Posted on 03/14/2010 10:06:20 AM PDT by Altura Ct.
New York floods mailboxes with 700,000 vintage tax-delinquency letters: You may be a debtor!
New York state has unearthed billions of dollars in unpaid taxes as old as the 1950s in an attempt to shake money from the pockets of some taxpayers.
In January, the state dug into its archives and mailed a list of outstanding bills to 700,000 people — everyone who has a debt older than three years on the state’s books.
“Maybe they hoped we forgot about it,” Acting Tax Commissioner Jamie Woodward said.
Gov. David Paterson and state legislators are offering a kind of half-off sale on the old debts. If taxpayers pay in full by Monday, they can have a discount.
The effort has sent accountants and retirees into their own archives to find records from businesses they closed decades ago. The notices surprised many people who said they had not been billed previously. Some say the state is mistaken.
The state told Michael Rothman, 59, of Manlius, that he owed $3,491 with penalties and interest on unpaid taxes from 1988.
It was news to him. He sold his car repair business 17 years ago and said he did not hear about an outstanding tax bill until January.
The notices tell taxpayers the tax year, an amount due and amount of the discount. But the letters do not say what kind of tax the state thinks the person owes or how much of it is penalties and interest. The letters offer options to pay by phone, Internet or mail.
They do not offer an avenue for appeal, even though the burden is on the taxpayer to prove the state wrong.
Rothman said he called two phone numbers at the tax department and got no more information.
He said he does not intend to pay.
Ben Berry, 69, of Jamesville, was also surprised to get a notice for a 1998 tax bill he said he does not owe. He operated a coin laundry business and then two TCBY franchises, but closed his last business in 1997.
If he paid by March 15, the letter said, the state would reduce his bill from $20,571 to just $9,724.
“It’s just fishing, I think,” Berry said.
An opportunity to pay
To help raise quick money for the cash-strapped state, Paterson and legislators ordered the tax department to run a two-month tax amnesty program.
Eligible taxpayers who had unpaid bills more than three years old could get a discount if they paid by Monday. The Penalty and Interest Discount Program, also called PAID, works like this: Liabilities between 3 and 6 years old could be eligible for 50 percent off of penalties and interest; bills older than 6 years could qualify for 80 percent off.
The tax department tried to pitch the amnesty program as a win-win for the state and taxpayers. They didn’t want to leave anyone out of an opportunity, so they woke up even their oldest records of debt, Woodward said.
“Everybody’s looking for that money and we thought this was a good opportunity for folks,” Woodward said.
They tried to remove the names of people who had died or had incorrect addresses. Then, they mailed 700,000 notices. That’s one letter for every 25 people in the state.
Woodward said she saw the letters as an “invitation” to participate in the amnesty program. She knew they would be stirring up issues some people had not thought about in a long time.
The highest possible income from this effort, if all 700,000 debts were paid, is about $13 billion, she said.
The state knows, however, that is an imaginary number.
Paterson’s office came up with a more realistic estimate — $250 million.
So far, the tax department has collected $24 million.
“We really did try to present it as an opportunity, not as a mandate or a requirement or a bill,” Woodward said.
One taxpayer who owed more than $1 million paid $400,000 at once, the tax department said.
Not everyone saw it as a bargain.
“What we’re seeing is more of a nuisance than anything else,” said Tom Riley, a tax partner at ParenteBeard, of Syracuse. He said about 80 percent of his clients’ bills are incorrect.
He wonders how many people are choosing to pay small amounts they don’t owe because it is easier than fighting it.
“Try and argue about something from 1990,” he said.
Chris Anderson, an accountant with Testone Marshall Discenza in Syracuse, said about 12 of his clients received letters. In most cases, he sends a copy of the company’s final tax return to prove he properly closed out the business with no taxes due.
This is information, he said, the state should have in its own files.
A hard look for revenue
Rothman said the experience reminds him of another agency’s try to bill business owners for worker’s compensation insurance. A Post-Standard story last summer said the Worker’s Compensation Board was seeking judgments against people who had not had employees for many years.
Woodward said she does not know of any coordinated statewide effort to dig up old debts.
“I think the fiscal situation has made everyone go back to look very hard at where there could be some money that would not include raising taxes or cutting programs,” she said. “We’re working very hard to do our very best at making sure that the money that is due the state is paid and here. The Legislature added the incentive piece.”
Woodward said the department has heard from a small number of people who said they did not owe the money, and they are working to sort out those accounts.She said she wishes she could rewrite some of the things people have said about the tax department.
“A lot of it is folks didn’t give us the right information to begin with,” she said, adding that people may need to learn how to properly close a business.
She also knows a lot of people simply don’t have the money.
“It’s like Macy’s has a sale, even if the dresses are 90-percent off, if you don’t have the money to buy it, you can’t participate,” she said. “A lot of people are in financial trouble and maybe cannot even borrow from friends and relatives to take advantage of the deal.”
To Berry, the idea of surprising small business owners in difficult financial times is an extra insult. He does not have a problem with the state pursuing bad debts, but said it should be diligently researched and clearly explained. He never had a problem with the tax department in the 40 years he ran his businesses.
“I really think it was a ripoff for people to have this thing come out of the blue in this economy,” he said.
There is no statute of limitations on these debts. But the tax department does not plan to do anything out of the ordinary to prosecute the people who ignore their invitation to participate in the amnesty program, Woodward said.
The old accounts will go back to sleep until the state finds some other reason to wake them up.
Thanks for setting me straight. I need to read a little more carefully before I sound off!
I thought you only had to keep old tax records for ten years??
Hoping most people didn’t keep their paperwork around long enough to defend themselves.
Terrific comparison - this is really unbelievable, huh? I wouldn’t be surprised if 3/4 of these letters were just made up. Pulverize the IRS!!!
I wonder how many delinquency notices Tax Cheat Charlie Rangel received?
If they could just get their elected representatives to cough up their “fair share” instead of grandstanding about everyone else’s, perhaps the state deficit could be reduced, no?
Thats exactly what they are doing.
Shakedown artists.
I don’t know why anyone live in that state.
What we are seeing is the end of the socialist dream of creating a Utopia. We may even be seeing the end of our nation (but I personally believe we are strong enough to survive this mess).
You can not continue to take from those that produce to give to those that do not and in this I am going to include government employees since they are (sometimes necessary but still) a drain on the economy.
Social engineering does not work. Welfare does not work. Taxing to prosperity does not work. Regulating 100% safety does not work.
The government has a function, but that function should be limited to a few things that individuals can not do on their own.
The bottom line is we have more government than we can afford and it is killing us.
I suspect they will get less money from this mailing then it cost to research and mail the letters.
Americans for the most part are honest taxing paying citizens (excepts are policticians and friends of policticians). We pay our taxes because (A) it is the right thing to do, and (B) the IRS scares the hell out of us.
Action like this makes tax collectors appear impotent.
Did they also open the ‘lock box’ where they are suppose to keep UNCLAIMED money? Are they also looking to return that money to those folks?
BLOOD-FROM-A-TURNIP PING!!!
Doesn’t statute of limitations apply on debts over 10 years old?
Sounds like a stupid plan... If the guy owes 1 million and you settle for 400,000 the tax payers take a loss..
I think it would be a really good idea for someone to ask the court to designate the Governor's Office as the appropriate venue for appeal.
That often requires onerous and expensive methods such as calling a phone number associated with the individual's paperwork. Also, the risk-to-reward is unfavorable to the state, as many times the person is still at that same phone number and address.
Exactly!
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