States to zero-in on tax cheats as economy sags
By
RICHARD RICHTMYER Associated Press Writer October 9,
2008
ALBANY, N.Y. (AP) - The U.S..
financial meltdown is creating brighter job prospects for at least
one occupation: tax collector.
Several states - including New York, Massachusetts, California and Illinois
- are beefing up tax enforcement and collection efforts as they face
widening budget deficits.
"As
their budgets quickly hit the skids and the pressure is on, they're going to
be looking to see where those dollars are," said Verenda Smith of the
Federation of Tax Administrators, an association of tax agencies from
all 50 states.
Their
targets range from major corporations to small businesses and individuals.
State
governments are always seeking ways to narrow their "tax gaps" - the
sometimes billion-dollar chasms between what they believe they're owed and
what tax cheats and delinquents actually pay. The sliding economy is forcing
states to intensify efforts to close the gaps.
In
New York, tax collectors have been trumpeting their crackdown, aiming to
persuade tax cheats to change their ways.
"At
the end of the day, I'm not interested in a lot of arrests. I'm interested
in increasing the number of voluntary taxpayers," said William Comiskey, the
state tax department's deputy commissioner for enforcement.
New York tax collectors
recently sent letters to thousands of small businesses advising them of the
consequences of not collecting or remitting
state sales taxes. They'll soon send letters to thousands of
taxpayers whose returns were done by preparers who are under investigation
for fraud, Comiskey said.
The
warning letters are part of a broader campaign to publicize the crackdown
and steer tax cheats to a new program that will allow them to come clean and
avoid criminal prosecution.
Officials expect the program to yield $30 million a year, a pittance
compared to New York's projected $5 billion-plus
budget deficit for
next year.
"You
really can't balance tomorrow's budget on enforced compliance," said the
Federation of Tax Administrators' Smith. "What you can do is rearrange your
resources and get some quick hits."
In
Massachusetts, which is facing a $1.3 billion deficit, officials expect to
take in an additional $150 million from new tax enforcement initiatives,
including $60 million as a result of the work of nearly 90 new state workers
focusing on compliance and collection.
"This
is part of the solution," said Massachusetts Revenue Commissioner Navjeet
Bal.
Massachusetts tax collectors
expect to squeeze another $30 million out of some businesses by cracking
down on those that improperly classify workers as
independent contractors instead of full-time employees to avoid
taxes.
Bay
State tax evaders also now run the risk of having their
driver's licenses suspended, a threat that officials expect will
yield an additional $7 million in delinquent taxes.
Tax
collectors are likely to focus their stepped-up enforcement on small
businesses, according to The
Tax Foundation, a nonprofit research group. That's partly because
small businesses tend to be the biggest
tax evaders, particularly during economic downturns, said Patrick
Fleenor, the group's chief economist.
But
some states, including Massachusetts and Illinois, are targeting large
corporations as well, focusing on those structured as "passthrough"
companies that shift their
income tax liabilities either to shareholders or to the states where
they are based.
California - faced with a $15.2 billion budget deficit - hopes to collect an
additional $1.5 billion by doubling the penalties on corporations that are
late in paying more than $1 million in taxes.
That
was one of several measures included in the state's latest budget that even
some of the state's loudest anti-tax voices support.
"As
long as they're going after people who are legally required to pay, what's
the problem?" said Kris Vosburgh, executive director of the Howard Jarvis
Taxpayers Association, a California anti-tax group. "It's better than
raising taxes."
California's tax collection agencies are getting an extra $226 million to
hire more auditors and tax collectors and pay for new enforcement
initiatives, including using
driver's license records to find people who should be
filing tax returns but aren't..
On
the Net: Federation of Tax Administrators:
http://www.taxadmin.org
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