California to Offer Amnesty to Tax Cheats

When you are the state of California and you're $8.6 billion in debt, it's going to take a mighty big bake sale to close the gap. California is taking a more lucrative road by offering tax scofflaws the opportunity to come clean with their back taxes without paying penalties, the San Jose Mercury News reported.

The state's first tax amnesty program in two decades will give everyone from waiters who have underreported tips to multinational corporations that underestimate corporate sales tax the opportunity to settle up with the state.

California, which is owed an estimated $6.5 billion in unpaid taxes, is hoping to generate the largest windfall in history from amnesty programs, looking to raise $640 million in personal income taxes, business income taxes, and sales and use taxes.

“This is bringing in badly needed revenue to the state,'' said Assemblywoman Judy Chu, D-Monterey Park, who wrote the amnesty bill. “Every dollar counts. That is $600 million less of cuts we have to make to seniors and the disabled.''

It behooves tax cheats to pay up now since the state plans to hit those who don't pay by March 31 with stiff new penalties, the Mercury News reported, adding that these penalties could also hurt well-intentioned taxpayers who are legitimately contesting tax bills or learn too late that they underpaid their taxes.

“Most people thinking of the word `amnesty' are thinking of a guy hiding in the woods who is told he won't be shot,'' Ernie Dronenburg, a partner with Deloitte & Touche, told the Mercury News. “This can be an ambush for people who aren't paying attention or who don't have tax counsel.''

California lawmakers vowed to never offer the amnesty program again after the last time it was offered in 1984. But with the state budget deficit skyrocketing to $17 billion last year, legislators changed their minds, the Mercury News reported.

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