State ramps up to ferret out tax cheaters and fraud

State government is ready to crackdown on tax cheats, using additional personnel and increased exchange of information with other governmental agencies.

Some may think the only good taxes are those paid by someone else. But making sure other people pay what they owe probably seems just as important as citizens complete their 2012 income tax forms.

The 2013-2015 budget bill calls for 33 audit and compliance provisions to use information obtained by the U.S. Internal Revenue Service. The IRS information includes two types of reports --- adjustments for unreported income such as dividend payments and changes reflecting unreported business income, nondeductible expenses, and incorrect credit changes.

More than 40,000 new reports come from the IRS each year. according to the Legislative Fiscal Bureau budget analysis.

The additional workers will generate $35 million in the next biennium, according to Department of Revenue estimates. The state also shares its audit work with the federal government.

Another 15 positions would increase efforts to collect delinquent taxes. The budget bill language would expand the DOR’s ability to impose a levy to collect delinquent sales and use taxes as it now can for delinquent income and franchise taxes.

Tougher laws and 13 positions are aimed at reduced tax fraud. Civil and criminal penalties would be created for negligent and fraudulent tax refund or tax credit claims. A penalty of 25 percent would be applied to the difference between the amount claimed and the amount that should have been claimed.

Under the budget bill provisions individuals would be ineligible for 10 years for homestead and earned income tax credits if they had made previous fraudulent claims under the program. If an individual made a “reckless” claim, he would be barred from the programs for two years.

The new language would match federal tax law provision. Currently there are no ineligibility provisions in state law.

Six state agencies would be authorized to share personal information with the Department of Revenue to help DOR address fraud, identity theft, non-filing and underreporting of income.

The Departments of Children and Families and Health Services would be required to provide information to DOR concerning applicants and recipients of as- sorted welfare programs.

The Department of Employee Trust Funds (ETF) which manages the Wisconsin Retirement System for more than a half million persons, both active and retired, would be authorized to provide social security numbers, amounts of annuities, and addresses.

More than $14 million per year would be collected with the additional information, according to the budget bill analysis.

Meanwhile, other tax provisions are alive in state and federal government. A group of Republican members of the Assembly are working on a plan aimed at making the state income tax simpler. They say it would ease enforcement and reduce frustration of the taxpayers.

The idea of “piggybacking” the state income tax on the federal system is a regular topic among the states which have individual income tax systems.

Gaining bipartisan steam, according to national media, is a federal requirement that all mail order and internet sales operations collect the appropriate state sales tax of the buyers. It would apply regardless of the locales of the sellers.


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