Don’t you just love the holiday season? We kick it off with a Thanksgiving feast, exchange presents on Hanukah and Christmas, and then celebrate a fresh start on New Year’s Day. But the fun doesn’t end just because we’ve all headed back to work and school.
Late last night, the Delinquent Tax Fairy visited local government tax offices across the state, leaving nicely wrapped presents filled with 2% interest and attachment notices. It must be Delinquent Tax Day!
That’s right: as of 12 a.m. this morning all unpaid 2011-2012 property taxes officially became delinquent. In a nutshell, this means that interest accrues and enforced collection remedies can begin.
Please allow me to interrupt your holiday celebrations to provide a few details on what should and can happen after Delinquent Tax Day.
I covered the mechanics of Machinery Act interest in this post last month. For the most part, the interest calculation is automated: your tax software will accrue 2% the first month and .75% for every month thereafter. But some issues still need attention.
The most important manual adjustment that a tax office may need to make involves the “postmark” rule. GS 105-360 states that tax payments made by mail should be considered received as of the postmark date, not the date on which the tax office actually receives the envelope.
Technically, this would require examining the postmark on every tax payment that arrives by mail after January 5. But many (most?) tax offices instead allow a grace period of three or four days after January 5. All payments received within the grace period are considered timely, regardless of their postmark dates. These offices begin charging interest on all payments received after the informal grace period ends.
This practice seems to satisfy the spirit of the postmark rule. But tax offices should remember that it is possible that payments with a postmark dated January 5 or earlier might not arrive until after the informal grace period ends. Tax offices that are not looking at actual postmark dates must be prepared to respond to taxpayers who insist that they mailed their payments before Delinquent Tax Day.
A quick heads up about Delinquent Tax Day 2013, which falls on a Sunday. The “weekend and holiday” provision in GS 105-395.1 requires that when the deadline for taxpayer action falls on a weekend or holiday, that deadline moves to the next business day. In 2013, the deadline to pay taxes at par, January 5, is on a Saturday. GS 105-395.1 pushes that deadline back to Monday, January 7. As a result, interest on 2012-2013 taxes will not begin to accrue until January 8, 2013.
Enforced Collection Remedies
Most enforced collection remedies for property taxes do not require a waiting period. Bank account attachments, wage garnishments, levies on cars or other personal property, and even mortgage-style foreclosures for unpaid 2011-2012 taxes all could begin today.
The only Machinery Act enforced collection remedy that requires a waiting period is in rem foreclosure, which cannot begin until 30 days after tax liens on real property are advertised. There is also a waiting period for set-off debt collection (aka “debt set-off”), the popular and effective collection remedy created by Chapter 105A of the General Statutes: debts must be delinquent for sixty days before the process can begin. Interestingly, this waiting period seems to have been created by the clearinghouse that processes debt set-off claims for local governments—you won’t find mention of the sixty-day requirement in the governing statutes. Nevertheless, because the clearinghouse is a necessary player in the debt set-off process, local governments must play by its rules.
Outside of in rem foreclosure and debt set-off, all other collection remedies can begin the second a tax becomes delinquent. Few tax offices are this aggressive, of course. Before beginning enforced collections, many tax offices send letters informing taxpayers that their taxes are delinquent. But these notices are not required or even mentioned by Machinery Act. As a result, their cost cannot be added to the taxes owed as can be advertising costs, service costs for notices of attachments, and other costs specifically identified in the Machinery Act.
Tax offices may pursue simultaneous collection actions for the same delinquent tax, with one exception. Once a foreclosure action begins, all other collections must stop. A foreclosure action begins either when the complaint is filed under GS 105-374 or the judgment is docketed under GS 105-375.
But outside of foreclosures, multiple collection actions are permissible. A tax office may conduct simultaneous wage garnishments for a taxpayer with two jobs or may initiate a bank account attachment while also levying upon and selling a taxpayer’s car for the same delinquent tax.
The tax office cannot be paid more than it is owed, of course. If multiple collection actions produce more funds than are owed by the taxpayer, those excess payments must be returned to the taxpayer. Without permission from the taxpayer, the tax office cannot keep those excess payments and apply them to next year’s taxes. That’s true even when dealing with a habitually delinquent taxpayer. The fact that the tax collector is nearly certain to be using enforced collection actions again next year doesn’t justify collecting more than is owed this year.
Now, back to those Delinquent Tax Day celebrations. Is it time for the Feats of Strength? Oops, wrong holiday—that’s Festivus.