Editorial: Catching delinquent taxpayers requires transparency, innovation, funding
The Internal Revenue Service has gotten a well-deserved black eye in recent weeks for injecting politics into the business of collecting taxes. It made us wonder what goes on at the state level. A new audit of the Division of Collections inside the New Hampshire Department of Revenue Administration provides an interesting window into the workings of the agency and leads us to three conclusions:
∎ The agents responsible for going after delinquent state taxpayers should operate with much more transparency.
∎ There is an interesting range of modern tax-collecting procedures used elsewhere but not here; they’re all worth a good, hard look.
∎ Dramatic budget cuts to the agency responsible for collecting on old debts are counter-productive.
The audit, conducted by the Office of Legislative Budget Assistant, was made public this month. The idea was to determine whether the agency efficiently and effectively collected delinquent taxes in 2011 and 2012. Auditors found that the internal rules governing how the agency runs put it at risk of inconsistent treatment of taxpayers and even loss of collectable taxes. They found that the agency did not consistently “receive or process delinquent tax notices timely; file liens to secure assets for the nonpayment of taxes; obtain proof of taxpayers’ inability to pay; inform the public on payment options and requirements; and retain all documentation related to collection cases.”
And the auditors noted that “the employees and public were not fully informed on how the Division was supposed to collect delinquent taxes and how a taxpayer could respond.”
At a time when every penny counts, such sloppiness is risky. But there’s good news too: Agency officials concurred with nearly every criticism leveled at them and say they are on the road to improvement.
Auditors also noted that there are at least a dozen alternative collection practices used elsewhere but not in New Hampshire, everything from publicizing debtors’ names to revoking professional licenses to accepting automatic payments in the form of electronic funds transfers. Some or all of these might be worth trying.
Finally, between 2010 and 2012, staffing at the Division of Collections shrunk from 16 to eight, dramatically increasing to workload on tax compliance officers. And when auditors noted that the agency has not consistently provided appropriate training to its workers or continuing education, tax collection officials agreed – but noted that they would need more money to do so.
Keeping the tax collectors well educated and well trained and keeping their workload manageable should be a priority of state budget writers. In both of the years auditors examined, the Department of Revenue Administration collected $1.2 billion in taxes. The agency’s work is critical to keeping the government humming.