March 27, 2014

States Fight Back and Employ Creative Techniques to Collect Tax & Tolls

Holland & Knight Tax Compliance Blog
Kevin E. Packman

States are fighting back. While they may not have the same resources available to combat tax avoidance, as the Internal Revenue Service or Department of Justice, they are resorting to creative measures. 

In October 2013, New York Governor Andrew Cuomo signed legislation that would become effective as of March 2014. The legislation permits the Department of Motor Vehicles to suspend a taxpayer's driver's license when such taxpayer owes more than $10,000 in back taxes. The legislation has successfully caused 6,500 taxpayers to resolve their tax deficiencies, resulting in approximately $56.4 million of additional revenue from tax collection.1 Not everyone has taken advantage of the legislation, and as a result approximately 8,900 taxpayers have had their drivers' licenses suspended by the DMV. These taxpayers had ample opportunity to avoid the suspension. The legislation provides taxpayers 60 days to satisfy the tax liability upon receiving a suspension notice from the Tax Department. After the 60 days, the DMV will send a second letter providing an additional 15 days in which to pay the deficiency.

"We are sending a clear message to tax delinquents that they either have to pay the taxes they owe, or face real consequences, Cuomo said. "For many, this message is getting through and as a result, thousands of people have come forward to do the right thing and find a way to pay their taxes."2

Even though Florida does not have a state income tax, it does want a way to collect unpaid tolls from those residents who utilize the Florida Turnpike and fail to pay for their use. While details are being worked out, the Ft. Lauderdale Sun-Sentinel reported on March 16, 2014 that Florida officials are designing a plan to block the issuance of the annual vehicle registration until the delinquent tolls and fines are paid in full.3

The article also noted that in Texas, more than 70,000 people owe 100 or more unpaid tolls totaling in excess of $53 million. Texas lawmakers permit the toll agency to prevent vehicle registrations from being issued to those who owe money from more than 100 tolls. And on March 20, 2014, the Texas Department of Transportation indicated that drivers with 100 or more unpaid tolls were in danger of having their cars impounded.4

Maryland and Colorado were also noted for preventing vehicle registration from renewing for nonpayment of tolls. Uncle Sam also strives to help fill coffers at state taxing agencies. The IRS routinely provides states with information resulting from examinations as well as on the tens of thousands of taxpayers who have participated in of the offshore voluntary disclosure program iterations. Therefore, taxpayers are in danger of incurring penalties at the state level if they fail to amend state returns to be consistent with federal returns.





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