State employees who don’t file their income tax returns on time could end up with more than an inquiry from the Department of Revenue.
They could be out of work.
A provision buried in legislation designed to promote electronic filing spells out not only that state employees must e-file but also that those who fail to file a tax return in a timely fashion “may be subject to immediate dismissal.” And to police compliance, HB 2280 would require the Department of Revenue to come up with rule to annually check the returns of each worker as well as all applicants for employment.
Rep. Don Shooter, R-Yuma, said he is pushing the legislation to modernize tax collection.
“This bill takes us from the 1980s into the 20th century,” he said. “We’re going to work on the 21st century as soon as we get this done.
There’s actually a lot more in the legislation which gained approval Wednesday by the House Ways and Means Committee than cracking down on tardy state workers.
For example, it would eventually require all businesses to file their tax returns online. That would start with companies with tax liability of at least $20,000 for any taxable period, whether it is annual corporate income tax or monthly sales taxes.
And by 2020, any business with at least $500 of liability would have to use electronic filing.
Agency spokesman Ed Greenberg said 80 percent of individuals already e-file their returns.
He said it’s not only easier for the state to process but it also makes it easier to detect fraud. Greenberg said that’s because electronic returns contain a lot more information that would raise alarms if numbers don’t match.
Greenberg said it works: He said the department’s review of electronically filed returns detected $78 million in fraud last year.
But committee members zeroed in on the concept of firing state employees who are late filing their returns. And they clearly had concerns.
Rep. Mitzi Epstein, D-Tempe, said she understands why the Department of Revenue might fire workers who aren’t filing their own returns on time, saying taxes are part of their job. But she questioned whether the same penalties should apply to other workers, such as those at the state Department of Transportation.
“It’s their job to be out in the middle of the night to fix a barrier of a road to keep a road safe,” Epstein said.
“That’s maybe not the same kind of personality who will timely work on a computer and get their taxes filed on time,” she continued. “I want to give that hero that goes out and keeps us safe an extra couple of weeks or so.”
Epstein pointed out this isn’t excusing late filing. She said the employees would still be subject to penalties and interest for failing to file on time.
“But he’s not going to lose his job,” she said.
Rep. Jay Lawrence, R-Scottsdale, said he appreciates the desire to move the state more in the direction of electronic filing.
“But the spying part of the bill is really painful,” he said.
Lawrence noted that current law keeps the Department of Revenue from sharing information about any taxpayer, state employee or not, with that person’s employer. HB 2280 would loosen those confidentiality laws.
Grant Nulle, the agency’s deputy director, defended the move.
“We just want to make the data available to state agencies as to whether their employees are contributing to the general fund like we would expect state employees to do,” he said. “We saw it as a piece of good government.”
Lawrence did not see it that way.
“It is spying,” he said.
“We’re going to turn in anyone that has not filed on time, whether they are out late or not, whatever the reason,” Lawrence explained. “That’s not the purview of the Department of Revenue.”
The legislation spells out that state employees who do not have computers or Internet access would not be penalized.
That requirement for state employees to file electronically and on time or face dismissal has one significant exception: It would not apply to state lawmakers.
Shooter said he understands the objections and has promised to make changes when the legislation reaches the House floor.
