ASC 740-10-25-7 has the following provision: "When the past administrative practices and precedents of the taxing authority in its dealings with the entity or similar entities are widely understood, for example, by preparers, tax practitioners and auditors, those practices and precedents shall be taken into account." From a state tax perspective, to what extent are the states' lookback policies for non-filing widely understood? I am aware of Wisconsin's 10 year lookback but wasn't aware of others. Ideas?
Tax Professional Answers
If your factors are not small and your business is profitable, I would give strong consideration to filing.
Sincerely, Brett Layton
In addition if you find you have "nexus" and have past exposure do not wait for the state to find you. If you do it will usually be too late to mitigate your exposure. There are Voluntary Disclosure Programs (VDAs) where the state will reward you for stepping forward. These VDAs in most instances will limit the look back period to 3-4 years. They also have provisions to waive 100% of the penalty and in a handful of states some or all of the interest. These VDAs are usually done on an anonymous basis by a third party. If anyone would like more information let me know.
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