New Mexico Voluntary Disclosure Agreement: What You Need to Know
The state of New Mexico has an attractive tax climate for businesses, but it can also be incredibly complex. The New Mexico Voluntary Disclosure Agreement (VDA) is a program that can help companies to resolve tax compliance issues and avoid penalties and interest on unpaid taxes.
What is a Voluntary Disclosure Agreement?
A VDA is a formal agreement between a taxpayer and a tax authority in which the taxpayer admits to past tax liabilities and agrees to pay them, usually with reduced penalties and interest. The taxpayer also agrees to comply with tax laws in the future. The goal of a VDA is to encourage taxpayers to come forward voluntarily and resolve tax issues without the need for an audit or enforcement action.
Why Use a VDA in New Mexico?
New Mexico has a tax system that can be difficult to navigate for businesses. The state imposes a gross receipts tax (GRT) on businesses that sell goods or services. The GRT is a complex tax that covers a wide range of transactions and can vary depending on the industry. Furthermore, New Mexico is one of the few states that allows local governments to impose their own GRTs, which can make compliance even more challenging.
The New Mexico Department of Taxation and Revenue (NMTD) is responsible for enforcing tax laws and collecting taxes. The NMTD has the authority to audit businesses and impose penalties and interest on unpaid taxes. However, the NMTD also offers a VDA program that allows businesses to come forward voluntarily and resolve tax issues without the risk of an audit or enforcement action.
Who Qualifies for a VDA in New Mexico?
The New Mexico VDA program is available to any taxpayer who is not currently under audit or investigation by the NMTD. The program is most beneficial to taxpayers who have not been filing tax returns or have underreported their tax liabilities in the past. A VDA can also be useful for taxpayers who are uncertain about their tax obligations in New Mexico.
How Does the New Mexico VDA Program Work?
The process of applying for and participating in the New Mexico VDA program is straightforward. First, the taxpayer must contact the NMTD and express their interest in participating in the program. The NMTD will then provide the taxpayer with a questionnaire that asks for information about their past tax obligations.
After reviewing the questionnaire, the NMTD will determine whether the taxpayer is eligible for the program. If the taxpayer is eligible, they will be required to sign a VDA agreement that outlines the terms of their participation in the program. The taxpayer will be required to pay all past tax liabilities, but penalties and interest will be reduced or waived.
Once the VDA agreement is signed, the taxpayer will be required to comply with all tax laws in the future. The NMTD will also conduct a follow-up review of the taxpayer`s compliance to ensure that they are meeting their obligations.
Conclusion
The New Mexico VDA program is an excellent option for businesses that have not been fully compliant with New Mexico tax laws. By voluntarily coming forward and resolving tax issues, businesses can avoid the risk of an audit or enforcement action and reduce their penalty and interest costs. If you are unsure about your tax obligations in New Mexico, or you have not been fully compliant in the past, consider applying for the VDA program and get your tax affairs in order.