WASHINGTON, DC - Each year, the District of Columbia loses millions of dollars in potential revenue because many individuals and businesses fail to file and pay District taxes or do not report all activities on a tax return. To help close this 'tax gap,' the DC Office of Tax and Revenue implemented a Discovery contract in April 2000 with MBIA MuniServices. MBIA MuniServices is a company that assists municipal governments in identifying businesses and individuals who fail to fully comply with the local tax code. Operating under strict security and confidentiality requirements, the company will contact delinquent taxpayers and provide the necessary assistance and direction on how to file and pay their liabilities.
Initial Discovery projects focus on property rentals within the District and construction contractors conducting business in the District. In many cases, individuals are not always aware that the business activity they conduct in the District may be subject to taxation.
"We want to encourage voluntary compliance with our tax laws and help educate the public about their tax obligations," says Herbert Huff, Acting Deputy Chief Financial Officer for Tax and Revenue. "We want to give taxpayers the knowledge and the tools to resolve their taxes voluntarily. This is a key component of any effective tax administration."
Real Estate Rental Discovery Project
The Real Estate Rental Project identifies individuals and businesses, both corporate and unincorporated, which own and may be deriving annual income from rental real estate located in the District of Columbia. If you own rental property - a house, condominium, English basement apartment, or apartment building - located in the District of Columbia and the annual gross income of the rented or leased property exceeds $12,000, that income is subject to the Unincorporated Franchise Tax. Payment of this tax is a responsibility of both resident and non-resident owners of rental property in the District. Persons liable for the Unincorporated Franchise Tax are also subject to the Arena Fee, which is used to finance the pre-construction cost of the MCI Center.
For help and information on these filing requirements, individuals should call the customer service help line at (202) 727-4TAX. Tax forms and instructions are available for download from the Office of Tax and Revenue's Web site, located at www.dccfo.com under 'Taxpayer Services.' This information is also available in the forms center of the walk-in customer service center, located on the first floor of 941 North Capitol Street, NE, in Washington, DC. To have materials mailed, the forms center can be reached at (202) 442-6546.
Construction and Federal Contractor Discovery Projects
The Discovery contract also examines construction contractors and federal government contractors, because they may be required to file a District business franchise tax return, whether they are located in the District or not, if they derive income from work done or services performed within the District. This includes income from any type of business activity in the District, other than sales of tangible personal property.
Where the sale of tangible personal property is concerned, contractors are liable for District taxes on such sale income if the contractor has or maintains an office, warehouse, or other place of business in the District; has goods in the District in a warehouse or on consignment; or has an agent or other representative with an office or other place of business in the District.
The Voluntary Disclosure Program
If a taxpayer wants to satisfy an outstanding tax liability and the Office of Tax and Revenue or its compliance contractors has not contacted them about it, they may call the Voluntary Disclosure Program. This program invites taxpayers who are not in full compliance with the District's tax laws to come forward on their own. If a taxpayer wants to participate in the Voluntary Disclosure Program, he or she must first contact Thomas Kerwin, assistant audit manager, by telephone at (202) 442-6578 or by facsimile at (202) 442-6883. The taxpayer must then file all delinquent returns and pay any taxes due, with interest. The Office of Tax and Revenue will waive civil penalties, which may be up to 25 percent of the amount of taxes owed.