Tax revenue has become increasingly important for states due to tight budget constraints stemming from the economic downturn. States may be faced with additional budgetary concerns if consumers fail to pay their state taxes. One state facing this problem is Wisconsin. According to an article appearing on Wisconsin’s HITNews.com website, the state expects to collect only one-third of the nearly $1 billion of tax delinquencies owed last year.
Lack of tax revenue creates considerable concerns for Wisconsin. According to the article, in 2011, individuals owed the state of Wisconsin $934 million; however, it is predicted only $340 million will be collected. If state taxes were paid in full, Wisconsin would have enough money to run it’s prison system or fund all University of Wisconsin campuses for a year. Instead, the state is faced with a deficit and is exhausting all efforts to attempt to collect the delinquent tax accounts.
Wisconsin uses a variety of tactics to collect back taxes, including:
- Garnishing wages up to 25 percent;
- Tapping bank accounts or other assets;
- Posting names to the state’s “shame” website;
- Issuing tax liens or holds on property in court;
- Intercepting state and federal tax refunds;
- Intercepting federal vendor payments;
- Scheduling a hearings with revenue agents;
- Revoking seller permits; and
- Suspending or requesting non-renewal of professional state licenses.
One method Wisconsin uses to encourage payment of back taxes is publishing a list online of individuals and businesses that owe more than $5,000 in unpaid taxes. HITNews.com stated about 20,000 individuals and businesses owe more than $5,000 in back taxes and are on the list.
Revenue agents can also negotiate with parties that owe taxes by offering installment agreements or a “petition to compromise.” Although these strategies may be effective, they are not profitable options. According to the article, accepting “petition to compromise” agreements led to the collection of about $11 million in Wisconsin; however, it also meant the state had to forgive over $30 million of debt.
In the final stages of collection, Wisconsin often turns accounts over to third-party collection agencies. This is usually done for out-of-state accounts. Since 2007, Wisconsin taxpayers paid private collection agencies $1.8 million to collect delinquent state taxes, and those agencies managed to collect $8.5 million in debts, commented HITNews.com. As delinquent state taxes continue to rise, collection agencies may want to consider entering into this lucrative market.