Back in March the California legislature passed a law giving taxpayers who underreported their California income tax liabilities through the use of abusive tax avoidance transactions (ATAT) or offshore financial arrangements (OFA) the ability to obtain a waiver of most penalties if they amend their returns for 2010 and all prior years in which there is underreported income. Taxpayers will be required to pay all tax and interest that is owed.
The Voluntary Compliance Initiative 2 (VCI 2) (http://www.ftb.ca.gov/Voluntary_Compliance_Initiative_2/index.shtml) program will be available to taxpayers with California liabilities from August 1 through October 31, 2011. After October 31, taxpayers who are found to have unreported liabilities through the use of ATAT or OFA will face the full range of penalties and interest, and may be subject to criminal prosecution. Furthermore, the eight-year statute of limitations will be extended to 12 years for assessing additional tax and penalties.
If you are a California taxpayers and you wish to take advantage of the penalty waiver then you must :
1. Sign a participation agreement.
2. Complete and sign an amended return reversing the ATAT or including the income from the OFA.
3. Pay all tax and interest.
4. Submit all of the above to the Franchise Tax Board (FTB) by October 31.
The participation agreement will be available on the FTB's web site on August 1. All other required forms are currently available.
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