©2012 Revenue Solutions, Inc. ©2014 CT Department of Revenue Services Connecticut NATP Fall Conference November 12, 2015 John Biello Connecticut Department

©2012 Revenue Solutions, Inc. ©2014 CT Department of Revenue Services

ConnecticutNATPConnecticutNATP

Fall Conference

November 12, 2015

John Biello

Connecticut Department of Revenue Services

2©2012 Revenue Solutions, Inc. 2©2014 CT Department of Revenue Services

Agenda

State of the State What’s New at DRS Audit Update Collection Update Fraud and Identity Theft Legislative Changes Affecting Income Tax Legislative Changes Affecting Sales Tax Legislative Changes Affecting Corporation Tax


State of the State

Agreement on the amount of the shortfall– $350-370 million (includes previous $103 million cut to hospitals and

social services)

Legislature is working on a plan to close the gap through spending cuts– Reduction in state workforce

Reconsidering some of the Corporation tax changes that passed in June


What’s New at DRS

New Tobacco Enforcement Unit– Illegal trafficking of tobacco and cigarettes– Substantial arrest in Meriden– Managed by Pat Bernardo

Enterprise Content Management IT Modernization Benchmarking Agency Move Operations Division BPR

– New Bureau Chief


Audit Update

Income Tax– Manager – Mike Rose– Supervisors – Peter Gacek and Ozhan Mashayeki

Areas of Focus– RAR’s– Matching programs (nonfilers, differences, CP-2000’s, TEI)– Credit for taxes paid to other jurisdictions– Domicile– Modifications to federal adjusted gross income– Part-year / nonresident issues (income sourcing)


Business and Employment Tax Audit Unit (BETA)

Manager – Jeff Wojtusik– Supervisors – Christine Kiely and Andrew Black

Areas of Focus– Sales Tax and Withholding Tax Delinquencies

Permit Renewals

– Holistic approach (all tax types)– Field and office audits– Offers of Compromise


Corporation and Passthrough Entity Audit Unit

Supervisors – Katie Lewis and Andrea Taylor

Areas of Focus– Field

Large multistate – multinational corporations

– Desk Corporations Passthrough Entities

– Transfer Pricing, Income Sourcing, Refund claims, Credits etc.


Sales and Use Tax Audit

4 Regional Offices– Hartford – Mike O’Sullivan– Bridgeport – Marcia Schoepfer– Norwich – Lori Hall– Waterbury – Diane Pinho-Monteiro


Collections Update

Manager – William Clato Day Supervisors – Laura Niski and Ken Corrigan

Collection Initiative– Increased field presence– Cases routed faster– New tools– Cases are scored and prioritized– Credit card payments– Changes to online payment plans– Bank Matching Legislation– Website Improvements


Website Changes

DRS Website: www.ct.gov/drs


Fraud and Identity Theft

CT DRS is a leader in fighting tax refund fraud We were put to the test this past filing season Chronology of the 2015 Filing Season

– February 5th – Intuit recognizes a large spike in potentially fraudulent returns

– February 6th – 9th DRS stops refunds to assess the situation– February 11th – Commissioner Sullivan issues a press release that

enhancements to fraud detection may delay refunds– February 17th – IRS issues an alert to a phishing scam targeting preparers– February 20th – Commissioner Sullivan issues a press release concerning

new refund verification notices


Fraud and Identity Theft

Number 1 priority – DRS is proactive and responsive to the issue Continuous improvement

– Eliminated direct deposit option for first time filers – Paper Check or Debit Card

– If direct deposit information changed from previous year the taxpayer receives a check. Before check is issued a refund verification letter is mailed. The taxpayer must: Visit the DRS website, enter the identifying number and verify they filed a return


Fraud and Identity Theft Stats

Total income tax returns filed 1,836,439

Fraudulent refunds (FYE 6/30/15)– 20,488 returns– $38.1 million in fraudulent refund claims stopped

The Challenge– 35,000 Refund verification notices mailed.– From 1/1/15 – 4/30/15 DRS received 226,923 phone calls, an increase of

60k


Income Tax and Withholding Changes

New Withholding Tables issued – must have been in use by August 31, 2015 – no catch up withholding provisions

New due date for submission of Form W-2 – January 31st Changes to income tax rates

– Current 6.7% rate increases to 6.9%– New top rate of 6.99%

single and MFS for income amount over $500k Head of Household on income over $800K MFJ on income over $1million

– Trusts and estates rate is 6.99%


Income Tax and Withholding Changes

Personal Exemption– Exemption increase delayed for single filers– Personal Tax credit increase is delayed for single filers

100% of military retirement pay is exempt for taxable years beginning on or after January 1, 2015

Phase in exemption for teacher pensions beginning January 1, 2015– 10%, 25%, 50%

EITC increase is delayed by 2 years. Rate is 27.5% of federal EITC Changes to property tax credit. Maximum credit decreases from $300

- $200 beginning in 2016 Innocent Spouse – Can seek equitable relief even if beyond the 2 year

time limit.


Changes affecting Sales and Use Tax

Clothing exemption is repealed Motor vehicle parking services Car Wash Services Luxury rate increase

– 7% to 7.75% for sales occurring after 7/1/15

Exemption for purchases by water companies is repealed Rental Surcharge Exemption from admissions tax


Changes affecting Sales and Use Tax

Changes to tax free week Dry cleaning surcharge Exemption for sales to and by certain hospitals no longer sunsets Computer and data processing services New due dates for filing and paying


Changes affecting Corporation Tax

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Documents

©2012 Revenue Solutions, Inc. ©2014 CT Department of Revenue Services Connecticut NATP Fall Conference November 12, 2015 John Biello Connecticut Department