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Audit Sees Ways to Increase State Income Tax Collections
Nearly 70,000 Oregonians did not file 2007 tax returns, violating state law
SALEM—A new state audit released Monday shows the Oregon Department of Revenue could increase income tax collections with comprehensive new practices to increase compliance with state tax law.
The report issued by the Secretary of State's Audits Division made several recommendations, including comparing state tax filer data with other sources, such as the Internal Revenue Service; increasing the use of private collection firms to collect tax debts; and closer monitoring of their collection efforts and caseloads.
"Oregon should pursue the best methods possible to collect the revenue legally due the state," said Secretary of State Kate Brown. "That's especially true today in an era where the state faces critical revenue shortfalls. We should all be playing by the same rules. In a fair tax system, everyone pays their fair share."
"We appreciate the Secretary of State's involvement to help us review our current practices and identify ways we can improve taxpayer compliance with Oregon's tax laws," said Department of Revenue Director Elizabeth Harchenko.
"Both agencies have a common goal to improve the performance of state government," she said. "We worked together from the beginning of this process to have Secretary of State auditors focus on areas we thought would benefit from the review."
State auditors compared Oregon tax records with IRS records and identified about 66,000 individuals who should have filed state income tax returns for tax year 2007 but had not as of the end of March 2009. The non-filers, the audit said, owed about $109 million in tax liability for that tax year. Based on past collection rates of non-filer debt, the department could expect to collect about $54 million of the total liability over a five-year period.
"We analyzed millions of records to spot the non-filers," Audits Director Gary Blackmer said. "A good first step for these 66,000 people is to make sure they file their 2009 tax returns then contact DOR about other years."
One option involved greater use of private collection firms to recover unpaid taxes. Right now, the department contracts with five private firms that receive a commission based on the tax revenue they collect. Private firms could help ease the burden on state agents, who carry a workload so heavy that sometimes many months pass before they make an initial contact with a taxpayer, the audit said.
The audit included a review of "best practices" that showed successful collections is related to timely contacts, up-to-date information about the delinquent taxpayer, good account management and effective use of technology. The audit recommends that DOR expand its efforts to better identify non-filers, address the backlog of non-filers, increase tax compliance efforts and increase the effectiveness and efficiency of its collections process.
The Department of Revenue conducted a study of taxpayer compliance in 2008. The conclusions of the Secretary of State's audit validate the findings of that study, Harchenko said.
She added that The Department of Revenue is committed to continually improving their processes to identify non-filers and collect the appropriate amount of tax from all Oregonians.
"It's a difficult task, and this report focuses on ways we can improve how we use the information available to us, and identifying ways we can use new technology to do so," Harchenko said.
"This $54 million is a small amount relative to the state's financial shortfall forecast for the next biennium," Blackmer said, "but it can help."
The full audit can be seen at www.sos.state.or.us/audits.
To contact the Department of Revenue about your tax filings, visit www.oregon.gov/DOR; e-mail dor.questions@state.or.us; call 800-356-4222 from an Oregon prefix; or 503-378-4988 in Salem.