Voluntary Disclosure: Unfiled Returns

  1. Background

    If a person (which includes individuals, partnerships, corporations, limited liability companies, and fiduciaries) hasn't filed the required Wisconsin tax returns, but now wants to comply with the tax laws, what should that person do? If a person waits until a letter is received from the Wisconsin Department of Revenue, the person could be subject to costly civil and criminal penalties. For example, failure to file a corporation franchise/income tax return with intent to evade the tax may result in a civil penalty (equal to 100% of the tax) and criminal penalties.

    Don't wait for a contact from the Department of Revenue. A better alternative is to voluntarily disclose to the Department of Revenue the nonfiling of prior years' returns and request that a settlement agreement be executed. The information below describes the department's policy relating to voluntary disclosure and the procedures for persons to follow.

  2. Policy

    The Wisconsin Department of Revenue has a new policy regarding the interest rate charged on taxes due through voluntary disclosure of unfiled returns. Previously, 18% delinquent interest was charged on the tax due. Effective January 1, 2011, 12% regular interest will be charged on the tax due instead of the delinquent interest rate.

    In addition, effective for taxable years beginning on January 1, 2010, and thereafter, 2009 Wisconsin Act 28 provided for an increase in late filing fees. The late filing fees apply as follows:

    • Late filed individual or fiduciary income tax return--$50.
    • Late filed corporation income or franchise tax return or insurance company return--$150.
    • Late filed withholding report or late deposit of withheld taxes--$50 for individuals, partnerships, and fiduciaries, and $150 for corporations and insurance companies.
    • Late filed partnership return--$50.
    • Late filed Form PW-1--$50.

    The late filing fee for sales and use tax returns remains $20.

    A person making a voluntary disclosure of past non-compliance with Wisconsin tax laws may be granted a waiver of penalty and/or reduction in the number of periods for which returns are required to be filed. To be considered for such treatment, a person must meet certain requirements, provide a written description of its activities in Wisconsin, and enter into a written settlement agreement with the Department of Revenue.

    (Note: This policy applies to income, franchise, sales/use, withholding, motor vehicle fuel, alternate fuel, alcohol, beer, wine, cigarette, and tobacco taxes, except where noted otherwise.)

    1. Conditions for Voluntary Disclosure

      A disclosure is considered to be voluntary if the person meets all of the following conditions:

      1. Submits a written request for voluntary disclosure treatment.
      2. Has not filed tax returns for the periods in question.
      3. Is not registered during the periods in question for the tax involved, although tax may have been collected from customers or withheld from employees.
      4. Has not been contacted within the last six years by the Wisconsin Department of Revenue regarding a registration or filing requirement, an assessment or audit assignment, for the tax type involved. NOTE: A request for completion of nexus questionnaires by the department constitutes the commencement of an office audit.

      Subscribing to the Wisconsin Tax Bulletin or having received a written response to a question submitted to the Department of Revenue does not disqualify a person.

      Registration for and/or filing returns for a different or related tax type does not disqualify a person (for example, a sales tax registrant may be allowed to settle a withholding tax liability).

    2. Settlement Agreements

      A written settlement agreement will be executed whenever a penalty is waived or the number of periods for which returns must be filed is reduced pursuant to this policy. Persons may remain anonymous until a settlement agreement is reached. All settlement agreements shall include provisions reserving the Department of Revenue's right to:

      1. Audit factual representations made as part of the agreement and to void the agreement where facts are misrepresented. Also, see II.C.2.a. and b. below.
      2. Audit the person and/or any returns filed.
      3. Void the settlement agreement if not accepted within 60 days by the person. Additional time to accept the agreement may be permitted based on the facts and circumstances of the case.
      4. Void the settlement agreement if factual misrepresentations have been made by the person and assess additional tax, penalties, and interest, as appropriate.
      5. Void the settlement agreement if the person fails to comply with any of its terms.

    3. Filing and Payment Requirements

      1. Number of years

        1. A person with nexus in Wisconsin who makes a voluntary disclosure shall generally be requested to file returns for the "current year" and the four preceding years, assuming a liability existed in those years. "Current year" is a year for which the return is not yet due. "Due date" is the unextended due date of the return.

          1. Franchise and income tax:

            Example: If on November 11, 2010, a calendar year filer voluntarily disclosed a corporation franchise or income tax liability for the years 2002 through the present, franchise or income tax returns would be requested to be filed for the prior years 2006, 2007, 2008 and 2009. The year 2010 would be the current year.

            Example: If on January 20, 2011, a calendar year filer voluntarily disclosed a corporation franchise or income tax liability for the years 2004 through the present, franchise or income tax returns would be requested to be filed for the prior years 2006, 2007, 2008, and 2009. Their return for the year 2010 would be the current year since the request was made prior to March 15, 2011, the due date of their 2010 return.

            Example: If on May 1, 2011, a calendar year filer voluntarily disclosed a corporation franchise or income tax liability for the years 2004 through the present, franchise or income tax returns would be requested to be filed for the prior years 2007, 2008, 2009 and 2010. The year 2011 would be considered the current tax year since the request was made after the due date of their 2010 return.

          2. Sales and use tax:

            Note: For sales and use tax purposes, the current year is based on when their franchise or income tax return is due and not when their sales and use tax return is due. For example, the current year for a calendar year corporation requesting sales and use tax voluntary disclosure on February 14, 2011, is 2010. Even though the request was made after the due date of their December 2010 sales and use tax return, the current year is based on the due date of their franchise or income tax return which would be March 15, 2011.

            Example: If on July 1, 2010, a calendar year taxpayer voluntarily disclosed a sales or use tax liability for the years 2003 through the present, quarterly sales and use tax returns would be requested for the prior years 2006, 2007, 2008, 2009 and the first two quarters of 2010.

            Example: If on February 14, 2011, a calendar year taxpayer voluntarily disclosed a sales or use tax liability for the years 2003 through the present, quarterly sales and use tax returns would be requested for the prior years 2006, 2007, 2008, 2009 and the current year, 2010. The year 2010 is the current year since it is before the due date of their franchise or income tax return.

          3. Any tax that was collected or withheld prior to the first return we require to be filed, must be reported with the earliest return requested.

            Example: If on July 1, 2010, a calendar year taxpayer voluntarily disclosed a sales or use tax liability for the years 2003 through the present, and they began collecting sales tax from their customers starting in 2003, the tax collected from 2003 through 2005 needs to be reported on the earliest return we require to be filed, which would be the return for the quarter ending March 31, 2006.

        2. A person that discloses a liability for an excise tax under Chapter 78 of the Wisconsin Statutes will be requested to file as in II.C.1.a. above, whether or not the person has nexus.
        3. A person with no nexus for the tax involved that discloses tax collection or withholding in prior years shall be requested to file returns beginning with the earliest year tax was collected or withheld, but not more than four years, as long as all tax collected or withheld is remitted with the returns as in II.C.l.a. above.
        4. A person with no nexus for the tax involved that discloses no collection or withholding of tax in prior years will not be required to file returns for any prior period for which there is no nexus, unless an excise tax under Chapter 78 is involved. (See II.C.1.b. above.)

      2. Misrepresentation of facts

        1. If an unintentional misrepresentation of facts is discovered, the person will be requested to file returns for the current year and the six preceding years, assuming a liability existed in those years.
        2. If an intentional misrepresentation of facts is discovered, the Department of Revenue may void the agreement and make any assessment it deems necessary.

          For example, an audit of the person's records uncovers an internal memo signed by an officer directing the accounting department to represent that the Wisconsin office location was opened two years later than the office was actually opened.

      3. Sales/Use and Withholding Tax

        All sales/use and withholding tax returns for prior years will be requested to be filed as if on a quarterly filing basis, regardless of any filing frequency established for future periods. Quarterly sales/use and withholding tax returns will also be requested for the current year, if necessary, to bring the person's filing record up to the current period.

      4. Time period for filing returns

        Returns will be required to be filed within ninety days of signing the settlement agreement. Additional time to file may be permitted based on the facts and circumstances of the case.

    4. Interest and Penalties

      1. General

        1. If there is no discovery by the Department of Revenue of any misrepresentation of facts by the person, only late filing fees, underpayment interest, and regular interest will be applied on late filed returns which have been voluntarily filed.
        2. If there is discovery of an unintentional misrepresentation as in II.C.2.a. above; the late filed returns may be subject to the negligence penalty, if there is evidence to support the negligence penalty.
        3. If there is discovery of an intentional misrepresentation of facts as in II.C.2.b. above, the Department of Revenue may consider the assessment of any additional penalties deemed appropriate, including fraud penalties.

      2. Sales/Use and Withholding Tax

        1. Late filing fees

          If the annual liability is $300 or less, one late filing fee will be assessed.

          If an annual liability exceeding $300 exists, late filing fees will be assessed for each quarterly return not previously filed in a timely manner.

        2. Interest

          If the annual liability is $300 or less, regular interest will be computed from the due date for annual returns (for example, January 31 for a calendar year filer).

          If the annual liability exceeds $300, regular interest will be computed from the due dates for the quarterly returns which should have been filed (for example, April 30 for the March quarter, July 31 for the June quarter, October 31 for the September quarter, and January 31 for the December quarter).

        3. If there is discovery of an intentional misrepresentation of facts as in II.C.2.b. above, the Department of Revenue may consider the assessment of any additional penalties deemed appropriate, including fraud penalties.

  3. Procedure – Voluntary Disclosure

    A taxpayer or the taxpayer's representative may request voluntary disclosure treatment by submitting Form A-020 to the department for consideration. The request will include the following information:

    • Description of Wisconsin activities for the years involved.
    • List of property owned or leased in Wisconsin.
    • Taxpayer's taxable year-end.
    • Taxpayer's federal tax return type.
    • Date taxable activities began in Wisconsin.
    • Whether the tax involved has been collected or withheld and for what periods. For sales and use tax purposes, whether tax has been paid to a vendor in error for which a credit is being claimed.
    • Approximate liability (by tax type) for each of the years involved.
    • Prior contacts by the Department of Revenue.
    • Other types of tax returns currently being filed with the department.
    • Whether the taxpayer is registered with the Wisconsin Department of Financial Institutions (formerly the Secretary of State) to transact business in Wisconsin.

    Note: If unable to complete the electronic request for voluntary disclosure, submit a written request including the information above. Also, for a written request, if applying for voluntary disclosure for more than one tax type, each tax type must be specified. For example, a request for voluntary disclosure for income tax does not cover sales tax.

    A person submitting a written request for voluntary disclosure treatment should send the request to:

    ​Contact Us​

    MS 2-233
    Wisconsin Department of Revenue
    ​Nexus Unit
    PO Box 8906
    Madison, WI 53708-8906
    Phone: (608) 266-3969
    Fax: (608) 266-5464
    Email: ​ DORWIVoluntaryDisclosureProg@wisconsin.gov


  4. Any Questions?

    The department may be contacted by:

October 19, 2017