FL DOR COLLECTION PROCEDURES VIOLATE TAXPAYER RIGHTS
It appears that we have uncovered yet another small problem happening with our Draconian Comrades in Tallahassee. I have received word from two separate sources from within the Florida Department of Revenue on how collection agents are evaluated – and it is the type of situation that not only violates taxpayer rights, but it would even get someone fired in the IRS in the same situation. I suppose it is not that surprising given that issuing 7,000 erroneous tax warrants in a year didn't cause anyone to blink an eye until the press got wind of it. I'm bringing this issue to light so that perhaps the offensive practice will change.
Making a long story short – the Florida Department of Revenue has established that each local service center manager may determine how collection agents are evaluated. One of those criteria is based on closed out collection accounts per period. A collection account is when a taxpayer is deemed behind in paying taxes and the agent's primary job is work with the taxpayer, usually a business owner, to get the taxpayer back into compliance and the back taxes, interest, and penalties paid back to the state. So if collection agent wants good evaluations, raises, and promotions, then (s)he is incentivized to coerce taxpayers to pay back the funds as soon as possible.
I suppose this is not completely surprising. Their job is to collect back taxes so the FL DOR sets up evaluations on how well the agent collects funds. However, ponder this for a moment. I understand that the IRS is forbidden from evaluating their employees based on this criteria. Let that sink in. If the largest tax collection agency in the country determined that it is bad idea to evaluate collection agents based on closed out collections, then there must be a reason why? The reason is that it creates an incentive for agents to effectively bankrupt people to pay their back taxes. Seriously – what does the collection agent care if the taxpayer becomes destitute as long as that agent gets a bonus or raise at the end of the year? The IRS determined a long time ago that this was conflict with what is good for the country and banned the practice. It should cause everyone a moment of pause to realize that if the IRS thinks this is an unconscionable way to evaluation collection agents, then why does the Florida Department of Revenue think it is ok? The answer is – they should not. Florida has a prohibition on evaluating auditors based on the size of assessments and collection agents on the amount of collections. Sec. 213.015(12), Florida Statutes, provides that the taxpayer:
The right to procedures which assure that the individual employees of the department are not paid, evaluated, or promoted on the basis of the amount of assessments or collections from taxpayers
The FL DOR has apparently determined that evaluating collection agents based on the number of collection accounts closed out is not the same as basing the evaluation on the amount of taxes collected. Call me crazy, but isn't the distinction almost non-existent? The result - collection agents have a strong incentive to put taxpayers – businesses out of business to pay their back taxes – with no regard to how many people lose their job in the process. This is exactly what the prohibition on evaluating collection agents based on collections was supposed to prevent. I propose that we need to amend the law to fix this.
Don't get me wrong, some collection agents are very good at their job. If you are a collection agent reading this article – you know who you are – and I commend you for doing your job well. You care about taxpayers and truly want to help them get back into compliance. You will work with the taxpayer, evaluate their ability to pay, and help set up a way for taxpayers to pay back the funds without having to close down their business and fire everyone. Unfortunately, the FL DOR has a system set up that punishes these good collection agents if they aren't closing out the account by collecting the funds in full.
If you don't practice in this area of law or your business has not fallen into this circumstance, then you might not realize how bad the situation has become for business owners. I can't tell you the number of times I have talked on the phone with a taxpayer who just got off the phone with a collection agent who told them they don't care if their business closes. The taxpayer will have explained that they want to pay everything off – they just don't have the funds to pay back all the money at once, but the collection agent offers no potential solution or hope. This is a direct result of the DOR's evaluation scheme – to effectively punish agents for not collecting accounts in full. This is why the IRS does not evaluate collection agents based on closed out collections – and why the DOR should not either. It hurts Florida taxpayers and Florida businesses - at a time when our businesses are already struggling to survive.
The most common phrase I hear from collection agents is:
The Department of Revenue is not in the business of loaning money.
I usually hear this only once from each collection agent I deal with because every one of them hear the same response back from me. I nicely remind them that the Florida Department of Revenue is a creation of statute and is tasked with whatever the statutes tell the organization it is supposed to do. It usually surprises the collection agent to learn that Sec. 213.015(11), Florida Statute, provides taxpayers:
The right to procedures for retirement of tax obligations by installment payment agreements which recognize both the taxpayer's financial condition and the best interests of the state, provided that the taxpayer gives accurate, current information and meets all other tax obligations on schedule.
This little statute, found in the Florida Taxpayer Bill of Rights, provides that the Florida Department of Revenue is actually in the business of allowing taxpayers into installment plans to retire tax liabilities – in fact, the taxpayer has a right to at least be considered for a payment plan. So that phrase "we are not in the business of loaning money" is not only untrue, it is also a violation of the taxpayer's rights to say so. Unfortunately, this is exactly what the collection agents are taught to say. This procedure needs to change. Then I nicely point out to the collection agent that Sec. 213.015(5), F.S., provides that taxpayers have:
The right to obtain simple, nontechnical statements which explain … the procedures, remedies, and rights available during … collection proceedings, including, but not limited to, the rights pursuant to this Taxpayer's Bill of Rights…
So when the collection agent fails to provide the taxpayer with a notice that Taxpayer Bill of Rights allows them procedures for installment plans – it is also a violation of the taxpayer rights under Florida law. I proffer this is a direct result of both the Florida Department of Revenue's collect agent evaluation scheme – and the organization's blatant disregard for most of the Taxpayer Bill of Rights.
Would it surprise you to learn that the Florida Department of Revenue does not formally train employees in the Taxpayer Bill of Rights? I've been told that the bill of rights is mixed in with other training. However, I've been asking auditors and collection agents for the last two years if they ever received training in the Taxpayer Bill of Rights. The answer is consistently no. Even if there is some training "mixed in", if the FL DOR employees themselves do not believe they have been trained in the rights of taxpayers, then that speaks volumes. I even went through the certified sales tax auditor training class at the DOR myself, which I can say did not cover the Taxpayer Bill of Rights either.
Collection agents, along with ALL DOR EMPLOYEES need to be taught Florida's Taxpayer Bill of Rights in full and in detail. There needs to be procedures in place track when a DOR employee violates a taxpayer rights. The only item in the Taxpayer Bill of Rights that is tracked per employee that I'm aware of is disclosing taxpayer confidential information, which can potentially get an employee fired. Needless to say, DOR employees pay attention to this right. If the Department of Revenue will not follow the statutes governing its actions, then I propose that we need to legislate teeth into the Taxpayer Bill of Rights so that the organization and its employees will pay attention.
Unfortunately, I not only uncovered that collection agents are tracked by closed out collections. I also discovered that the definition of what is considered "closed out" is left up to the local DOR service center manager's discretion. This exponentially complicates the problem. What I discovered is that some local DOR service centers consider an installment plan as closed out while other service centers do not. When I heard this, it finally made since why some service center collection agents were much more aggressive in forcing full payment rather than offering a payment plan. (FYI - I confirmed this policy with two additional collection agents before I even started writing this article.) Therefore, some offices punish collection agents for offering installment plans by rewarding their fellow agents for only collecting by full payment. This is a violation of the Taxpayer Bill of Rights in several ways. First, the collection agent is required to notify the taxpayer that an installment plan may be available per Sec. 213.015(5), F.S., – which is not happening. Second, the collection agent is now directly being evaluated on the amount of collections per Sec. 213.015(12), F.S., because installment plans are lesser amounts than payment in full, by definition. Finally, Sec. 213.015(21), F.S., provides that taxpayers have:
The right to fair and consistent application of the tax laws of this state by the Department of Revenue
So, when taxpayers in one part of the state are offered installment payment plans but taxpayers in the other part of the state are not, this is a direct violation of the Taxpayer Bill of Rights – the 3rd taxpayer rights violation with this policy. Again – this is happening as a direct result of the evaluation scheme used for collection agents, which needs to change.
I think it is important to say this again. The problem is not with individual collection agents who are merely following what they are being taught. The problem is with the policies established by the Florida Department of Revenue as an organization. When a government organization ignores the rights of the citizens it is meant to serve, then it is time for the legislature to set firmer ground rules for that organization that will hold accountable the individuals violating taxpayer rights. In my opinion, this is the only way we are truly going to see change. However, I continually encourage the powers that be within the Department to change from within and become the organization the voters and legislature intended it to be.
The Law Offices of the Law Offices of Moffa, Sutton, & Donnini, P.A. is a firm with a dedicated focus on tax controversy work against the Florida Department of Revenue. Since 1991, our firm has been assisting company in virtually all industries to get a just and fair result when dealing with the Florida Department of Revenue. If you feel that you or your clients are not being treated fairly by the Florida Department of Revenue, then please contact our attorneys today by phone or email (see top of this page) for a free initial consultation.
About the author: Mr. Sutton is a Florida licensed CPA and Attorney and a shareholder in the law firm the Law Offices of Moffa, Sutton, & Donnini, P.A. Mr. Sutton's primary practice is Florida tax controversy, with an almost exclusive focus on Florida sales and use tax. Mr. Sutton worked for in the State and Local Tax department of one of the Big Five accounting firms for a number of years and has been an adjunct professor of law at Stetson University College of Law since 2002 teaching State and Local Tax and at Boston University College of Law since 2014 teaching Sales and Use Tax. Mr. Sutton is a frequent speaker on Florida sales and use taxes for the FICPA, Lorman Education, NBI, and the Florida Society of Accountants. Mr. Sutton is also co-author of CCH's Sales and Use Tax Treatise and the State and Local Tax Chairman of the American Association of Attorney – Certified Public Accountants. You can read more about Mr. Sutton in his firm bio.
ADDITIONAL RESOURCES
7,000 TAX WARRANTS ISSUED IN ERROR – GOV SCOTT TOO, posted May 23, 2014, by James Sutton, CPA, Esq.
FL DOR USES "CALLZILLA" TO HARRASS TAXPAYERS, published July 28, 2013, by James Sutton, CPA, Esq.
FL TAX WARRANT ISSUED AGAINST THE FL SUPREME COURT, published February 10, 2012, by James Sutton, CPA, Esq.
TAXPAYER FORCED TO SIGN AWAY RIGHTS TO REMIT TAX?, published September 2, 2013, by James Sutton, CPA, Esq.
FLORIDA TAXPAYER BILL OF RIGHTS, published July 8, 2012, by James Sutton, CPA, Esq.
CRIPPLING PENALTIES UNDER FLORIDA SALES AND USE TAX LAW, by James Sutton, CPA, Esq., July 19, 2012
© 2014 All Rights Reserved – James Sutton