Those in the Bay Area who have been following our column understand that one of the main tasks of the Internal Revenue Service of late has been to collect uncollected taxes. The IRS has been using a carrot and stick approach to fill their coffers with the money owed.
The state of California has a similar problem. The State Franchise Tax Board estimates that there is about $8 billion that is owed to the state in delinquent income taxes. The person in the top spot is a doctor in Walnut Creek who owes $4.1 million in back taxes according to the state. Will the Franchise Tax Board use a carrot or a stick?
One of the tactics the state is using appears to be public humiliation. A list of the top tax debtors has been published every year since 2007. Apparently having one's name on the list is not enough to encourage payment of overdue taxes.
One of the tactics used by those who owe the debt is to file for bankruptcy protection. The taxes may eventually be paid, but perhaps not all of the taxes and perhaps not in a timely manner.
Another stick approach to collect the back taxes is to suspend the taxpayer's driver's license or his or her professional license. The suspension of a professional license could be a pretty serious consequence that might cause someone to become current, or at the minimum work out a payment plan.
In the case of the top owing doctor in Walnut Creek, he is reportedly aware that he owes the taxes but has no plans to pay them in the immediate future.
The State Franchise Tax Board seems to have lost this round.
Source: San Francisco Chronicle, "Walnut Creek doc tops tax deadbeat list," Matt Drange, Oct. 21, 2012
- At our San Francisco law office, we represent clients with tax issues including those dealing with tax audits related to back taxes owed to either the state or the federal government.