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Lane
Lane, JD, CFP, MBA, CRPS
Category: Tax
Satisfied Customers: 10109
Experience:  Law Degree, specialization in Tax Law and Corporate Law, CFP and MBA, Providing Financial & Tax advice since 1986
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This question is ONLY for those who is very familiar with state

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This question is ONLY for those who is very familiar with state income taxes: We file a separate state return in Kansas since 2006, and now Kansas is inquiring why we filed a separate return while we filed a consolidated Federal return. How should we respond? Should we come clean with them, and how long should we amend prior years' returns? Is there a voluntary disclosure program in KS?

Lane :

Hi,

Lane :

From: http://www.ksrevenue.org/faqs-taxii.html Kansas Dept of revenue says the following: "The filing status on your Kansas return must be the same as on your Federal return. There is one exception. If your filing status on your Federal return is Qualifying Widow or Widower with Dependent Child, your filing status on the Kansas return is Head of Household." ... and you must have a dependent to qualify for Head of Household filing status They say, "you must claim Head of Household or Qualifying Widow or Widower with a Dependent Child on your federal return."

Lane :

Your best bet here IS to explain your thinking ... If you did not realize that it was a requirement I would most certainly say so. (You should make that the first statement in the explanation)

Lane :

Regardless, of the why, they will most likely WANT you to amend for those years, so that the tax will come to the amount that you would have arrived at, had you done them as per Kansas' instructions

Customer:

Sorry if I wasn't clear. I was talking about state income tax return in Kansas for CORPORATE, not individual.

Customer:

Have you dealt with this same issue before? If not, I'd appreciate someone else to help me

Lane :

I understand tax law at both the corporate and individual ... stated and federal level I HAVE NOT MEMORIZED Kansas tax code, but if you explain what you're saying here I'm sure I can tell you what the best avenue is ...... are you sayin that you and another individual who both own a portion of the corporation filed two separate corporate returns? ... Firt tell me how your company is structured .... (LLC, C-Corp, S-Corp, partnership or sole-proprietorship)

Lane :

Let's start here:

Lane :
Any association or organization which is required to report as a corporation, for federal income tax purposes under the internal revenue code of 1954 as amended during the taxable year, shall be considered to be a corporation for the purposes of the Kansas act. Conversely, any association, organization or corporation required to report in any other capacity, for federal income tax purposes under the internal revenue code as amended during the taxable year, shall report in a like capacity for purposes of the Kansas act.


Kan. Admin. Regs. r. 92-12-8

Customer:

We filed a Federal consolidated US return, with 5 tax legal entities, all C Corps, all doing the same kind of business. Only 1 of the LE has nexus in KS. I know we are wrong in filing separately in Kansas since Kansas codes and laws say as you said above

Customer:

Now KS is asking us to amend the KS return, to file a combined return. And we dont despute that fact.

Customer:

We have been filing separately since 2006. Can KS ask us to file amended returns for all open years under combined reporting? Is there a voluntary disclosure program in KS?

Lane :

Let me check both Cd and statute of limitations for you ... give me just a minute

Lane :

sorry for the typo ..."VD" Vol Disc ... and statute ....

Customer:

OK, Thanks!

Customer:

We received a letter from KS, so I assume we can qualify for the VDC if there is such program in KS?

Lane :

Yes KS has a Voluntary Disclosure Program ... See this: http://www.ksrevenue.org/voluntary.html

Lane :

However, see this:

Lane :

Qualifying for Voluntary Disclosure


Each voluntary disclosure request is considered separately on its own facts. Before the Department will consider a request for a voluntary disclosure agreement, the following criteria must be met:



  • The taxpayer has not been contacted by the department or The Multistate Tax Commission with respect to any tax for which the taxpayer is requesting voluntary disclosure.

  • The taxpayer is not under audit for any tax for which the taxpayer is requesting voluntary disclosure.

  • The taxpayer's failure to file is not the result of fraud or gross negligence on the part of the taxpayer.

Customer:

Thanks!

Lane :

Given that you make the case that you were simply unaware (no intent) I thin you're still there

Customer:

I am afraid we won't qualify then because we have now been contacted by the department?

Lane :

You're welcome

Lane :

If this has helped, I would appreciate a feedback rating of 3 (OK) or better (excellent, is ideal)… That's the only I get credit for the work.


However, if you need more on this, please come back here, so you won't be charged for another question.

Customer:

I am afraid we won't qualify then because we have now been contacted by the department?


Lane :

Again, I would make application get the work done and stress that you have no "mens rae" ... intetn that you were completely unaware,,, and that your assumptions were based on knowing that only the SIb has KS source income

Customer:

OK Thanks for your help today!

Lane :

Mens rae means .... knowledge, intent or purpose

Lane :

you're selcome

Lane and other Tax Specialists are ready to help you

Thanks Kendrick,

Lane

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