More than 526,000 NC taxpayers given incorrect tax bills
The Department of Revenue’s aging tax system is printing tax bills that are wrong.
More than half a million North Carolina taxpayers got incorrect tax bills by the state this year, and every day the number of people getting incorrect bills is climbing.
5 On Your Side has learned 526,742 people who paid their taxes late were sent a bill with a penalty for 10% of their tax bill. The correct rate is 5%. That has caused people to send the Department of Revenue more money than they should.
Ron Whitaker, who happens to be a federally licensed tax professional, got one of these incorrect bills after filing an extension on his taxes. He said he’s never seen anything like it.
"I caught it because I know of the change," Whitaker told 5 On Your Side.
The change he’s talking about is the Late Tax Payment Penalty Rate. In 2022, taxpayers were assessed an additional 10% of their tax bill for paying late. In 2023, the penalty rate was lowered to 5%, but people are still getting bills that say they owe 10%.
"What’s happened is that when the General Assembly changed the law to lower the penalty, we did not complete all the code changes that was necessary," explained David Roseberry, the Department of Revenue’s chief operating officer.
He says the department knew they had a problem in late 2022.
"So, we knew before late November, early December that that piece of code was not going to be able to be implemented in time," Roseberry said.
The solution has been to go ahead and send the incorrect bills, but insert a letter explaining what happened, what the correct penalty rate should be and that taxpayer who overpay will eventually get a refund.
"So, between the the law changes, making sure that we’re telling the taxpayer every time we touch an account and what’s going on and to maintain good records, it’s actually better to let the notices go, manually intervene, and then follow up with another notice," Roseberry told 5 On Your Side. "We are struggling with the system, but that’s why we’re manually intervening to make sure the taxpayers aren’t harmed in this process."
That approach didn’t sit well with Whitaker who says, as an enrolled agent, he was not notified of this problem. He wonders how the general public is supposed to know.
"Most people are afraid when they get a letter from a federal agency or state agency that they owe," Whitaker said. "They assume, I just have to pay this."
5 On Your Side asked the Department of Revenue multiple times how much people have overpaid them because of this error. They said they do not know and won’t know until after this issue is resolved.
Roseberry says the department is quickly issuing refunds to people who made overpayments, sometimes in as little as three days.
In the meantime, bills with incorrect penalties are still going out. The Department of Revenue is targeting January 2024 to have this fixed.
"When the new tax season rolls out, that code will be put in production," Roseberry explained. "That completely is dependent upon getting through testing and everything working like it’s supposed to, of course."
However, there’s another problem on the horizon. A different, more complicated change to the Late Tax Payment Penalty Rate takes effect in 2024. The Department of Revenue has already tried to make that change, but their aging system couldn’t do it.
"We did try to make that change in the mainframe, and we were unable to make that change," Roseberry said. "We’ve notified the General Assembly and that stance is still the same. We cannot make that change."
It’s not clear what will happen, but requiring the NC Department of Revenue to go through with the planned tax code change could mean this problem with incorrect bills could happen all over again next year.
Rosenberry says they don’t have a solution to that problem at this point.
But again, this current issue should only affect people who paid their taxes late.
Those taxpayers should have gotten a "failure to pay penalty notice" letter, that’s what has the wrong rate. It should have come with the insert explaining the error. Then, another notice should have been sent to you after your account was corrected.
"The key is to read the notices, read any inserts," Roseberry said.
If you have questions, call the NC Department of Revenue at 1-877-252-3052.
