VT Homestead Tax Forms Delayed

By Matt Hongoltz-Hetling 
Valley News Staff Writer

Wednesday, July 18, 2018

http://weathersfieldvt.org/portal/index.php/town-news/19-news/newsflash/2317-vt-homestead-tax-forms-delayed

White River Junction — A backlog within the Vermont Department of Taxes in processing key tax forms tied to the state’s income sensitivity program has led to thousands of Vermonters receiving property tax bills far higher than they expected to owe.

Tax Commissioner Kaj Samsom sent municipal officials a note Tuesday acknowledging and apologizing for the delay in processing homestead declaration forms that are filed with state taxes, and said the department will complete the 14,000 as-yet-unprocessed forms by July 27.

“We did not want to leave even 1,000 unprocessed by July 1,” Samsom said in a phone interview on Tuesday, referencing the date at which some towns begin to send out property tax bills to their residents.

Homeowners who live in Vermont and have a household income of less than $147,500 can qualify for the income sensitivity program through the homestead declaration form. They then get a partial rebate on their education property taxes, with a maximum adjustment of $8,000, depending on income level.

Concerned taxpayers “should call us,” Samsom said. “If they call the town and the town says, ‘We didn’t receive anything,’ then they should call the state and find out, and say, ‘Hey, I filed.’ ”

 

He referred people to the department’s phone number, 802-828-2505.

John Sausville, 78, of White River Junction, said last week that he was dismayed to receive a tax bill from the town of Hartford that didn’t reflect his income sensitivity rebate.

 

“It’s for a thousand dollars more than I expected,” he said.

Sausville said that a phone call to the state seemed to have resolved the issue.

“In my case, it was a data entry error up in Montpelier,” said Sausville. “They claimed my income was over $400,000, when actually it’s a lot less than that. Now they’ve got the correct amounts in there, and I will get a corrected tax bill, supposedly, in three to 10 days.”

Others who were affected by the problem said they weren’t sure what to do. One Norwich resident, who asked not to be identified as income sensitive, said she had called the Department of Taxes but hung up after being on hold for 20 minutes.

A phone call to the department on Tuesday morning resulted in a wait time of 15 minutes.

Too Many Red Flags

Taxpayers seeking homestead exemptions or income sensitivity rebates to their tax bill are required to file applications with the state by mid-April; those that are “timely filed” ordinarily are processed before towns generate any tax bills.

But beginning last year, the Department of Taxes has relied on a new computer system to process the applications. As with the old system, the new software approves most applications automatically, and flags a minority of them for manual processing by a staff of about a dozen people, with outside support from other divisions.

The problem, Samsom said, is that the new, more sophisticated system is capable of flagging more scenarios for possible fraud or inaccuracy, and it sent 55,000 — more than 31 percent — of the 175,000 timely filed applications to human staffers this year, overwhelming the department’s resources.

About 41,000 of those had been processed by early this week, leaving the 14,000 yet to resolve.

Samsom said each staffer is given a chunk of applications to work through at a time, which they fix either by reconciling simple errors (such as transposed digits in property SPAN numbers), or by calling the taxpayer to gather new information.

Samsom said different applications were flagged for different reasons — in about half the cases, he said, it comes down to the applicant having made some sort of error, such as an incorrect SPAN number, or a missed data field. The other half, he said, prove to be processing errors.

Some of the applications are being approved in batches with the help of the IT department, by removing specific reasons for flagging that have not proven to be effective at identifying fraud.

For example, Samsom said, some forms were held up because they were missing their 1099 statements, which report various types of income, even though the amount paid matched to the relevant bank’s figures.

Holding such forms, he said, “is not appropriate,” he said. “We’re not seeing any value.”

Last year, there also were processing backlogs for income tax refunds, for similar reasons, which has been part of what Samsom called the “growing pains” of learning the new system.

Samsom said that next year the department will know how to properly calibrate the system to turn up as many substantive errors as possible, but also “don’t set the threshold so tight that you can’t get them through in time.”

While he agreed that the downside is unacceptable, he said there is an upside.

“We’ve saved the state millions of dollars in improper payments, because we’re able to find things that the older system could not find,” he said. “It’s a double-edged sword.”

Headaches and Costs

Not all of the 14,000 affected Vermonters will experience a problem, Samsom said, because roughly three-quarters of the state’s municipalities don’t send out tax bills until a little later in the year, which means those towns will be working from updated lists.

But in towns that bill in July, including Hartford and Norwich, income-sensitive taxpayers are left hoping that the problem will be resolved before the day tax bills are due. If not, they either will have to pay the full amount due now and wait until their second installment to receive the credit (which typically is split between the two installments), or pay whatever interest payments and penalties are imposed by the municipalities.

The situation has created anxiety among affected taxpayers, and added headaches and expenses for town finance departments.

When asked to assess the impact in Norwich, Finance Director Roberta Robinson offered a terse “not good.”

Last year, she said, the state sent the town $1.25 million in tax rebate credits for 440 parcels. This year, she said, she’s gotten $815,000 for 330 parcels — and, since sending out tax bills on Friday, she’s received about 50 phone calls from worried taxpayers. The first installment in Norwich is due on Aug. 17.

“We are getting lots and lots and lots of calls,” she said. “I tried to put something on the listserv just to get people to stop calling us. We don’t have the information.”

Robinson said the staff will be hard pressed to clean up the mess, even after they receive the correct information.

“We’re going to have to send out how many revised tax bills showing the new amount due? Not only is it our time, it’s postage, it’s paper.”

Hartford Town Manager Leo Pullar said some sort of delay happens at the state level every year, and that the town is used to updating its bills according to a scheduled series of data updates that run through September.

He said there’s no way for Hartford to modify its due date for the affected residents, because there’s no way to identify them.

“We don’t know who’s going to be eligible for the credit until the state determines that eligibility,” he said.

Galen Mudgett, a lister with the town of Sharon, said the town was at about 380 taxable homesteads, not much less than the 400-plus he would expect, based on last year’s numbers.

He said he knew of a handful of taxpayers who had filed their homestead applications in February or March, and who hadn’t yet gotten word from the state.

“Right now it doesn’t make it any harder for me to do my job,” Mudgett said, “but after the next month, it will make it a little bit difficult because once tax bills go out, we have to go through the process of sending bills and correcting bills.”

Gov. Phil Scott, “has been made aware of this situation and understands the frustration of those Vermonters who received incorrect bills,” spokeswoman Rebecca Kelley said in a statement responding to questions from the Valley News.

Kelley said the Department of Taxes is working with municipalities to mitigate the impact on Vermonters, and that Scott’s staff “will be working to identify improvements to prevent such delays next year, as we all understand we must do better to ensure we’re providing better service to Vermonters.”

Samsom offered a flat guarantee that things will be different in 2019.

“Next year, we will not be in this situation,” he said. “Period.”

Matt Hongoltz-Hetling can be reached at mhonghet@vnews.com or 603-727-3211.