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Desperate for revenue, Connecticut Revenue Services blasts out Fresh Start audit letters

by: Anthony Parent   2018-04-23

The IRS Fresh Start program has been a marketing success --- for the IRS. Despite the IRS Fresh Start Program not really being a program, just slightly different settlement guidelines, taxpayers' interest in making a "Fresh Start" has been significant. Following suit are states like Connecticut, with their own claimed "Fresh Start program." In this article we will discuss just how different the approaches are and what to do if Connecticut asks you to make a Fresh Start.

 

Connecticut Department of Revenue Fresh Start Audit Program

 

Connecticut is a state that used to be touted a as a low-cost low tax alternative to New York and Massachusetts. Now things have changed. A bit.

  • The moniker "Taxachusetts" is obsolete, at least for anyone in Connecticut. Companies like Bristol- Meyers Squibb have left Connecticut for Boston.
  • While Connecticut tax burden is terrible, the State continues to run a deficit that exceeds the deficit that the state income tax was supposed to eliminate. That is, Connecticut taxed more and more, and has wound up further and further in debt.
  • Instead of controlling spending, the State has done the opposite, for example, bailing out the City of Hartford and a $1.2 billion "investment" in commuter rail though medium-light density populations between Springfield and New Haven. 

 

The problem is that there little left to tax that isn't taxed already. And of course, the State can't tax businesses and individuals that have left the state. So essentially, the Connecticut Department of Revenue Services (DRS) is tasked with trying to spin gold out of straw.

 

So far, we have seen the the DRS send bills out to customers of NewEgg for sales use tax -- even though in many cases no tax was due or was already paid.

 

And now a new initiative, sending out mass mailings to people suspected of owing additional income tax ---  here is a sample letter from the Connecticut DRS about potential audit expsoure:

 

Why is the DRS sending you this letter?

 

The Department of Revenue Services is searching state databases for people and entities it suspects have not reporting or paying all taxes, income or otherwise. This means things such as probate records for probate tax returns, professional license records for people who are licensed to conduct business in the State of Connecticut but have not been reporting income. And we suspect they will be pouring through the Secretary of State records to find others to send mass letters to.

 

Does this letter mean you are under audit?

 

No. It says you are a potential audit target. Which is another way of stating the obvious. Everyone in Connecticut or does business in Connecticut is already a potential audit candidate.

 

Does this mean I stand a great chance of being audited by the State of Connecticut?

 

Probably. But you also have to realize the DRS doesn't actual audit too many personal income tax returns. Its focus has been Sales and Use taxes both for audits and collections. For personal income tax liablties, the DRS usually allows the to IRS audit the personal returns and then sends a bill based on the increase in Federal Adjusted Gross Income. 

 

On the other hand, the DRS is absolutely aggressive on underreported and/or unpaid sales and use taxes liabilties. Three are seven DRS Special Agents in the State of Connecticut whose job it is to investigate and  process warrants for arrest. Typical plea deals involve quite rapid repayments of claimed tax debts in order to avoid jail time. 

 

If I have more questions, what should I do?

 

You can contact us at (203) 269-6699. Or email info@irsmedic.com.  Our state and local tax resolution department will be able to help you out.

 


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