Government and Politics Issues

State Revenue Services As Fouled-Up As IRS

Tax enforcement mischief at the state level doesn't get the national headlines the federal Internal Revenue Service gets. But observers say it's just about as bad.

Last year, New Mexico's Taxation and Revenue Department -- said to be the worst such agency in the nation -- sent out tax packages missing a whole page of instructions. This year it sent 25,000 tax returns to wrong addresses. Meanwhile, it sent out a tax form containing erroneous instructions, then announced that anyone following them would be hit with penalties -- a position it has since abandoned.

  • Twenty-eight-thousand California taxpayers who had filed electronically and then mailed in their checks received delinquency letters -- because a computer spit out the letters without waiting for the checks to arrive.

  • When the Indiana Department of Revenue failed to take into account a tax credit for low-income persons, it started sending out erroneous bills to taxpayers -- and continued to do so months after the error was discovered.

  • After the Ohio Department of Taxation discovered it was sending out incorrect bills for up to $650, plus interest, it decided to make no public announcement and made no plans to correct the errors -- unless taxpayers complained.

  • The Arizona Department of Revenue blamed "an error in programming" after it sent thousands of letters to businesses, mistakenly accusing most of not paying state taxes withheld from employee paychecks.

Source: William P. Barrett, "Tax Torture, Local Style," Forbes, July 6, 1998.

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