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Arizona's Voluntary Disclosure Program

A program the Arizona Department of Revenue runs for taxpayers who come forward before the Department comes to them. This page explains it; it does not tell you whether to use it.

If some of your construction work may have been reported under the wrong classification, this program is one of your options.

Everything here comes from ADOR's own program pages, its application form, and the Arizona Revised Statutes, each listed at the end of this page. No statute sets the program's terms. The Department does, and they can change without a change in the law. Where the sources differ or stop short, this page stops with them.

What the program is

The Voluntary Disclosure Agreement program, or VDA, lets a business come forward on its own to settle past tax it did not report. Transaction privilege tax is eligible. So are use tax, income tax and withholding. The voluntary disclosure glossary entry carries the same material with its sources.

The program has four benefits, as ADOR lists them.

  • A limited look-back period. The general rule is four years back from the date the application is submitted. A longer period is considered case by case where the facts justify it.
  • Abatement of penalties, once all tax and interest have been paid on time.
  • A waiver of the Department's ability to audit tax periods before the look-back period.
  • Anonymous application, for any tax type the Department administers.

It has limits too. Interest is not relieved; standard interest applies. There are no protest rights; the agreement is final. The program can be used once per tax type, and no refund can be requested after the case is closed. And the whole liability for the look-back period, tax and interest together, is paid in full, electronically, within fifteen calendar days of the final agreement.

Interest is set by statute at the federal short-term rate plus three percentage points, compounded annually (A.R.S. § 42-1123). Penalties are set at A.R.S. § 42-1125. Neither statute mentions the program.

Why the look-back matters for TPT

The ordinary limit on assessment is four years, running from the later of when a return was due and when it was filed (A.R.S. § 42-1104(A)). Three exceptions reach contractors. Where the amount omitted from gross receipts exceeds twenty-five percent of the amount stated on the return, the period is six years from the date that return was filed. Where a return is false or fraudulent with intent to evade, the Department can assess at any time. And where no return was filed at all, the Department can assess at any time; that exception covers every tax under Title 42 except income and withholding tax.

Which rule reaches a given period depends on what was filed for it. A contractor who filed returns under the wrong classification and a contractor who never filed for those periods are in different positions, and this page does not decide which one describes you. The statute of limitations entry sets out the rules; the voluntary disclosure entry, how they bear on the program.

Who can apply

ADOR states that individuals and businesses that may have recently become aware of undisclosed tax obligations may participate. For TPT, two situations are named: an unlicensed business conducting taxable activities in Arizona, and a licensed business with unreported or under-reported taxable activities. Whether a misclassified project amounts to under-reporting is not something this page decides.

The condition with no warning attached is contact. You can apply only if the Department has not already contacted you about an audit, a non-filer notice or an enforcement investigation. Once an audit or investigation begins, eligibility is gone. The application asks whether you have been contacted by the Department or any municipality, and failing to disclose previous contact of any kind may make you ineligible. Any prior collection activity, for any tax type, must be satisfied in full before you apply.

Participation is not automatic. You apply, the Department decides eligibility, and acceptance is one of the requirements.

How a TPT application runs

  1. The application and a TPT Schedule are received and eligibility is determined. The schedule is an Excel spreadsheet listing each taxable period, its tax jurisdictions, the business classification code, gross receipts, deduction amounts and deduction codes, tax collected and the net taxable figure. It stands in for a return for each period.
  2. If eligible, an application number is assigned. If not, you are notified and the process ends.
  3. The application package is assigned to a member of the VDA team.
  4. A draft agreement and an estimated tax liability are emailed to you or your representative.
  5. Within 15 calendar days of receiving the draft, you apply for a TPT license or supply an existing license number, and supply a Form 285 power of attorney where a representative is acting.
  6. The completed agreement, with the final amount due, is emailed.
  7. Within 15 calendar days, the agreement is signed and returned and the liability is paid in full electronically through AZTaxes.gov.
  8. The Department signs, abates the associated penalties, and sends a copy of the executed agreement.

The form adds a timing note: all required documents, including sales schedules for TPT applicants, are expected within 30 days of acceptance, and the form should be submitted only if that deadline can be met. The program page places the TPT Schedule with the application; the form allows 30 days after acceptance for the sales schedules.

The form itself is two pages. Its first part names the representative or applicant and is required. For TPT it asks whether you have collected transaction privilege or use tax and since when, whether you are remitting now, your business class code, and your estimated gross receipts and estimated tax due for each of the last four years. It also asks whether the applicant is under criminal investigation by the Department. An applicant not already licensed must license through AZTaxes.gov and pay the state and city license fees.

Timing

Two timing facts matter. The look-back runs from the date the application is submitted. Eligibility ends at the Department's first contact about an audit, a non-filer notice or an enforcement investigation. Nothing published says the program is closing or that a deadline to apply exists. This page does not urge anyone toward it.

The other program

The Department runs a second program, the Managed Audit. It removes interest as well as penalties and keeps the right to protest, and it is for currently registered businesses that want to check their own records and fix errors under the Department's guidance. Its glossary entry carries the detail.

Candor's role

Candor Bookkeeping does not represent anyone in a voluntary disclosure. A VDA is an agreement negotiated with the Department, and negotiating on another person's behalf is representation. Candor is not a CPA firm. It does not prepare or file returns and does not appear before ADOR. Candor may build the records a voluntary disclosure application rests on and supply the figures. Candor may not prepare the application or the TPT Schedule, submit either, appear as your representative, negotiate the agreement, or sign.

Anonymous application is not something Candor can offer. The first part of Form 11158 names the representative or the applicant, and Candor does not act as anyone's representative.

What a bookkeeper does is keep the record the figures come from. The TPT Schedule rests on gross receipts, deductions and tax collected for every period, and those come from the books. Whether the figures support an application, and whether to make one, is your decision with whoever represents you.

Sources

Program contact, as printed on Form 11158: (602) 716-7070 and VDA@azdor.gov.