Connecticut tax amnesty runs through January 2022

The Connecticut Department of Revenue Services (DRS) understands how taxing the COVID-19 pandemic has been for individuals and businesses alike. To help Connecticut taxpayers that owe back taxes “get right,” DRS is offering a tax amnesty program through January 31, 2022. The department began accepting applications for amnesty on November 1, 2021.

Businesses and individuals that owe back taxes for periods up to and including 2020 are invited to take advantage of this “limited window of opportunity” to pay the Connecticut taxes they owe. Those who do will:

• Avoid criminal prosecution
• Pay no penalties associated with eligible liabilities
• Pay 75% less interest on eligible liabilities

Who is eligible for tax amnesty in Connecticut?

The tax amnesty program is open to businesses and individuals that 1) are required by law to file a tax return with DRS, and 2) did not file or report all tax due through December 31, 2020. Taxpayers may seek amnesty for all eligible taxes or tax periods, even if some taxes and tax periods don’t qualify.

Eligible taxpayers include businesses and individuals:

• Pursuing civil litigation with DRS
• Under audit by DRS for periods ending on or before December 31, 2020
• With an unpaid tax liability with DRS (including tax and penalties and/or interest)
• With a protest pending before the department’s Appellate Division

This is generous, as states often prohibit taxpayers embroiled in an audit or litigation from participating in an amnesty program.

DRS makes it clear that Connecticut tax amnesty is open to unregistered businesses that should be registered with DRS, though it doesn’t specify whether this includes remote sellers who may have economic nexus with the state.

Who cannot participate in the tax amnesty program?

However, Connecticut does prohibit some taxpayers from participating.

Taxpayers not eligible for this tax amnesty program include anyone:

• Currently under criminal investigation by DRS
• Party to any pending criminal litigation as of November 1, 2021
• Party to a closing agreement with DRS
• Party to a managed audit agreement
• With an Offer of Compromise that’s been accepted by DRS

Which taxes qualify for Connecticut tax amnesty?

The current tax amnesty program applies to most taxes administered by DRS, including:

• Business and individual use tax
• Cigarette tax
• Corporate business tax
• Income taxes
• Motor vehicle fuels tax
• Pass-through entity tax
• Sales and use tax
• Withholding tax

Connecticut’s motor carrier road tax (IFTA) and property taxes do not qualify for amnesty.

Is amnesty guaranteed?

All taxpayers seeking amnesty must submit an application electronically with DRS and comply with all terms of the amnesty program, including initiating full payment “on the same day the amnesty application is submitted.” Failure to do so could result in denial of amnesty, meaning the taxpayer will be liable for all outstanding taxes, plus all penalties and interest. DRS offers additional details.

The Connecticut tax amnesty program offers an excellent opportunity, particularly for small businesses with shallow reserves. However, it’s usually wise to consult with an accounting or tax professional before making important tax decisions. If you don’t already work with a trusted tax advisor, Avalara’s directory of sales tax experts can be a good place to start.

Cover photo by Canva