Comptroller Franchot lauds 2016 tax season, mourns failure of TPA

Franchot
ANNAPOLIS — In a Monday phone conversation with Maryland State Comptroller Peter Franchot, The Banner learned about the final day numbers for the 2015 tax season, and experienced the Comptroller’s obvious dissatisfaction over the demise of his Taxpayer Protection Act.

As of Monday morning, more than 2.4 million taxpayers have filed their personal tax returns — approximately 220,000 via paper and more than 2.2 million electronically. Based on 3.04 million returns filed last year, the returns filed early Monday represent 80 percent of last year’s total. Total refunds issued as of April 18 totaled more than $1.6 billion.

“Knock on wood, we’ve had a very successful tax filing season,” Comptroller Franchot told us. “We’ve processed two and a half million returns, and we have another half million that will come in today. I just want to thank all Marylanders for doing the right thing and paying their taxes. Nobody likes to pay taxes, but it’s an important part of our civilized society.”

The comptroller was optimistic for a good final day, with concerns about ongoing tax fraud. “Things seem to be going smoothly,” he said. “We do have a wave of tax fraud that has appeared, but that’s affecting every state. We’ve identified tens of thousands of suspected fraudulent returns, and we’re not going to pay any money out until we make sure they’re on the level.”

Taxpayers today have a choice between electronic filing and paper filing. Certainly electronic filing and software preparation are easier, but we asked which is really the better choice, considering all the concerns about fraud and identity theft.

“When I was first elected ten years ago, only 40 percent of the public was filing electronically,” Mr. Franchot said, “now it’s 90 percent. Electronic filing is much better for the public, it’s much more secure — you don’t have people looking at your return, it’s all done electronically. And it saves the state money; I think it saves us $1.50 to $2.00 on each return that is processed electronically, so it is all the rage. Unfortunately it allows tax criminals to file dozens if not hundreds of fraudulent returns electronically.”

The same system that makes filing so easy for honest taxpayers is the avenue criminals use to file false returns, looking for easy money from state coffers. But, the Comptroller assured us that the computers can be used for good as well as evil.

“We use the same technology that we use to get people’s refunds back quickly,” the Comptroller said about incoming returns, “the computers allow us to scan incoming returns for any indication of fraud. The software we use separates the suspect returns to a special queue where the return has to be looked at before a refund is issued. It’s kind of a game of cat and mouse, but I’m going to have almost 50,000 tax returns for this year that are highly questionable, and we’re going to deal with that issue. It goes with the times, but it’s exacerbated in Maryland because we have very few penalties on the books for people who engage in this kind of illegal behavior. However, a lot of the fraud is headed off before the criminals succeed.

“I’ve asked the legislature to give me some investigatory powers that would help me, in addition to stopping the fraudulent payouts, would allow me to hold accountable some of the tax criminals. Inexplicably, the legislature decided to go in the direction of the tax criminals rather than my direction.”

Comptroller Franchot named his bill the Taxpayer Protection Act. According to the comptroller’s office the act would enhance the tools available to the Comptroller and his staff to detect and prevent tax fraud. Among the key provisions of the legislation were to make major tax crimes a felony and to extend the statute of limitations for tax crimes to six years, from the current three years, to allow sufficient time to properly investigate and charge in fraud cases in what are commonly highly sophisticated schemes.

Other features of the bill included:
• Change major criminal tax offenses from misdemeanor to felony charges;
• Add a fraudulent return preparer penalty;
• Make it a felony for anyone to try to evade or defeat any tax imposed under the Tax General Article and impose a penalty upon conviction of the offense; and,
• Provide legal authority to issue injunctions against preparers under investigation for fraud to protect consumers while investigations are ongoing.

“It’s a very straightforward, simple bill that could serve as a national model for good, common sense tax responsibility, exercising our duty to protect the state of Maryland from tax fraud,” Comptroller Franchot told The Banner. “It lost in the legislature even though nobody testified against it — everyone assured me it was going to pass, and it didn’t pass. Nobody in their right mind opposed this bill, so either the legislature is insane — which I don’t think they are — or they are playing politics.

“We’re holding our own, but it’s been a cat and mouse game, like I said. It’s not foolproof; unfortunately some of the fraudulent returns go through. A lot of it is prevented, but the key to real prevention is arresting people and holding them accountable.”

The comptroller assured us that the most insidious problems are caused by an organized effort. “This is not someone who is filing an individual fraudulent return, these are hardened criminals who are filing hundreds of these returns, and they get off scott free. Nobody ever goes and investigates them. I asked the legislature to give me the power to do that, and they decided to side with the tax criminals. It’s pretty sad.

“But I’m very upbeat. We’ve had a great session, other than that; we’ve had a great tax season, our staff is doing a wonderful job and we’re fighting as hard as we can for the taxpayers. Frankly, though, I’ve got one arm tied behind my back as far as enforcement goes.”

Comptroller Franchot is quick to urge taxpayers to call his office if they have any concerns about criminal activity, or even just questions about their returns.

“My people follow the ‘Three R’s’ And that means, Respect the taxpayer, Respond to the taxpayer, and get Results for the taxpayer,” he said. “If you call 1-800-MD TAXES you’re going to get a friendly, professional, helpful voice on the other end of the line — a real person.”

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