Printer Friendly

Alaskan Native Village Outreach Program.

Due to chronic employment problems in Alaskan native villages, the Anchorage District Collection Division explored new techniques to solve them and increase the voluntary compliance of "bush" communities. The resulting "Alaskan Native Village Outreach Program" included taxpayer education, federal/state cooperation and collection case assignments to a few specified revenue officers. This article outlines the strategies used and describes resulting compliance improvements attributed to the three-year program.

The Anchorage District of the Internal Revenue Service is honored to share the results of its Alaskan Native Village Outreach Program developed by our Collection Division. The program was developed in response to significant trust fund (employment tax) problems endemic in Alaskan native villages.

Background

In addition to major population centers, Alaska has 207 predominately or exclusively native "bush" communities. These communities or villages range in size from 200 to 1000 residents. They are typically located in remote areas of Alaska accessible only by chartered air service.

The village governments employ many village residents in public works projects such as construction of roads, schools, sewers and dumps. Their government administrators are usually elected by popular vote. Few of these officials are highly trained in tax matters. Although most of the officials and staff members are conscientious, problems in meeting the demands of the larger society are common to these village people. In our case these demands are compliance with the tax laws.

Meeting the calendar-driven, paper-intensive requirement related to employment tax obligations became a persistent problem for the Alaskan village. Exploring the reasons behind the multiple notices, tax delinquencies and non-filed employment tax returns, we found common contributing factors.

The most significant reason found was the difference between the native culture and our predominate culture. "Our" urgency of meeting employment tax filing, deposit and payment deadlines is not compatible with a subsistence lifestyle that is geared to survival. When the native survival priority clashes with a tax deadline, tax matters take a back seat and are often forgotten. The native tradition of "fish camp" is an example. During "fish camp" all villagers work together to harvest fish for the village winter food supply.

Similarly, when caribou herds migrate, the food supply must take precedence. Survival is top priority. Relate this to a construction site, when the lunch wagon comes through, the workers are probably going to eat rather than fill out a tax form or respond to an IRS notice.

Understandably, tax matters to the natives are a distant concern when a lunch wagon opportunity comes to the village -- the fish are in, the whale needs to be butchered, a caribou herd is near.

We found a further complication to be the extreme isolation of the villages. Many of the villages are over 1000 miles from a bank where they can make their federal tax deposits. In the absence of banks, they must rely on air mail service which is irregular under the best of conditions. In winter and poor weather conditions, airplanes coming into and out of the villages may be delayed by as much as two weeks. These two conditions, the culture differences and the isolated locations, were found to be the primary causes of persistent employment tax problems for these villages.

The village tax problems were compounded by:

1. The multiplying effect of

various penalties (i.e., failure to file,

deposit and/or pay); 2. Erroneous issuance of multiple

employer identification

numbers; 3. Failure to respond to notices; 4. Inaccurate assessments under

IRC 6020(b), brought by the

Service based upon the best

information available; 5. Related 100% penalty

assessments against responsible

officials under IRC 6672; and 6. Levy actions.

IRS levy actions attached to state and federal grants for the villages often produced funds to apply to their delinquencies. However, hardships for the native villages resulted as the funds were needed to purchase essential winter supplies. Complaints to Congress and resulting Congressional inquiries were constant.

We found that other traditional collection tools such as liens and 100% penalty assessments further complicated matters reinforcing attitudes of hostility and mistrust toward federal authority.

In early 1988, the Anchorage District of the Internal Revenue Service concluded that a new approach was needed in the interest of voluntary compliance for native villages. An agreement was soon reached between the Internal Revenue Service and the State of Alaska to cooperate in resolving these problems.

Objective

Reduce the incidence of employment tax problems in native villages and increase their voluntary compliance by developing cooperative relationships.

Strategies & Implementation

Strategy 1: Develop a taxpayer education program for native village administrators and staff.

We developed a taxpayer education program for native village administrators and staff. The program consisted of presentations on employment taxes in a workshop format. The workshops also included distribution of a simplified employment tax manual we jointly developed with the State of Alaska, a question and answer period and individual time to resolve specific problems. Opportunity was also given to complete tax returns and make payment arrangements. The information shared in these workshops enabled village administrators to better understand the tax system and helped them to more easily comply.

In August 1988, the Service presented its first workshop to an audience of 200 village administrators attending a meeting of public works contractors. Subsequently we have held twelve additional workshops. Additional presentations have been made at five Mayors' Conferences.

Strategy 2: Train specific State of Alaska employees in how to detect and remedy village employment tax problems while carrying out their routine on-site responsibilities.

The State of Alaska employs local government specialists whose primary responsibility is to protect the well-being of native villages. Depending upon size and location, the ratio of specialists to villages is approximately 1:10-15. The state specialists are typically college educated and are from the area, speak the local language and are familiar with the local culture. Enlisting the aid of these specialists was essential, particularly given the pervasive atmosphere of hostility and mistrust.

In 1988, we worked with the State of Alaska to include employment tax issues as part of the responsibility of these specialists. We provided the necessary training so they could recognize problems and provide assistance during routine visits. They were provided with copies of the disclosure form to be completed by village administrators authorizing the specialists to help them with their tax problems.

During the first year of the Program many of these specialists accompanied revenue officers on village visits. Previously, assertions of native sovereignty and hostility related to employment tax problems had made the Service unwelcome in many villages. These visits were essential as the specialists vigorously guard the well-being of villages. The joint visits convinced the specialists and villagers of our serious intent to help and increased the tax knowledge of the specialists and village administrators on issues encountered during the visits. They saw first hand how we conduct business.

The specialists acted as liaisons or mediators. On many occasions the specialists made important introductions, solved language barriers by translating, advised us on cultural differences impeding resolution of problems, and were able to mutually convey difficult points which would otherwise have caused frustration to both sides. One state specialist went into five remote villages, set the village accounting books in order, worked with us in preparing all tax returns for the past ten years, and helped the villages explore means of payment. The specialist communicated with us by telephone and FAX in completing the tax returns.

The contributions of these specialists cannot be overstated. Much of the credit for the success of this Program is theirs. At our recommendation, the State of Alaska subsequently hired two full-time accountants now devoted to assisting the villages.

Strategy 3: Assign all village delinquent accounts and non-filing investigations to specific revenue officers familiar with the cultural issues and objective of the Program.

Traditional collection approaches had failed to resolve employment tax problems. Our lack of focus on unique village needs and our typical practices in assigning collection cases appeared to undermine voluntary compliance by the native villages.

A decision was made to develop a body of expertise in these problems by assigning all such delinquent cases to only two revenue officers. These individuals were selected based upon their knowledge of the native culture, interpersonal skills, willingness to travel and endure harsh conditions, and degree of interest in the program. The effect was to develop two "experts" whose contributions assured success of the program. Virtually all the workshops were conducted by the two revenue officers.

The group manager also developed special insights into village issues and now has an historical perspective concerning the program. Cultural differences and practical problems are now considered when evaluating case issues such as reasonable cause determinations for penalties. The revenue officers and group manager also serve as contact points for all specialists and administrators. Though most questions relate to employment taxes, they may call on any tax related matter. All villages have been advised of our availability.

We also decided to establish a greater "presence" in the villages in an attempt to quickly identify and resolve problems before they grew out of control. This was a costly approach and necessary in spite of conditions encountered which were often harsh. We believe this greater presence was essential to the program's success.

Revenue officers make most of their village visits during the winter when those they need to contact are more likely to be at home. Transportation is by chartered float or ski plane, skiff, snowmobile or fourwheeler. The cost of chartered planes averages $1,000 per day. Sometimes the planes wait and sometimes they return for the revenue officer. Weather conditions are extreme in the Alaska interior, sometimes reaching -40 degrees fahrenheit and made worse by wind chill. Instances of being weathered-in for days, with or without the charter pilot, are not unusual.

Standard equipment for the revenue officer is appropriate weather gear, a back pack, a sleeping bag and food. There are no motels or restaurants. It is not unusual for sleeping quarters to be the floor of a jail or school. On one occasion the entire village was on alert due to marauding brown (grizzly) bears.

Results

The program was begun in 1988 in an effort to be more effective with this taxpayer population. Since it was not designed as a formal research project, our attempts to reconstruct valid data have been only moderately successful. We believe our results offer preliminary evidence in support of Compliance 2000. Specified market segments can be positively influenced to correct unintentional non-compliant behavior!

In 1988, fully 49% (103 of 207 taxpayers) of native villages had some type of employment tax problem. These problems were delinquent accounts or non-filer investigations or both. As previously described, many delinquent accounts were inaccurate due to assessments under IRC 6020(b), using the best information available to the Service. Many non-filer investigations resulted from multiple employer identification numbers. Secondary 100% penalty assessments against responsible officials under IRC 6672 were numerous. Three years later (September 1991) only 18% (38 of 207 taxpayers) have some type of employment tax problem.

Delinquent accounts totalled $960,000 in 1988. As of September, 1991, delinquent accounts totalled $386,000 of which $220,000 was recently identified as owed by one taxpayer. In three years, $1.5 million was collected toward delinquent accounts. An additional $250,000 was collected accompanying secured delinquent returns.

In this same period, $1 million was abated. These abatements resulted from inaccurate assessments under IRC 6020(b) and inaccurate 100% penalty assessments. Also abated were failure to file, deposit and pay penalties based upon information developed through our cooperative efforts.

In 1988, fully 45% of delinquent accounts were assessed under IRC 6020(b). In 1991, only 13% are so assessed. In 1988, more than 40 individuals were assessed a 100% penalty under IRC 6672. There have been none in 1991. These improvements were due to better informed taxpayers complying with employment tax requirements, thus reducing the need for enforced collection actions which had proved counter-productive. Our strong emphasis on outreach proved far more effective.

The above results also enabled us to purify our records thus reducing the burden on taxpayers and increasing our credibility as an institution. In addition to the above results, we recently observed filing trends in the villages for both business and individual master files. We believe increases reflect a "ripple" effect on voluntary compliance.

We found that BMF returns filed increased 39% from 1988 to 1991. We believe that some of the increase is attributable to our direct efforts to secure unfiled returns pursuant to our nonfiler investigations. We have no test or control population to further refine the data. Similarly, IMF returns filed increased 66% from 1988 to 1991. Some of the increase we believe is attributable to forms W-2 being provided to employees as a result of our activities. Again, we have no test or control population.

Conclusion

We believe the success of the Alaskan Native Village Outreach Program well illustrates the potential for effective alternatives to enforcement. Collection workload has been growing rapidly for years and represents a true cross section of American society.

A challenge is to use Compliance 2000 concepts to identify homogeneous market segments for which alternatives to case-by-case enforcement can be designed. Of course the design of such alternatives is itself a challenge. A difficulty may be in finding market segments small enough for meaningful program design yet large enough to have significant impact. Industry or issue specialization is a new concept for Collection.

Compliance 2000 asserts that a large segment of the taxpayer population would like to or tries to comply with tax laws but cannot without changed tax administration methods. We believe our outreach program is an example of the potential for working with specific market segments to prevent compliance problems. By doing so we can reduce the number of instances where confrontational enforcement techniques are necessary.
COPYRIGHT 1992 National Society of Public Accountants
No portion of this article can be reproduced without the express written permission from the copyright holder.
Copyright 1992 Gale, Cengage Learning. All rights reserved.

Article Details
Printer friendly Cite/link Email Feedback
Title Annotation:taxpayer education program
Publication:The National Public Accountant
Date:Feb 1, 1992
Words:2304
Previous Article:Needs & problems of minority-owned small businesses.
Next Article:State efforts: small business.
Topics:


Related Articles
Closing the tax gap: alternatives to enforcement.
Situations wanted: rural Alaska Natives have a range of education and job training opportunities. (Alaska Native Business News).
SBA: help for Business: the Small Business Administration is committed to the development and the success of the small-business sector.
Alaska Native village corporations: sleeping giant? ANCSA village corporations will continue to expand and develop their business operations both...
Alaska Native Heritage Center: building for the future: this nonprofit organization promotes cultural diversity and celebrates Alaska Native...
Financing businesses in rural Alaska: mainstream banks sometimes shy away from financing businesses in rural Alaska, but there are options for...
Polar fleeced: Sen. Ted Stevens built a welfare state for Eskimos that made defense contractors rich.
The SBA 8(a) program: business development leads to success for Alaskan-owned business; the legal aspects of 8(a) and its benefits to Native...
First Alaskans Institute: a helping hand to natives: teaching business skills, leadership and even etiquette, programs exist to help Native Alaskans...
First Alaskans Institute funds healthy community projects.

Terms of use | Copyright © 2017 Farlex, Inc. | Feedback | For webmasters