December 27, 2013

When you’re more than $132 billion in the red, you have to get creative with your revenue. The California Tax Franchise Board certainly has. In 2007 it started compiling a list of individuals and corporations who owe at least $100,000 in California state taxes. The list started as a top-250 list but in April of 2012 expanded to 500.

The Top 500 Delinquent Taxpayers in California

Last year, the list received much more attention. Probably because it included celebrities such as actress and model Pamela Anderson, film director Nick Cassavetes, and Halsey Minor, the co-founder of CNET, who topped the list with nearly $11 million in back taxes.

This year the list lacks any big showbiz names. Instead it is dominated by lawyers, contractors, realtors, doctors and dentists, which isn’t going to sell many tabloids. As of December 2013, California’s top tax delinquents are Mon B. and Mimi Hom of Los Angeles, who owe a whopping $6.3 million in personal state income tax. The Corporation with the largest tax debt is Sharon A. Bogerty, M.D., Inc of San Jose, which owes nearly $3.4 million in corporate income taxes.

By law, the Franchise Tax Board is required to include the names and status of any professional licenses held by tax evaders on the list. In the case of corporations, the FTB must include the names and titles of the officers of the businesses on the list.

Additional Incentives

Naming and shaming is not the only method the Tax Franchise Board has to motivate delinquent taxpayers. New legislation passed last fall, the Delinquent Taxpayer Accountability Act, gives the Tax Franchise Board new powers, which give it the ability to inflict some serious pain.

These powers allow the Tax Franchise Board to suspend the occupational, professional and even driver’s licenses of delinquent taxpayers that make it on the list. This means you could lose your CPA license, medical license, or even your driver’s license if you don’t pay your taxes. Top 500 delinquent taxpayers are also banned from entering into contracts for providing services and goods to state agencies.

State Reciprocal Agreements

The Delinquent Taxpayer Accountability Act also grants the California Tax Franchise Board with the authority to enter into reciprocal agreements with its counterparts in other states. These agreements allow California to collect from taxpayers who live in other states by using their tax refunds in other states to offset the tax debts in California.

As of December 2013, the only state California has such an agreement with is New York. However there are plans to expand this to other states, such as Illinois. These “I’ll scratch your back if you scratch mine” deals allow states to target state income tax evaders who jump state after accruing large tax debts.

Naming and Shaming Works

Naming and shaming has reaped significant results. According to the Tax Franchise Board, more than $166 million have been recovered since 2007 through the Top 500 program. Further evidence of the program’s success is that celebrities who appeared in the 2012 list have since put their affairs in order with the taxman.

The Delinquent Taxpayer Accountability Act requires the California Tax Franchise Board to notify candidates they have 30 days to resolve their accounts to avoid appearing on the list. Many delinquent taxpayers provide the Tax Franchise Board with proof of hardship, set up an installment payment agreement or pay their debt in full, and their names are not published. This is why if you ever visit the TFB’s Top 500 list you won’t see 500 names.

If your name is on the list, Optima Tax Relief can help you make arrangements to resolve the issue or correct any mistakes. Contact us today at 1+800-965-3192.

Photo: BlueRobot