Pennsylvania has recently joined the 20 states and the District of Columbia in posting the names of individuals and businesses who owe taxes on their web sites, using names such as Maryland’s “Caught in the Web,” or South Carolina’s “Debtor’s Corner,” to bring pressure on tax scofflaws.
In many cases, the threat of disclosure is enough to persuade taxpayers to pay, says Illinois Revenue Director Brian Hamer. The listing is particularly effective with self-employed professionals and small businesses where some routine collection tools such as the ability to garnish wages are not effective.
Notices advising taxpayers of the posting last year yielded payments in Illinois of $1,000,000 from 122 persons or businesses that owed taxes and payment plans from nine others that will produce $350,000.
In Wisconsin, where revenue officials had predicted that the web posting would bring in only $1.5 million, the actual additional tax collected amounted to $9.7 million in 2006, the Milwaukee Journal Sentinel reports. Wisconsin lists only those taxpayers who owe $25,000 or more.
Eighty-three of the 226 businesses on Pennsylvania’s current list have been removed, the state announced.
“The businesses that have been removed fulfilled their responsibilities and either paid the delinquent taxes in full or entered into a payment plan agreement with the state,” Secretary of Revenue Gregory C. Fajt said.
Last year, the prospect of appearing on the state’s first posting convinced delinquent Pennsylvania taxpayers to pay $19.1 million and enter into payment plans for an additional $16 million.
Many states have voluntary disclosure programs aimed at helping businesses and individuals to settle their tax debts. In some cases, penalties can be erased if the taxpayer cooperates.
Tax professionals who may be called upon to assist delinquent taxpayers who want their names removed from the list or who want to take advantage of the voluntary disclosure programs should talk to clients about all of their potential state tax liabilities. In Ohio, for example, the Ohio State Society of CPAs recommended that tax professionals consider asking business clients who were taking advantage of the state’s 2006 tax amnesty about:
- Employer withholding tax that was not paid to the state
- Sales and uses taxes
- Non filing of Corporate franchise tax return
- Personal income tax
- Pass-through entity tax, and
- Personal property tax.
Enhanced communication among states and between the individual states and the Internal Revenue Service has provided state departments of revenue with more information on businesses operating in more than one state and the resulting tax liabilities that could include sales and use and franchise taxes, the Ohio Society of CPAs said.