SALEM - City residents who filed federal income tax returns between 2006 and 2011 but apparently didn't file returns with Salem can expect an audit notice in the mail this week from the Central Collection Agency.
Salem City Income Tax Administrator Fred Pamer said the Cleveland entity completed a review of federal tax returns and identified 667 city residents who filed federal returns but had no record of filing city returns to report their income during that time frame.
Last fall, the city contracted with CCA to track down non-filers using federal income tax information that Salem can't access but Cleveland can due to its size. Before unleashing CCA on the records, the city offered a widely-advertised, one-time only income tax amnesty program in an effort to help residents take care of their tax issues.
Now that CCA is involved, the city is out of the process for those identified residents who may owe taxes. They will have to contact CCA and follow the directions in the audit notice letter to resolve their city tax issue.
Pamer said CCA reviewed federal tax records for tax years 2006, 2007, 2008, 2009, 2010 and 2011.
"People will have to deal with CCA, not with Salem," he said, stressing that the Salem Income Tax Office personnel will not be able to help them.
They'll be directed to call the CCA auditor listed on their letter at the toll-free number 1-877-878-8587.
A sample letter provided to the Salem News by Pamer said the residents who receive a letter from CCA will be asked to provide requested information in writing within 30 days to CCA.
The form to be returned to CCA asks for residential addresses for the person and their spouse for the past six years, along with their employment income for the last six years, whether they've been self-employed, own rental property or received a form from a partnership or Sub S Corp. They'll also be asked to submit copies of their 2006 through 2011 federal income tax returns (and spouse's return) and copies of all 2006 through 2011 federal W-2 and 1099 forms.
Pamer said the city provided CCA with addresses identified in the city and reviewed some of the initial records and eliminated some that were identified as not being in the city. The city has a 1 percent income tax in place for city residents.
When Pamer and city Treasurer Bob Tullis explained the proposal to members of the Finance Committee of City Council in September, they said CCA would compare the Salem taxpayer data base with the IRS federal income tax data base to identify taxpayers with a Salem address living in the city who filed a federal return but had not filed with the city. CCA would also look for taxpayers who had underreported their Salem income and compare federal withholdings for Salem-based businesses to look for businesses that had not reported wages and withholding to the city.
CCA was to pursue the filing of missing returns, billing of underpaid taxes and unreported withholding from local businesses, charging the city 5 percent of the total amount collected. Any money CCA receives will be repaid to the city after CCA takes its 5 percent cut.
Pamer said the letters were supposed to be mailed out Friday.