as far back as necessary to recover taxes that a taxpayer collected yet did not remit.
- Corporate Income Tax: The look-back period depends upon the amount of tax due and the existence of a net operating loss during the period.
Important:
If a small amount of tax is due for prior periods, please note that the Department will almost never waive any past liability as part of a prospective, going-forward basis, with no look-back period.
Frequently Asked Questions
What is the Georgia Voluntary Disclosure Agreement (VDA) Program?
The Georgia VDA Program allows taxpayers to voluntarily disclose and resolve previously unfiled or underreported tax liabilities without having been contacted by the Department of Revenue, often resulting in waived penalties.
Who qualifies for Georgia’s VDA Program?
To qualify, a taxpayer must not have been contacted by the Georgia Department of Revenue for enforcement regarding the specific tax obligation and must voluntarily come forward by submitting an application.
What are the benefits of participating in the VDA program?
The main benefits include a waiver of all penalties and a limited look-back period, typically three years, during which the taxpayer must pay any owed taxes. However, interest will still apply.
How long is the look-back period for different tax types?
For most taxes, the look-back period is about three years. However, for individual income tax it can extend to five years, and for sales/use or withholding tax, it can go further if taxes were collected but not remitted.
Can I apply for a VDA if I owe only a small amount?
Yes, but it’s important to know that Georgia rarely offers a VDA without a look-back period, even if the amount owed is small. The Department typically requires back taxes to be addressed regardless of the amount.