- Associated Press - Monday, July 20, 2015

LANSING, Mich. (AP) - Michigan’s Treasury Department issued 76,000 tax assessments with incorrect balances to businesses and individuals, causing some to pay delinquent taxes they did not owe, an audit said Monday.

The mistake occurred when the agency last year created an automated system for managing sales, use and withholding tax returns and payment information. The system was not accurately programmed to reduce assessments when electronic payments were received by taxpayers, according to a report from the Office of the Auditor General, which said the error led to at least $142,000 in avoidable mail and other state processing costs. The audit did not estimate how much was overbilled.

The report also flagged the Office of Collections for missing deadlines to collect delinquent debts and failing to consistently monitor a contractor and oversee a program to identify businesses without a license for sales tax collections and withholding. Overall, auditors said the state’s efforts to collect delinquent debts were “moderately effective and efficient.”

The Treasury Department in April placed 79,000 more assessments with potentially incorrect balances on hold. It expects to resolve the 76,000 assessments this month and issue refunds as appropriate.

“The report … focused on a faulty system implementation that has not provided the service quality we expect to deliver to taxpayers,” Treasurer Nick Khouri said in a statement. “We have apologized to taxpayers and will ensure that any affected by the assessments will receive a full refund.”

The Collections Office acted on 1.4 million delinquent accounts in the last fiscal year and collected $391 million of $3.7 billion in estimated debts.

Auditor General Doug Ringler’s report also dinged the department for not reconciling commissions paid to the contractor with the amounted collected and letting treasury employees visit 61 percent of zip codes to flag businesses suspected of not filing tax returns. The department, which agreed with eight findings, partially agreed with a ninth finding on visiting all zip codes, saying staff concentrated on the most populated areas and in cases where unregistered business activity was suspected.

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Online:

Full text of audit: https://1.usa.gov/1JcfuJ2

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