Are we about to see a more inflexible Department of Revenue?

Recently, the New York Times reported that “Facing Deficits, States Get Out Sharper Knives.”  Will these deficits encourage Departments of Revenue throughout the county to take harder lines in resolving tax audits, appeals and collections?  The article, which includes an informative map highlighting the numerous state deficits, also discusses what the governments of those states are considering doing to address their deficits. 

The Milwaukee Journal Sentinel has reported on Wisconsin’s budget deficit and Governor Jim Doyle’s plans plans to make spending cuts state wide (see article).  The paper reports that currently one of every nine positions in the Wisconsin Department of Revenue is vacant.  Part of Doyle’s plan to cut spending is to allow additional employment vacancies to arise in state government through retirements and attrition.  This means that the vacancy rate at the Department of Revenue is only likely to grow. 

The current vacancies and the prospect of a growing vacancy rate begs the question as to how the Department will be able to effectively administer the tax laws.  Will this mean that Wisconsin residents will be able to get away with more?  Maybe, but probably not.  It is more likely that those Department of Revenue employees that remain, will be overworked and simply less able to spend the time necessary on each case.  This probably means less flexibility in reaching resolutions. 

An over-worked and under-staffed Department of Revenue could mean a harder line during audits, through the appeal/court process and in the collection of tax.  We can be confident that the Department will still conduct audits and collect tax, but they’ll likely just have to do more with less.  This could mean more money out of the pocketbook of those under the microscope.  While perhaps a bit coutner-intuitive, a funded and effectively operated Department of Revenue is good for those that are facing tax related scrutiny.

Rob Teuber is a tax attorney located in Milwaukee, Wisconsin.  His practice includes Wisconsin state and local tax matters and federal tax problem resolution nationwide.  For more information on Rob Teuber’s federal tax law practice, see www.federaltaxlawforum.com.