By Robin Palmer

TIMES ARGUS STAFF

MONTPELIER ? Hundreds of letters have been mailed in error to Vermont income taxpayers saying they are ineligible for Act 60 rebates or must repay prebates issued last year.

Tax preparers whose clients have received the letters say they are causing undue stress and work at this busy time, but note that the state Department of Taxes has been quick to correct the errors.

Ellen Tofferi, tax department deputy commissioner, said the problem was with the state?s income tax form scanning system, implemented last year.

Because of misalignment, the scanners misread the three eligibility questions on Act 60 forms 133, 134 and 135 filed by tax preparers on computer generated forms, Tofferi said. Individuals doing their own taxes write in their responses and these are reviewed by hand, not scanned in.

The three questions ask the taxpayer if he or she was claimed as a dependent by someone else, lived in the state a full year and owned a homestead as of Dec. 31, 2001. The questions determine whether an individual?s school taxes should be reduced based on income under the state equal education law.

The problem in reading the three questions has since been corrected, Tofferi said.

?It?s been fixed for returns that are arriving now. It?s a constant process of realigning and tweaking when you?re doing volumes of scanning,? Tofferi said. ?If a particular form seems to give us a problem, we will stop it and realign it and try to make it go through the scanner.?

But Tofferi, who was initially unaware of the problem saying the tax department had had no such complaints, downplayed the number of letters sent out in error to Vermont income taxpayers. Tofferi said the problem was likely limited to one tax preparer?s form.

Of the central Vermont tax preparers reached by phone Tuesday, more than half reported having received the letters during the past couple of weeks.

?Out of about 900 returns, we?ve gotten about 200 people with those letters,? said Crystal Richardson, the H&R Block office leader in Waterbury. On Friday alone, 20 people came into the office, she said.

Another 50 or so people who aren?t even H&R Block customers also came in, upset that their own tax preparer had made a mistake and wanting H&R Block to ?rescue them,? Richardson said.

The letters people have come in with say one of two things.

Those who are receiving a rebate with their income taxes for property taxes paid out last year are being told they do not qualify for the rebate. The letter is then followed up by income tax refund check that is short the Act 60 refund money owed.

Those who received a prebate prior to paying last year?s property taxes are receiving a letter saying they did not qualify for the prebate. A notice, or bill, follows saying they must repay the prebate money they received from the state last year.

Brick House Business Services owner Bob Dole, a tax preparer in Plainfield, criticized the tax department for sending out such complicated, ?unintelligible? letters to taxpayers.

Dole said four of his customers had received these Act 60 related-letters from the state so far, but said he hadn?t been aware that there was a problem. While other tax preparers have been calling the tax department asking what had happened, Dole said he mailed a paper appeal to the state.

Calling the tax department ?arrogant,? a ?screw-up over the last 24 months? and a ?debacle,? Dole said, ?they don?t have the courtesy (to say) ?I have made a mistake. It has been corrected. You owe no money.??

Dole worried that elderly people who had received the letters may have gone ahead and repaid prebate money.

?These people tend to treat the tax department as God and pay that bill,? said Dole, adding, ?I?m sorry to be so down on them but this has gone on too long. The taxpayers deserve better from their state government.?

Tofferi said taxpayers failing to notify the state that an error had been made was not an issue.

?Most people have a pretty good sense of what they expect and if it?s not what they expect, they call,? Tofferi said.

Both School Street Business Service and Compucount in Randolph have received the letters and called the state for help.

Compucount owner George Gray said 10 to 15 of his clients had received the letters but the state has been good about fixing them.

School Street Business Service owner Roland Therrien was unsure how many of his clients had received the erroneous notices of adjustment. He didn?t keep track because he didn?t realize it would become such a problem, he said.

Trying to meet the April 15 income tax filing date, Therrien said a problem like this wastes both his and the state?s time.

Dole added that the effort is time the tax preparers do not get paid for, and all the tax preparers reached noted that the computer software they use to generate forms was approved by the state prior to the start of the tax season.

Other tax preparers have had few problems with the state this year, and following many problems last year, praised the state?s effort.

?This year I haven?t had any problems as of yet,? said Marshfield tax preparer Robinson Billings. ?I think they?ve definitely made an effort to do things better.?

Advisor Tax Services owner Stephen Cairns of Stowe and Jeff Fothergill, a partner with Fothergill Segale & Valley in Montpelier, both said they had had no problems either. Both men electronically file most of their returns.

Like hand-written ones, electronically filed returns are not scanned in.

While calling the tax department?s scanning system an ?unfortunate decision,? Cairns said, ?I think they did a fabulous job of recovering and getting the new system on line. I?m pretty pleased with the state overall.?

After problems last year, Fothergill said he was glad to be avoiding the Act 60 issue preparers are now facing.

?We are still dealing with 2000 return issues,? Fothergill noted, adding, ?Thanks for telling me what I?m missing (this year).?

The state does encourage electronic filing as it saves time opening mail and processing returns, Tofferi said.

Last year, 15,000 of the state?s income tax returns were filed electronically. This year, the number is already up over 26,000, Tofferi said.

In all, the state had received 189,212 income tax returns by Monday. More than 130,000 of those have already been processed, most within seven to 10 days of receipt, Tofferi said. The average refund was $290.76.

?We?re very encouraged by the way things have processed this year and we?ve been turning returns around quickly,? Tofferi said.

A total 330,000 returns are expected by April 15, which is now just a few days away. ?There will be a large influx of them and we will process them as fast as we can,? Tofferi said.

Contact Robin Palmer at 479-0191, ext. 1171; or robin.palmer@timesargus.com

Times Argus

-- Anonymous, April 11, 2002