Direct debit update: Letters mailed, refunds scheduled

Taxpayers who electronically file their Rhode Island personal income tax returns, and who have a balance due on April 15, have the option to pay that balance by arranging for a direct debit from their bank account. Late last week, as a result of a computer issue, the direct debit was mistakenly made twice for a small number of those taxpayers. Following is an update:

The Division of Taxation has completed the mailing of letters to all affected taxpayers. "We completed the mailing on Wednesday," Rhode Island Tax Administrator David M. Sullivan announced. "Therefore, we are confident that many of the affected taxpayers have received their letters by now. Anyone who has not should receive theirs shortly," he said. 

Sullivan also announced that a small number of affected taxpayers have already recovered all of their funds because their banks, of their own accord, reversed the unintended transactions. Because the banks were able to reverse the transactions in a number of cases, the Division believes that the number of affected taxpayers is now down to approximately 250.

"The Division has determined that all of those approximately 250 taxpayers will receive their refunds by direct deposit, not by paper check," Sullivan said. "Direct deposit is faster, and we want to get the taxpayers' money back into their hands as quickly as possible," he said. 

"The refunds will process this weekend and direct deposits of the duplicated payments should be initiated on Tuesday, April 28, for all the remaining taxpayers who were affected by this," Sullivan said. "Thus, the direct deposits should show up in the bank accounts of affected taxpayers late Wednesday (April 29) or early Thursday (April 30), depending on the receiving bank. The latest would be Friday," Sullivan said.

Tax Administrator on Channel 12

Rhode Island Tax Administrator David M. Sullivan was interviewed on Channel 12 to discuss the Division of Taxation's efforts to resolve an issue involving direct debits for some taxpayers. Sullivan was interviewed on Wednesday by Susan Hogan, Channel 12's "Call for Action" reporter.

The issue involves some taxpayers who, when filing their tax returns last week, arranged to pay what they owed via direct debit of their bank account. As a result of a computer issue, the direct debit was mistakenly made twice for a small number of taxpayers. In other words, in some cases, they were charged twice. The problem arose after last week's filing deadline.

The Division of Taxation is in the process of issuing refunds to the affected taxpayers – either through a direct deposit or a refund check by mail within the next five to seven business days.

The Division is also in the process of mailing to each affected taxpayer a letter that explains what happened, how the Division is resolving the matter, and what steps affected taxpayers can take -- including contact information.

The Division of Taxation receives and processes more than 600,000 personal income tax returns each year. Of that total, approximately 267 taxpayers may have been affected by the direct debit issue, Sullivan said. The interview was broadcast on the Channel 12 evening news and is also available online.

Tax Administrator David M. Sullivan

Direct debit issue

Taxpayers who electronically file their Rhode Island personal income tax returns, and who have a balance due on April 15, have the option to pay that balance by arranging for a direct debit from their bank account.

Late last week, as a result of a computer issue, the direct debit was mistakenly made twice for a small number of those taxpayers. In other words, in some cases, they were charged twice. The problem arose after last week's filing deadline.

The Division of Taxation receives and processes more than 600,000 personal income tax returns each year. Of that total, approximately 267 taxpayers may have been affected by the direct debit issue, or about 0.0445 percent of the total.

“Although only a relatively small number of taxpayers are involved, each one of them is important to us -- and we want to make sure that their situation is resolved as quickly as possible,” Tax Administrator David M. Sullivan said.

“The Division of Taxation is aware of this problem and is in the process of resolving it and individually notifying every single taxpayer involved,” Sullivan said. “We apologize for any inconvenience this has caused those taxpayers and we are working with them to make sure they are made whole -- including any overdraft or other such charges and fees,” Sullivan added.

The Division of Taxation is in the process of issuing refunds to the affected taxpayers – either through a direct deposit or a refund check by mail within the next five to seven business days. 

The letter that the Division of Taxation is in the process of mailing to each affected taxpayer explains what happened, how the Division is resolving the matter, and what steps affected taxpayers can take -- including contact information. The letter also explains how each affected taxpayer can file a claim, using a specified form, for reimbursement related to overdraft fees, “bounced check” fees -- from financial institutions, retailers, and others -- and other such charges. (However, affected taxpayers do not have to take any additional steps regarding refunds; refunds will be issued automatically.)

The total amount of tax that the affected taxpayers planned to pay via direct debit was approximately $450,000. Of that, one taxpayer owed $290,000.

Editor's Note: This post was updated at 12:22 p.m. ET on April 22, 2015

Five new Administrative Decisions

The Division of Taxation has posted five decisions that were issued after recent administrative hearings:

• 2015-09: revocation of a cigarette dealer's license;
• 2015-10: whether a refund claim was timely filed;
• 2015-11: whether two refund claims were timely filed;
• 2015-12: whether withholding was properly documented; and
• 2015-13: whether a taxpayer could deduct a parent's nursing home costs.

Notice posted on comp drinks

The Division of Taxation yesterday posted a Notice regarding complimentary drinks.

Notice 2015-01 says that, under certain circumstances, a complimentary alcoholic beverage provided to a patron by a restaurant, bar, or similar type of establishment is not subject to Rhode Island sales tax. (The Notice follows a recent Administrative Decision on the subject.)

Apartment project at Providence mill site

The Division of Taxation has posted details on an apartment project at the Providence Dyeing, Bleaching & Calendaring Co. site on Valley Street in Providence. The project involves Rhode Island historic preservation tax credits. 

The Division of Taxation's web page on historic tax credits shows details involving all applicants that have signed a contract and paid the required fee under the state's 2013 historic preservation tax credit program.

Tonight's the night

The deadline is tonight for filing Rhode Island personal income tax returns. Returns must be postmarked or e-filed on or before 11:59 p.m. It's also the deadline for final payments. Click here for last-minute filing tips and other information.

Tips for last-minute filers

The Division of Taxation today posted some tips for last-minute filers ahead of Wednesday's filing deadline.

Tax Administrator offers last-minute filing tips on Channel 10

Rhode Island Tax Administrator David M. Sullivan provided some last-minute tax-filing tips during an interview on Thursday with Frank Coletta, the well-known anchor at Channel 10.

Sullivan discussed electronic filing of returns (a process known as e-filing); refund totals and averages; filing for a deadline extension; and making payments to avoid penalty and interest. The filing deadline is Wednesday, April 15.

The interview, on Channel 10's "Money Watchers Business Lunch" segment, was broadcast during the noon newscast and is also available online (see screenshot below).

Tax Administrator David Sullivan (left) with Channel 10's Frank Coletta

 

A nonresident, an LLC, and the estate tax

A nonresident decedent owned a less-than-100% interest in an LLC. The LLC held Rhode Island real property. Should that interest be included in the Rhode Island gross estate for purposes of Rhode Island estate tax? 

Tax Administrator David M. Sullivan determined that the nonresident decedent's interest in the LLC is not subject to the Rhode Island estate tax, according to a recently posted declaratory ruling.

• But Sullivan said his answer would be different if the holder of the less-than-100% interest in the LLC were a Rhode Island resident.

Channel 12 looks at tax refund fraud

Rhode Island Tax Administrator David M. Sullivan was interviewed by Channel 12 for a segment about efforts by the Internal Revenue Service and the states to combat tax refund fraud.

The interview, with Susan Hogan, Channel 12's consumer reporter, appeared on the Wednesday evening news and is also available on the Channel 12 website.

Sullivan talked about steps that the agency is taking to screen returns for potential fraud. He said that the agency currently has about 16,000 returns under review for potential fraud, of which about half may turn out to contain fraudulent claims for refunds. (The Division of Taxation processes more than 600,000 returns each year.) He also discussed what steps taxpayers can take if they suspect they have been victimized by tax refund fraud.

Latest issue of newsletter

The Rhode Island Division of Taxation has posted the latest issue of its quarterly newsletter, "Rhode Island Tax News." Topics covered include: 

• a new assistant tax administrator;
• states and the IRS fighting refund fraud;
• a new chief of Corporate Tax;
• checking the status of your refund;
• a new chief of Tax Processing Services; and
• tips on preparing Schedule W.

The issue also has regular features, including “Legal Corner” and “Practitioners’ Corner.” 

Claim for historic tax credits is denied

A taxpayer's claim for historic preservation tax credits was denied following an administrative hearing. See Administrative Decision 2015-08, posted yesterday, for more details.

Tax credits for project in Warwick

The Division of Taxation today posted details on the Pontiac Mills rehabilitation project on Knight Street in Warwick, a project that involves Rhode Island historic preservation tax credits. 

The Division of Taxation's web page on historic tax credits shows details involving all applicants that have signed a contract and paid the required fee under the state's 2013 historic preservation tax credit program.

Tax administrator named acting DOR director

Rhode Island Tax Administrator David M. Sullivan has been appointed as acting director of
the Rhode Island Department of Revenue (DOR) by Governor Gina M. Raimondo.

David M. Sullivan