By John F. Raspante, CPA, MST

The Pennsylvania Voluntary Disclosure Program (VDP) provides an opportunity for businesses and individuals who have recently become aware of a Pennsylvania tax obligation to voluntarily come forward. In return for coming forward voluntarily, filing their tax returns, and clearing their tax debts, taxpayers are only responsible for the payment of tax and interest. Penalties for most taxes administered by the Department of Revenue would be waived when the requirements of the VDP have been completed.

In this blog I’ll provide a brief overview of the VDP and direct your attention to the potential risk for legal liability should you provide services to clients in this area. It should be noted that Pennsylvania provides for a separate VDP regarding the state’s use tax, so it will not be covered in this blog.

Many CPAs’ professional liability claims are based on accusations of failing to advise with respect to tax rulings, opinions, and special programs such as amnesty. VDPs are no exception. Many times, the VDP eligibility on a tax will expire, and if the client subsequently realizes they lost an opportunity to have penalties abated, a professional liability claim often follows.

Before we get to some best practices to minimize or avoid professional liability claims, let’s review how to determine eligibility for taking part in the VDP in Pennsylvania:

• If the taxpayer believes they missed a Pennsylvania tax obligation, request a case via e-mail at ra-voluntarydisclosure@pa.gov.
• Upon making the request, a case number will be assigned and a business activities questionnaire will be sent.
• In addition to the questionnaire, taxpayers must list the type of tax and the date(s) the tax liabilities began.
• Provide a detailed description of the taxpayer’s activities in Pennsylvania.
• Include an explanation of the taxpayer’s failure to pay and or file.
• Verify that the taxpayer has not been contacted by the taxing authority.

It should be noted that the tax department reserves the right to audit the taxpayer.

If the taxpayer is found to be eligible, they will receive a proposed voluntary disclosure agreement to sign. Subsequently, the taxpayer will receive instructions for filing and paying the delinquent taxes.

The following are a few best practices to help you mitigate or prevent a liability claim against you by clients who believe you did not provide proper VDP guidance:

• Screen clients for nonfiled and open tax assessments.
• Send out alerts to clients about the VDP and similar collection programs offered by the state.
• When offering clients a VDP service, use a well-crafted engagement letter.
• If working with the VDP isn’t your area of expertise, give your client a recommendation to a specialist in state and local taxes.
• Obtain CPE in the field of tax collections and tax representation.

John F. Raspante, CPA, MST, is director of risk management at McGowan Pro in the New York metropolitan area. He can be reached at jraspante@mcgowanprofessional.com.

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^{Statements of fact and opinion are the authors’ responsibility alone and do not imply an opinion on the part of the PICPA's officers or members. The information contained herein does not constitute accounting, legal, or professional advice. For actionable advice, you must engage or consult with a qualified professional.}