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Virginia to Administer Tax Amnesty

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On February 20, 2017, the Governor of Virginia signed legislation into law that will require the Virginia Department of Taxation to administer a tax amnesty program. The legislation, House Bill 2246, requires the program to take place sometime between July 1, 2017 and June 30, 2018, for a period of 60-75 days. This  amnesty program is Virginia’s first since 2009.

Participating taxpayers with unpaid tax liabilities due to Virginia will receive a waiver of all civil or criminal penalties and one-half of the interest due in exchange for payment of the outstanding tax liability. The program is available to taxpayers with liabilities resulting from nonpayment, underpayment, non-reporting, or under-reporting of their tax liabilities. Any tax administered or collected by the Department is eligible for the program.

The amnesty program does have limitations related to tax periods and assessments that are eligible for amnesty. For income tax purposes, the program generally will not apply to any tax liability that is attributable to taxable years beginning on and after January 1, 2016. Further, a liability with respect to an outstanding assessment dated less than 90 days prior to the first day of the amnesty program is not eligible for the program. As with many state tax amnesty programs, a 20% post-amnesty penalty will be assessed against any taxpayer that does not participate in the program on any tax balance remaining after the amnesty program ends. The Department will issue additional details on the exact dates of the program and the participation procedures.

The amnesty program is separate from Virginia’s ongoing voluntary disclosure program, which is generally available to out-of-state non-registered business taxpayers with an outstanding Virginia tax liability. Any businesses considering coming forward to pay their Virginia tax liabilities should examine which program is more beneficial. One important distinction is that the voluntary disclosure program grants a waiver of all tax, penalties, and interest for periods older than a three-year look-back period. Thus, businesses with a tax exposure that is greater than three years may find the voluntary disclosure program more appealing despite it not offering the same level of penalty and interest waivers for the periods for which tax will be paid.

If you have any questions about Virginia’s amnesty program, please contact your Aronson tax advisor or Michael L. Colavito, Jr. at 301.231.6200.

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How Will Minimum Wage Increases Affect Your Restaurant or Hotel Business?

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While recent changes to the minimum wage have had a big impact on the restaurant and hotel industries, business owners should be aware that we expect to see another wave of increases over the next couple of years.  Staying ahead of the curve and knowing when these changes are set to occur will greatly reduce the potential for headaches in the future.

The federal hourly minimum wage currently stands at $7.25 per hour and $2.13 per hour for tipped employees. There has been recent conversation about raising the federal minimum wage to $10.10 per hour in the near future, which would apply to both tipped and non-tipped employees. In regards to tipped employees, their base hourly wage and tips combined must equate to the federal minimum wage.

Below is a summary of where state minimum wages currently stand in the DC metropolitan area, as well as anticipated changes over the next several years:

District of Columbia

  • Effective July 1, 2015, the hourly minimum wage increased from $9.50 to $10.50 per hour. Tipped employees must be paid at least $2.77 per hour.
  • Effective July 1, 2016, the hourly minimum wage will increase to $11.50 per hour.

Maryland

  • Effective July 1, 2015, the hourly minimum wage increased from $8.00 to $8.25 per hour. Tipped employees must be paid at least $3.63 per hour.
  • Effective July 1, 2016, the hourly minimum wage will increase to $8.75 per hour.
  • There are plans to phase in annual increases to make the statewide hourly minimum wage $10.10 per hour by July 1. 2018.
  • Montgomery and Prince George’s Counties will increase their hourly minimum wage from $8.40 to $9.55 per hour effective October 1, 2015. Tipped employees must be paid at least $4.00 per hour in Montgomery County and $3.63 per hour in Prince George’s County.
  • There are plans for Montgomery and Prince George’s Counties to phase in annual increases to make the local hourly minimum wage $11.50 per hour by October 1, 2017.

Virginia

  • Matches the federal hourly minimum wage of $7.25 per hour and $2.13 per hour for tipped employees.

As minimum wages continue to climb, restaurant and hotel operators will need to take these changes into account and budget accordingly to minimize the financial impact. Labor is a major component of a restaurant or hotel’s “prime costs” that needs to be monitored on a regular basis.

Aronson can help you prepare for the business challenges ahead so that when the time comes, your business can withstand the changes and continue to thrive. For more information, call Aaron Boker of Aronson LLC’s hospitality industry practice at 240.364.2582.

 

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