PVA Conference

Fall 2010

Consuetudo Debet Esse Certa

The Custom Must be Changed

Consuetudo debet esse certa

This workshop will focus on various “requests” from the State Valuation Branch regarding selected PVA Office “customs” that we would like to identify and address. This is intended to be an interactive discussion between the PVA Offices and Frankfort listing the issues and requested resolutions and the reasoning behind the requests.

Exoneration Forms

Affidavit for Correction/ Exoneration of Motor Vehicle/ Boat Property Tax

Exoneration Form for Property Tax Refund

Sample Exoneration Forms

These forms should be filled out and sent back to Frankfort so that State Valuation is aware of exonerations made at the county level.

Use the following two forms.

Updating Info From a Past Year Filing Taxpayer

If a past year filing taxpayer’s information needs updating the PVA cannot use the PF-14 screen by itself. PF-15 needs to be accessed after the data entry to make corrections. Failure to perform the update to the information as described will result in the incorrect information being carried forward and could result in the taxpayer not receiving a tax bill.

Updating Info… (cont.)

Off-Line Billing

If a bill is created at the county level after the tax register is closed, supplemental bills cannot be viewed or tracked at the state level.

It looks as though the taxpayer is missing that year. A letter may then go out to the taxpayer requesting

that the “missing” year be filed. This also effects any audits being conducted. Sending late filed returns to the Department of

Revenue, Personal Property Section, avoids this issue.

Off-Line Billing - Example

In the following example, we can see that there is no listing for the 2007 Tangible tax.

The return was either omitted or billed “off-line.”

It is important that no returns be billed “off-line” (after the tax register closes), because they cannot be viewed at the state level.

Tangible Property Tax System (TPT)

Documented Watercraft

Documented Watercraft owners are responsible for filing Tangible Property Tax Form 62A500-W, as of the January 1st assessment date and filed by May 15th.

Enter the Coast Guard number on the line with the Property Location, when entering the bill.

Non-Commercial Aircraft

Non-Commercial Aircraft owners are responsible for filing Tangible Property Tax Form 62A500-A, as of the January 1st assessment date and filed by May 15th.

Enter the Tail Number on the line with the Property Location,

when entering the bill.

Using Numerical District Codes

Only use numerical district codes. Do not use “ND” (no district) Instead, use the numerical district code that

corresponds.

Using Numerical District Codes - Examples

The first example incorrectly uses “ND” for the district code.

In the second example, the correct numerical code is used.

Incorrect

Correct

Punctuation

Do not use punctuation (such as periods, commas, hyphens, dashes, etc.) when entering billing information.

Entering information in the correct manner will aid in the creation of consistent records that are easier to locate in a system search or inquiry.

Punctuation - Examples

In the following first example, the data was entered incorrectly using a hyphen.

The second example shows the correct way to enter the date: “Coca Cola” instead of “Coca-Cola”.

No punctuation should be used.

Incorrect

Correct

Entering Names

To keep records consistent (and easier to find), remember to enter individual names using the following format and without punctuation:

“Last Name” “First Name” Exception: If the individual name is part of the

business name or professional title: for example, “John Smith Plumbing Inc” or “Jane Doe DMD”

Entering Names - Examples

In the first example, the name is incorrectly entered in the “First Name” “Last Name” order.

In the second example, the name is entered correctly in the “Last Name” “First Name” order.

Incorrect

Correct

Entering Values

In addition to entering the reported value, the original cost should always be entered, as well.

The original cost figure provides information that is important if audits are being conducted and in determining if the reported values are correct.

All values should be rounded to the nearest whole dollar – do not use decimals.

Entering Values - Examples

In the first example, the original cost was incorrectly left off when the information was entered.

The second example shows the original cost correctly entered.

Always record the original cost

Incorrect

Correct

Postmarks and Date Stamps

When forwarding tangible returns to the Personal Property Section, always include the original envelope or packaging with the postmark.

Whenever possible, date stamp the return with the date it was received.

Postmarks are very important,because they are used as proof of late filing.

Entering the FEIN/ SSN

Update from a default FEIN/ SSN to the correct FEIN/ SSN, where applicable.

Taxpayers sometimes change the Tax ID – particularly when there are changes to the type of entity or to company ownership.

Alternative Valuations

When alternative valuations are received, the information from the return should be entered as normal.

Make a copy of the return to retain at the PVA office. Forward a copy of the alternative valuation to the

Personal Property Section at the Dept. of Revenue, for review.

The Personal Property Section will determine if the alternative valuation is acceptable and notify the taxpayer if any amendments or changes are required.

Vehicle Dealer’s Inventory

When filing the Tangible Form 62A500, vehicle dealer’s must list their fixed assets on Schedule A, not just the vehicle inventory on Line 34. (If they sell parts, accessories, ATVs, etc., they should also have Line 31.)

Do not allow dealers to submit incomplete returns.

Correct Vehicle Dealer’s Form – Example

Dealer’s Inventory Form 62A500-S1

In addition to regular Form 62A500, dealer’s should also file the 62A500-S1, which provides for the itemization of vehicle inventory. The total is reported on Line 34 of regular Form 62A500.

Boat Dealer’s Used Inventory Form 62A500-M1

Similarly, there is a separate form for boat dealer’s used inventory (Form 62A500-M1).

The total from this form should be recorded on Line 31 of the 62A500.

132.200 Property subject to state tax only.(17) New boats and new marine equipment held for retail sale under a floor plan financing arrangement by a dealer registered under KRS 235.220

Reviewing Tangible Returns

Prior to processing (or forwarding) tax returns, there are some key points to check on the 62A500.

Review the Demographic Info

Check the demographic information. In order to process the form, you will need the tax id, business name, mailing address, and property location.

The property location must be an actual physical location.

The taxpayer should file each location on a separate return. It may be permissible to file multiple locations on one return, if all locations are in the same tax district.

Sample Demographic Portion of the 62A500

Districting Tangible Returns

When possible, please write the districts on late-filed returns, before forwarding them to Frankfort – Especially, for businesses that have no prior bills in the system.

Districting Tangible Returns

Check the Return for Missing and Incorrect Line Items

Depending on the type of business, Tangible returns may have varying line items. Most businesses should have some Schedule A property. In addition, a manufacturer should have manufacturing machinery, goods in process, and manufacturers finished goods. A retail store should have merchants inventory, in addition to its Schedule A assets.

The following sample shows the line items reported by a restaurant.

Sample Line Items

Process Improvement Chart

Using the Process Improvement Chart

Using the Process Improvement Chart, we can see that the restaurant must have Line 17, Merchants Inventory, and Materials and Supplies.

This chart can be used for various types of businesses to determine if taxpayers are filing on the correct lines of the Tangible Personal Property tax form.

Check the Postmark Date Late filed returns should be forwarded to the Personal Property

Section, pursuant to KRS 132.290 (1). Timely filed returns should be held for billing at the local level.

132.290 Omitted property, what constitutes -- Periods within which it may be assessed retroactively -- Penalties and interest. (1) Any real property which has not been listed for taxation, for any year in which it is taxable, by the time the board of assessment appeals completes its work for that year shall be deemed omitted property. Any personal property which has not been listed for taxation, for any year in which it is taxable, by the due date of that year shall be deemed omitted property.

Materials and Supplies

Many taxpayers fail to record their materials and supplies on the Tangible Personal Property tax return.

Materials and Supplies should be reported on Line 60, with the values derived from Schedule C.

Sample Materials and Supplies

Sample Schedule C with Figures

Checking the Figures

Review Schedules A, B, and C to make certain that all totals have been brought forward onto the front page of the return.

You may also wish verify that the figures have been calculated and totaled correctly.

Checking the Figures – Examples

From the following examples we can multiply the original costs by the trending factors to make certain that the figures have been correctly calculated.

The reported values can also be added to verify that the totals are correct.

Sample Schedule A with Figures

Sample Schedule B with Figures

“Informational Purposes Only” Forms

In addition to the “billable” forms included in the 62A500 packet, there are two forms that are used for informational purposes only. Form 62A500-C (Consigned Property) and Form 62A500-L (Leased Property) should be filed by consignees and lessees.

These forms can then be reviewed to determine if the consignors and lessors who own the property are filing Tangible forms to report it.

Those not filing, can be added to your omitted list.

Omitted Lists

It’s a great idea to keep a list of omitted and non-filers for your county.

You may send your list of omitted filers to the Personal Property Section for review.

These lists aid in our compliance effort. When a non-filer is discovered (either through

our record review or your omitted lists), letters can be sent from Frankfort, requesting that they submit these missing returns.

Compliance Letters Explained

The following sample displays a typical form letter sent by the Personal Property Section to omitted and non-filers.

The letter denotes the year(s) missing and the county from which the Tangible filing was omitted, along with an explanation, instructions, and a deadline for submitting the form.

This compliance program helps to insure that the businesses in your county file the returns, providing essential revenue and tax dollars for your jurisdiction.

Sample Compliance Letter Sent from Frankfort

Questions… Comments…