Objective

To determine if the Department of Taxation and Finance (Department) is making adequate efforts, in accordance with Department policy, to collect unpaid amounts—including taxes, interest, penalties, and fees—from delinquent individual and business taxpayers. The audit covered the period from January 1, 2016 through December 31, 2019. We also considered information that was provided by the Department through April 15, 2021.

About the Program

The Department’s mission is to efficiently collect tax revenues in support of State services and programs while acting with integrity and fairness in administering State tax laws. When a tax debt has been billed and the taxpayer has exhausted all applicable protest rights, or protest rights have expired, the tax is considered delinquent and the Department may initiate collection actions through its Civil Enforcement Division. Not all debts include a tax amount; some include only penalties and/or interest. There could be just a penalty assessment, and some penalties accrue interest while others do not. Department procedures describe all appropriate collection actions staff must take prior to completing or closing a collection case. Collection actions may include filing a warrant, serving a levy (a legal seizure of property), and performing applicable searches to locate delinquent taxpayers and/or identify potential sources of payment.

In addition to pursuing collection of delinquent taxes, the Department has the authority to waive or abate (reduce or eliminate) some tax liabilities—including interest and penalties—under certain circumstances, such as when a tax liability has been deemed legally uncollectible or not legitimate or when there is reasonable cause to abate.

The Department publishes a monthly list of both the top 250 individual and top 250 business tax debtors for whom it filed at least one warrant in the prior 12 months. The March 2021 lists for individuals and businesses totaled almost $316 million and $182 million, respectively, for the amount due and owed at the time the warrant was filed.

Key Findings

• For a significant number of the delinquent tax assessments we reviewed, we were unable to determine, based on documentation, that the Department took adequate collection actions prior to completing or closing cases for one of the five collection steps we tested: using applicable search tools to identify taxpayer resources that might be pursued to satisfy the debt.
• The Department generally followed relevant policies—with certain exceptions—in cases where it abated amounts due.

Key Recommendations

• Improve documentation for each relevant assessment so that it affirms which actions are applicable and which actions staff take in their collection activities.
• Take steps to ensure compliance with policies and procedures that address abatement decisions, and, where considered necessary, document the rationale for decisions.