Thursday, Sept. 23, 2004 | 11:04 a.m.
In an ongoing effort to collect new business license fees, the state has conducted workshops, approved a deadline extension, spoken to industry groups and sent out letters. Now they're digging through your federal tax returns.
Thousands of Nevada residents are receiving new letters from the state Department of Taxation warning of possible business tax liabilities.
Those letters were generated after state officials reviewed information received through an agreement with the Internal Revenue Service. That deal allows state officials to review individuals' federal tax returns in an effort to identify taxpayers who declared certain income streams. Those taxpayers could now be forced to register business operations under a massive tax plan approved by state lawmakers in 2003.
Among those now being required to apply for a state business license and pay the $100 fee are people who own rental property generating more than $21,500 a year and independent contractors, such as hair stylists and real estate agents.
Chuck Chinnock, executive director of the state tax department, said his office has already sent out two such mailings, totalling about 50,000 letters.
More are on the way.
While he said between 130,000 and 150,000 businesses have registered, more are still dodging the issue, he said.
"Our research shows there are still about 200,000 businesses in Nevada that have not signed up," Chinnock said. "We'll keep at it until we notify everybody and get them signed up."
Local accountants said customers are clamoring about getting caught up in new taxes for owning rental property.
"There's some upset people," said Bonnie Houldsworth, managing partner at the Las Vegas accounting firm of Houldsworth, Russo & Co.
Chinnock countered that the department has been sending out notices of the pending requirements for months.
Another Las Vegas accountant, Kay Walker, was disturbed to hear that state officials were sifting through federal tax returns.
"I have a real problem with the IRS giving my stuff to the state, especially since we have no state income tax here," she said.
Chinnock said that the IRS and Nevada officials have had an agreement in which federal return information is shared with state tax personnel "for years."
"We have a very strict one-way agreement," he said.
Under that deal, the IRS oversees the state's review process and conducts inspections in an effort to ensure that the information is protected.
"Further, the state itself has very strict ... confidentiality statutes," he Chinnock said.
He added that the purpose for using the returns is narrowly contained.
"Our whole goal is to discover who has a (tax) liability," Chinnock explained.
Raphael Tulino, a San Diego-based spokesman for the IRS, said such information-sharing agreements are common. He also emphasized that such arrangements -- conducted through the Governmental Data Liaison Program -- are strictly monitored through guidelines spelled out in "implementing agreements."
"There's a lot that goes into it," he said. "The (state agency) needs to have a need and they need to know how to use the information ... This is something that has gone on for years."
Still, Walker was uncomfortable with state employees having access to federal returns.
"I have some high-profile clients who would not be thrilled about knowing someone in Carson City is going through their records without their consent," she said.
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