Tax Amnesty Act
A tax amnesty act is a state law, created by individual states within the United States. It is an act aimed at encouraging tax evaders to pay back taxes that they owe. The act creates a time frame for a tax evader or potential evader to pay their taxes and avoid penalties. These acts provide a last opportunity for nonpayers to avoid prosecution. The amnesty period normally lasts three months, and can be for either the previous financial year or for prior years. In the event of failure to pay within the time frame established by the tax amnesty act, more severe penalties apply if the evasion is discovered.
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Purpose
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Tax amnesty laws serve a dual purpose. The acts give the individual an opportunity to avoid harsher penalties at a later time. In some cases, people have saved up to 40 percent of their taxes by paying during the amnesty period. In this way, it benefits individuals who are potential offenders or who have not been able to pay taxes on time for some reason. It also benefits the government by encouraging evaders to turn themselves in without government investigation and discovery.
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Benefits
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A tax amnesty act saves the government much time and resources on actions such as audits and prosecutions for tax evaders, both of which can be time-consuming and laborious. In order to encourage people to take advantage of the act and maximize the benefit, most states include harsher penalties for those who do not take advantage of the act. When people do not comply, these harsher penalties make up for the additional time spent identifying and investigating the tax evasion.
Geography
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Tax amnesty acts exist within almost every state in the United States. It is up to the individual states to decide on the date and extent of amnesty. It can also decide on the quantum of amnesty offered to individuals and businesses. When a state passes a tax amnesty act, it passes it within state statutory codes. It is codified or statutory law as opposed to judicially made or common law.
Types
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Tax amnesty acts are legal acts of the state legislature. They have the legal sanction and authority of the sovereign, and citizens are punished for noncompliance. They apply to individual tax evaders and businesses alike. In cases of a nonregistered business, many tax amnesty acts also provide provisions to register during the amnesty period.
History
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Although it has existed informally in other forms and contexts, legal tax amnesty acts aimed at collecting back taxes and future taxes began in 1982. In the two decades since the first amnesty act was passed, 40 states took part in the scheme. Seventeen of these states had more than one amnesty program. In the first 20 years of the act's implementation, states collected more than $3 billion.
References
- Photo Credit Image by Flickr.com, courtesy of Bill
