The following is an outline of the disclosure process:
The taxpayer's representative contacts the Department of Revenue to offer voluntary disclosure and registration.
The taxpayer's representative submits the following information in writing:
- For a business - a brief description of the taxpayer's operation, the number of years the business has been operating, and the nature and extent of business operations in Kentucky. This description must include whether the business owns or leases property, has employees, or has other potential taxable activities in Kentucky.
- For an individual - The appropriate number of years the taxpayer was required to pay tax in Kentucky. A distinction between resident and non-resident years must be made.
- Whether or not the taxpayer receives payments for goods or services provided to the Commonwealth of Kentucky or the federal government.
- Whether or not the Department of Revenue has contacted the taxpayer. If so, the nature of the contact(s).
- The disclosure terms proposed by the taxpayer. Generally the Department of Revenue requires a four-year "look back" for all type taxes.
- If the tax nexus is so nebulous that the taxpayer believes prospective filing is justified, the Department of Revenue would prefer that the taxpayer simply register and go forward from that point. Under normal circumstances, the Department of Revenue will not be willing to waive any past liability as part of a prospective filing.
To preserve confidentiality, the taxpayer's representative is not required to reveal the name of the taxpayer or any other information that could readily identify the taxpayer to the Department of Revenue until the disclosure agreement is finalized. The Department of Revenue will assign an anonymous identifier to the case until the agreement is final.
Once the information is received, the Department of Revenue will advise the taxpayer's representative of policies generally found to be acceptable and, together with the representative, formulate an offer that is acceptable.
Once the terms of the disclosure are finalized, the Department of Revenue will prepare a disclosure agreement for review and approval by the taxpayer.
All information submitted by the taxpayer will be included in a Statement of Representations and Inducements, included in the disclosure agreement, used to determine whether the Department of Revenue will accept the disclosure.
If significant misrepresentations are found in this statement, or in any of the other representations made to support the disclosure, the agreement may be considered void and any additional taxes, penalty, and interest will be assessed.
The Department of Revenue will forward the disclosure agreement, the Statement of Representations and Inducements, and any necessary registration forms, with a cover letter to the taxpayer's representative. The Department of Revenue will work with the taxpayer's representative to determine acceptability of terms.
Three signature pages will be included within the agreement. A copy for the taxpayer, a copy for the taxpayer's representative, and a copy to be retained by the Department of Revenue, indicating acceptance of the disclosure. Generally the taxpayer has 90 days to comply and execute the disclosure.
The Department of Revenue will register the taxpayer at the time the signed agreement is received. The taxpayer has 90 days from the completion of the executed agreement to file returns or adequate schedules and submit payment of the tax. Interest will be assessed from the original due date of the return until the date the tax is paid in full. If additional information is needed, the Department of Revenue will contact either the taxpayer or the taxpayer's representative.
Inquire about Voluntary Disclosure by calling (502) 564-4921, ext. 4409 or by writing to:
The Kentucky Department of Revenue
Division of Collections
Legal Support Branch
P.O. Box 5222
Frankfort, KY 40602
Please include your representative's name and a telephone number where your representative can be reached between 8:00 a.m. - 4:30 p.m. EST.
Inquire about Voluntary Disclosure