Tax Law and Guidance    Tax Clarity Act Changes - Individual Income Tax Return Taxpayers no longer pay a sales tax on snack foods. Taxpayers must use whole numbers on Individual and Franchise Tax Returns. The interest rate for underpayment of taxes has been reduced. Individual taxpayers will receive automatic interest on refunds held more than 90 days by the Office of Tax and Revenue from the latest due date or filed date. The Office of Tax and Revenue may offset federal refunds for tax and other obligations owed to the District government. Real property tax refunds will only be allowed within three years of original payment. A spouse may not be liable for income tax penalties due to tax fraud of the other spouse. Sales Tax on Snack Foods Effective June 9, 2001, the "snack tax" has been repealed, which means that taxpayers no longer pay the 5.75% sales tax on foods such as candy bars, potato chips, peanuts and canned and bottled soft drinks. The new rule provides that food (excluding food or drink prepared for immediate consumption) sold at convenience and grocery stores is exempt from sales tax. Snack foods sold by restaurants, carryouts, vending machines and other non-grocery establishments remain taxable.   Q.   So, I can buy a single can of soda at the grocery store and it will not be taxable?   A.   That is correct. Whole Number Accounting Effective for individual income and franchise tax returns filed for tax years beginning after December 31, 2000, whole numbers must be used. For amounts with cents less than 50, the cents will be deleted. For amounts with cents of 50 or more the dollar amount will be rounded up to the next dollar. Examples:     $34,560.58 is rounded to $34,561 $34,560.45 is rounded to $34,560 Interest Rate for Tax Underpayment Effective for tax periods beginning after December 31, 2000, the interest rate for underpayment of taxes is reduced to 13% simple interest. The previous rate was 18%. For tax periods beginning after December 31, 2002, the rate is further reduced to 10% compounded daily.   Q.   Does this mean the interest rate on my 1999 delinquency will be reduced to 13%?   A.   No, only delinquencies for tax periods beginning after December 31, 2000, are subject to the 13% rate. Automatic Interest on Late Individual Income Tax Refunds Effective for tax years beginning after December 31, 2000, individual income taxpayers will receive interest if refunds are held more than 90 days. The interest rate will be 6%. The automatic interest on refunds applies to timely filed returns.   Q.   Can I get interest on my refund if I file January 15 and do not get my refund until April 30?   A.   No, the refund provision applies on the 91st day after the due date of the individual income tax return or after the return filing date, whichever is later. If the return is filed on or before the due date of April 15, interest will be paid if the refund is not mailed by July 15. DC Offset of Federal Refunds for DC Obligations The District of Columbia now has increased statutory authority to offset federal refunds for obligations owed to the District of Columbia. The offset will be used for District tax obligations and obligations of past due child support payments, past due payments to the University of the District of Columbia and overpayments of unemployment compensation that have not been recovered. Taxpayers will receive notification that an offset is to occur and will have a period to appeal. Real Property Taxpayers Must File for Refunds Within Three Years Effective immediately, real property taxpayers will only receive real property tax refunds within three years of payment. This provision does not apply if there is a lawsuit pending or for taxpayers with an exemption application pending with the District of Columbia. Spouse May Not Be Liable for Income Tax Penalties Due to Tax Fraud of Other Spouse In situations where spouses file joint DC tax returns, a spouse unaware of fraudulent behavior of the other spouse is only liable for his or her liability, interest and penalty, not that of the fraudulent spouse.