State advised to get tough on back taxes

Thursday, Oct. 2, 2003 | 10:57 a.m.

CARSON CITY -- The Taxation Department could bring in an additional $15 million owed to the state if it hired additional revenue officers to garnish wages and seize cars and bank accounts, an audit determined.

The Division of Internal Audit released the results of its examination of the Taxation Department on Wednesday.

The report, developed by auditor Mike Colburn, said the department's revenue officers were successful in pursuing uncollected taxes with phone calls, letters, in-person visits to business owners and filing liens on the individual's real estate.

But the department seldom seized personal property such as business cash receipts or the debtor's cars, boats and airplanes, despite its authority to do so. And the agency infrequently took a portion of the debtor's wages and bank accounts.

"We examined 40 accounts receivable files and found only one seizure and three withholds were used," the audit stated. "In some cases, by the time these measures were attempted, the taxpayer's assets were already depleted, and the ability to pay diminished."

The audit identified 23 accounts -- more than half of the accounts examined -- in which the department could have seized personal property and could have taken money from wages or bank accounts.

The report was presented to the Executive Branch Audit Committee headed by Gov. Kenny Guinn and composed of state elective officials.

In his written reply to the audit, Charles Chinnock, executive director of the Taxation Department, said the agency will review and standardize the procedures when property seizures and withholds are to be used.

But he said it won't be until February that a new system could be in place because the department is now too busy getting ready to collect on the $836 million new tax package that is going into effect.

He said additional training will be given to all revenue officers.

The audit said more revenue officers should be hired and that revenue officers should be relieved of some of their administrative duties so they can spend all of their time chasing down those who are not paying their taxes. Chinnock said he would have to wait for approval of the 2005 Legislature to get any additional staff.

The workload of revenue officers in Las Vegas exceeds the collection industry standards. Even if the administrative duties were removed from the revenue officers, they would be carrying an average caseload of 2,300 accounts. Colburn said a survey of private collection agencies indicated 1,500 accounts is the maximum a collector can effectively manage.

The Taxation Department was given authority by the 2003 Legislature to hire additional staff to collect the new taxes. The recommendation of the audit for more workers is beyond what the 2003 Legislature approved.

Colburn's report recommended Chinnock consider hiring a private debt collection agency to go after those businesses or people who are outside Nevada and who owe back taxes.

Chinnock said he has hired the same debt collectors as state Controller Kathy Augustine to track down those who owe the state money.

"Our success has not been very good," said Chinnock who added that 500 "top accounts" were turned over to the private agencies in January.

So far, he said, $11,000 has been collected of the $20 million owed. He said the department may have to look at hiring another debt collector or doing quicker write-offs of the money owed.

Chinnock said some of the businesses went into bankruptcy and the court had closed out the case without the state collecting. He said he would need more legal staff to pursue those who file bankruptcy to make sure the state gets its tax money before many other creditors.

In another examination, the audit division said the inmate stores in the state prison system could save $400,000 by making some internal adjustments.

The audit by Lee Pierson said the prison could buy in bulk to supply these inmate stores that now make their own purchases. There are inmate stores at the eight prisons and at eight of the 10 conservation campus. Four prisons also have coffee shops.

The stores sell tobacco, sodas, candy, soups and snacks. They also sell clothing, health and hygiene products and electronics. Profits go to the inmate welfare fund to finance law libraries, literacy programs, drug and alcohol treatment and recreation.

The audit said these stores carried about 3,500 items systemwide including more than 200 different kinds of candy, about 80 soda brands and 30 varieties of instant oriental noodles. The audit said many of these items do not sell very well. By reducing the number of varieties offered, it would allow the program to obtain better prices with purchases larger quantities or fewer products.