Posted: 11:30 p.m. Thursday, Sept. 20, 2012

IRS records could help city catch tax cheats

Outside company might boost collections, but some worry about security of service.

By Michael Cooper

Staff Writer


The city might hire a Cleveland-based collection firm that uses Internal Revenue Service records to help locate citizens who aren’t paying income taxes.

Springfield officials could not estimate how much the firm might recover, but other area cities have collected as much as $250,000 in the first year. The service collected approximately $410 million overall in 2011.

City finance director Mark Beckdahl said income tax collection hasn’t been a big problem here, but seeking the outside help is a fairness issue.

“We should be doing our best to make sure people pay their fair share of taxes,” Beckdahl said.

Federal law prohibits cities smaller than 250,000 residents from using IRS records to obtain tax information, but a bill passed in 2007 allows larger cities to contract with smaller cities to perform collection work using tax records.

The city’s finance department is looking to contract with the City of Cleveland Central Collection Agency, or CCA, which recently opened a branch in Dayton, to help locate residents who are paying federal income taxes but not paying local income taxes.

Other cities such as Dayton, Troy and Trotwood also contract with CCA. Springfield would pay a percentage of the funds collected back to the CCA — possibly as much as 5 percent, but typically 2 to 3 percent.

CCA was created in 1966 and serves more 1.5 million people in 50 communities and 20 Ohio counties. Beckdahl said CCA complies with security standards for federal taxpayer information and is regularly audited by the IRS.

The city’s income tax has increased each year over the last five years. Officials expect to collect $26.8 million in municipal income taxes in 2013, up from a projected $26.7 million this year and nearly $25.7 million last year.

The extra revenue could also help the city, which estimates it will have $1 million less in its general fund budget in 2013 due to state cuts in local government funds and the repeal of the estate tax.

Income taxes are paid by citizens who live, work or own a business inside the city limits, generally through withholding, Beckdahl said.

Overall tax revenue is up four percent from this time last year and projects to be about $29.6 million in 2013, Beckdahl said.

“It’s indicative of the fact that I think our economy in Springfield is improving a little bit, and we hope that continues obviously,” Beckdahl said.

CCA services would serve as a supplement to what the finance department is already doing.

“It’s another avenue for us to make sure we’re doing our best to collect taxes within the city,” Beckdahl said.

A work session and first reading of an ordinance were held on the topic at last week’s City Commission meeting. A second reading will take place at Tuesday’s City Commission meeting.

Commissioner Karen Duncan said she supports the ordinance and believes all citizens should pay their fair share concerning taxes. She doesn’t see it as a controversial issue.

“If people live in the city, they’re certainly benefiting from the city services, from the streets, the street lights, the police and fire departments,” Duncan said. “If they live here, they’re supposed to pay taxes here. If they’re not paying taxes, it’s wrong. It’s not fair to those of us who do pay our taxes.”

City commissioners Kevin O’Neill and Joyce Chilton said they’re both still researching the matter, especially concerning security.

“There’s been a lot of discussions about it,” Chilton said.

O’Neill believes it would a good service to the community but has concerns about the possibility of identity theft.

“It’s not that I don’t think it works,” O’Neill said. “The advent of technology is one of those tools that I think if it’s available to you, you have to use it, but at what cost? That’s where I have to make sure our citizens are being protected.

“You have to weigh the benefits to the potential liabilities and go from there,” O’Neill said.


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