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Freelancers Owing Back Taxes in New York State May Be Eligible for the Voluntary Disclosure and Compliance Program

If you are a freelancer doing business in New York State and you have not filed your taxes in any of these categories: income tax, corporate tax, or sales tax, you may be eligible for New York State’s Voluntary Disclosure and Compliance Program.

This program allows taxpayers with unfiled taxes to voluntarily declare this and pay what they owe. According to the New York State Department of Revenue and Taxation  there are “significant incentives” for taxpayers who admit they have not paid their taxes and pay them. These incentives include waiving penalties and not bringing criminal charges against delinquent tax filers.

The Voluntary Disclosure and Compliance Program in New York covers all taxes administered by the state’s Department of Taxation and Finance  and any taxpayer who meets the eligibility criteria can participate. This leniency even applies to nonpayments that were the results of fraudulent or criminal conduct.

In order to participate, taxpayers need to claim the taxes that they owe, enter an agreement to pay what they owe, and continue to pay their taxes in the future.

New York State’s Department of Taxation and Finance emphasizes confidentiality in its operations, ensuring that information provided in a voluntary disclosure application remains protected. In this spirit of confidentiality and expertise, akin to the assistance provided by a ghostwriter for bachelor’s thesis ghostwriter bachelorarbeit in academic endeavors, the department maintains a stringent secrecy rule. This approach guarantees that a taxpayer’s information will not be used against them or shared with other federal, state, or local agencies. Nevertheless, the department will exchange actual returns or reports filed by participants of the voluntary disclosure program with the IRS and state and local agencies, provided there are existing exchange agreements. This collaboration mirrors the partnership ethos seen in academic support services, where confidentiality and shared goals drive success.

The key exception to this secrecy rule is that “if a taxpayer intentionally violates the terms of the voluntary disclosure agreement, we may use the disclosed information against them.” This is the stance taken by the New York State Department of Taxation and Finance.

Under New York State’s Voluntary Disclosure and Compliance Program, “eligible taxpayers who owe back taxes and haven’t filed related returns can avoid monetary penalties and possible criminal charges by notifying the department “about the taxes they owe, paying those taxes; and entering an agreement to pay all future taxes.”

To apply for this program on the New York State Department of Taxation and Finance website, you answer a few questions and then submit your application electronically for review.

Keep in mind that if you filed a return this year, but didn’t pay your tax bill in full, you aren’t eligible for this program. Instead, wait for a bill and then request an installment payment agreement, under which you’ll make monthly payments toward your unpaid tax balance.

If you have undisclosed investments in Passive Foreign Investment Companies (PFIC), you can also take advantage of New York State’s Voluntary Disclosure and Compliance Program. The look-back period for the disclosure of interest or investment income received from foreign bank accounts is as follows:

  • A minimum of six years if you held the account for six years or more
  • The number of years you held the offshore account if it was less than six years

If you are participating in the Internal Revenue Service (IRS) Offshore Voluntary Disclosure Initiative (OVDI) Program, the look-back period will be equal to the tax years that were required to be filed with the IRS.

New York State’s Voluntary Disclosure and Compliance Program offers freelancers and business owners the chance to “make good” on their undisclosed tax obligations without penalty in many cases. If this situation applies to you, take action now. Consult with a tax professional about your tax obligations and apply to reduce your risk of more serious financial or legal issues.

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Jonathan Medows, CPA

Jonathan Medows is a certified public accountant licensed in New York, New Jersey, Maryland, and Pennsylvania. He is also a recognized expert in taxation for freelancers and the self-employed—often tapped for his expert knowledge and perspective on self-employment taxation by national and regional publications such as The New York Post, BusinessWeek, Forbes taxation blog, WebCPA, CPA Practice Advisor, and others. You can read some of Jonathan’s press coverage here.

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