With the legislature still in session, it is premature for me to provide a comprehensive update, but I do plan on doing so soon (hopefully). For now, I did want to reach out to preparers to let you know of two mailings going out to taxpayers over the next several weeks:
- Discrepancy 2014: This “discovery” program looks at various sources of data (IRS/Labor etc.) versus Vermont filed returns and generates a Notice of Intent to Assess (NOIA) to the taxpayer. This is a standard program the Department completes, we issued the 2013 discrepancy notices in December and January. We understand the timing was difficult for you and that there were a lot of “false positives.” I want to assure you that my compliance team has done a very comprehensive post-mortem on that effort and made at least a dozen major and minor tweaks to avoid the “false positives” that cause us, you and your clients unnecessary headaches. The VTax system gives us an unprecedented ability to track and categorize the outcome of every individual mailing. The 2013 mailing of 1,200 letters led to over 400 assessments of about $1,000,000 in additional tax owed.
While it was a worthwhile compliance effort, we are not satisfied with what amounts to a 70% false positive rate and apologize for the inconvenience this caused. The changes we have made should result in a much lower false positive rate in the 2014 and future discrepancy mailings. As always, your feedback in how the process runs is helpful. If you have suggestions in how to improve this process, please contact our Director of Compliance, Val Rickert (Val.Rickert@vermont.gov). If you or your client has specific questions about a letter received from this program, please call the number indicated on the letter.
- Looking at a list of the discrepancies; wages (W-2) and 1099-R, 1099-INT and 1099-DIV are the most common sources of differences we are inquiring about.
- These letters will go out in weekly batches starting this week.
- If you are asked to follow up with the NOIA on behalf of your client, make sure you have a PA-1 on file with us, so that we can discuss all possible issues and get things resolved efficiently. Here is a link to that form: http://tax.vermont.gov/tax-professionals/individuals/power-of-attorney
- The second mailing scheduled for early June will not be via NOIA, but are straight forward assessments based on income tax filings to date. These are generally underpayments or non-payments associated with filed and complete income tax returns. For instance, taxpayer files with a $1,000 VT tax due, and sends no payment, or just $500. For many of these, we have not adjusted the return, and the taxpayer has determined their own liability, therefore the NOIA process makes little sense here.However, an appeal can be filed if there is disagreement in the amount due. If the taxpayer is unable to repay the amount due in one payment, the taxpayer should not appeal. Instead, the best course of action would be to set up a payment plan using myVTax or contacting our Collection Unit at 802-828-2518.
One last item relevant to the above is that we continue to get good feedback from your community on the format and language in the NOIAs and I want to assure you we are continually discussing and making changes to the NOIA. One thing you will see in the above 2014 Discrepancy NOIA on page 3 is additional text information with explanations of why the adjustment was made. This additional information was a direct result of feedback from prepares and taxpayers. It won’t eliminate questions or confusion but I think we are heading in the right direction.
Thanks for your time and I hope this message gives you helpful background and preparation for client calls you may receive in the coming weeks and months.
Kaj Samsom CPA
Commissioner of Taxes