Tax Shelters Voluntary Compliance Program
The Tax Shelters Voluntary Compliance Program allows taxpayers to avoid penalties on past transactions entered into principally for tax avoidance. The program also phases in new requirements enacted by 2007 Wisconsin Act 20 for disclosing "reportable transactions" for taxable years beginning on or after January 1, 2001.
In order to receive the benefits of this program, you must comply by May 31, 2008.
Use the Tax Shelters Voluntary Compliance Program if you:
- Used a "tax avoidance transaction" that reduced your Wisconsin income or franchise tax liability (or caused you not to file a Wisconsin return) for a tax year beginning after December 31, 2000 and before January 1, 2007, or
- Had a "reportable transaction" for a tax year beginning after December 31, 2000 and before January 1, 2007, for which you were required to send Form 8886, Reportable Transaction Disclosure Statement, to the Internal Revenue Service but did not send a copy of the form to the Wisconsin Department of Revenue as part of your return.
What is a "Tax Avoidance Transaction?"
A "tax avoidance transaction" is a transaction, plan or arrangement devised for the principal purpose of avoiding federal or Wisconsin income or franchise tax, including:
- A "listed transaction." A listed transaction is a transaction that is the same as or substantially similar to one the IRS has determined to be an abusive tax shelter by published guidance. The IRS maintains a list of these transactions on its web site at www.irs.gov/businesses/corporations, in the section for "Abusive Tax Shelters."
- A transaction devised for the principal purpose of avoiding Wisconsin income or franchise taxes without providing a similar benefit for federal income tax purposes.
What is a "Reportable Transaction?"
A "reportable transaction" is any transaction required by the Internal Revenue Service to be disclosed by a taxpayer on Form 8886.
How to Comply
- If you used a tax avoidance transaction which reduced your Wisconsin income or franchise tax liability or caused you not to file a Wisconsin return:
- File an amended return for each year in which the tax avoidance transaction affected your Wisconsin tax liability, or an original return for each year in which the tax avoidance transaction caused you not to file a Wisconsin return.
- If the tax avoidance transaction required you to complete Form 8886 for federal income tax purposes, submit a copy of federal Form 8886 providing details of the transaction. If the tax avoidance transaction did not require Form 8886 for federal income tax purposes, provide details of the transaction.
- Complete and submit Form WI-VCP.
- Enclose a check for full payment of the unpaid tax and interest.
- Submit the above items to: Wisconsin Department of Revenue, Tax Shelters Program, P.O. Box 8958, Madison, WI 53708-8958.
- File an amended return for each year in which the tax avoidance transaction affected your Wisconsin tax liability, or an original return for each year in which the tax avoidance transaction caused you not to file a Wisconsin return.
- If you had a reportable transaction other than a listed transaction, and you do not believe you owe any additional tax attributable to that reportable transaction, you must submit a copy of the federal Form 8886 to: Wisconsin Department of Revenue, Tax Shelters Program, P.O. Box 8958, Madison, WI 53708-8958.
Eligibility and Limitations
A taxpayer who is currently under audit or has been contacted by the Department of Revenue or IRS about the tax avoidance transaction may still participate in this program.
A taxpayer who uses this program may not file an appeal or claim for refund regarding the tax avoidance transaction, except in cases where the appeal or claim for refund corresponds to an appeal or claim for refund granted by the IRS regarding the tax avoidance transaction.
Penalties for Failure to Comply
If a taxpayer is eligible for the Tax Shelters Voluntary Compliance Program but does not participate, the following penalties may apply:
- If a taxpayer negligently filed an incomplete or incorrect income or franchise tax return, or failed to file a return, a penalty may apply in the amount of 25% of the tax otherwise due. If a taxpayer intentionally defeated or evaded income or franchise taxes, a penalty may apply in the amount of 100% of the tax otherwise due. Additionally, criminal penalties for filing a false return include a fine of $10,000 or imprisonment.
- 2007 Wisconsin Act 20 enacted substantial additional penalties relating to reportable transactions. These additional penalties are as follows:
| Penalty | Listed Transactions | Other Reportable Transactions |
|---|---|---|
| Failure to disclose a reportable transaction |
|
|
| Tax understatement from reportable transaction |
|
|
| Tax understatement from reportable transaction if taxpayer does not use Tax Shelters Voluntary Compliance Program |
|
|
For More Information
You can find answers to frequently asked questions using the links below:
- Taxpayer Requirements to Disclose Reportable Transactions
- Material Advisor Requirements to Disclose Reportable Transactions
- Tax Shelters Voluntary Compliance Program
Also, you may contact the Department of Revenue as indicated below.
Wisconsin Department of Revenue
Tax Shelters Program
P.O. Box 8958
Madison, WI 53708-8958
Phone: (608) 266-3969
Fax: (608) 267-0834
E-mail: wivoldis@revenue.wi.gov
Last updated January 15, 2007