WASHINGTON – Taxpayers in a single Fort Washington ZIP code were audited more often than those anywhere else in the state in 2000 and 2001, according to a Capital News Service analysis of Comptroller’s Office records.
The analysis of state personal income tax audits for those two years found that ZIP code 20744 had the most audits each year, with 271 of the state’s 21,478 audits in 2000 and 302 of the 22,558 state audits in 2001.
The relatively high number of audits led one area legislator to wonder if auditors were “picking on us,” but an official with the Comptroller’s Office said he is certain that is not the case.
“We don’t do any auditing based on geographical area,” said James Loftus, deputy director of compliance in the comptroller’s office. “We did nothing ourselves consciously to target that area.”
He said state auditors do not have a fixed method of determining which taxpayers to audit, such as random or computer-generated audits.
But while Loftus and tax professionals offered several theories on why Fort Washington is at the top for audits, no one could say for sure.
Loftus said an audit might be triggered by errors on a person’s return or by discrepancies between state and federal returns, based on information Maryland receives from the Internal Revenue Service. The state may also go looking for a taxpayer who filed a federal return with a Maryland address, but no state return.
Those situations might turn up in ZIP code 20744 if there is a heavy concentration of military personnel there, or a large number of people moving in from out of state, Loftus said. They may not realize they have to file a part-year return, or may be more prone to make a mistake since there is “a high occurrence of errors on part-year returns.”
But Loftus could not say for sure if that was happening in Fort Washington. And tax professionals working in the area were surprised by the CNS findings.
“Our CPAs in Fort Washington were quite surprised to hear about the high concentration of tax audits in the area,” said Richard Rabicoff, public relations manager for the Maryland Association of Certified Public Accountants.
“They have seen no such trend among their clients in recent years,” said Rabicoff, after a quick poll of tax practitioners around Fort Washington.
The high number of audits is made more pronounced by the fact that 20744 was the second-smallest ZIP code, as measured by the U.S. Postal Service, of the 10 most-audited ZIP codes in the state. It has 16,000 estimated deliveries, said a Postal Service spokesman, compared to 30,000 deliveries in ZIP code 21234 in Baltimore, the fifth-most-audited.
Some tax professionals speculated that the number of audits is related to the area’s affluence: Fort Washington had a median household income of $81,177 in 1999, compared to a state average of $52,868 in the 2000 Census.
Joe McDonald, owner of Joe’s Tax Service in Fort Washington, agreed with Loftus that the surprising number of audits could be caused by military taxpayers in the area, noting that Andrews and Bolling Air Force bases are nearby.
Whatever the reason, most tax professionals were simply surprised by the number of audits.
“The state of Maryland doesn’t audit that many people,” said David Churchman, president of the Maryland Society of Accountants. “They don’t have the resources to audit that many people.”
Loftus said that 0.81 percent of state personal income tax returns were audited in 2000, compared with 0.85 percent in 2001. Those percentages are higher than IRS audits of federal tax returns. The IRS audited 0.58 percent of tax returns in fiscal 2001 and 0.57 percent in fiscal 2002.
Sen. Gloria Lawlah, D-Prince George’s, said she was “shocked” when she heard that a Fort Washington ZIP code in her district was the most-often audited one in Maryland for personal income tax returns.
“Are they picking on us?” asked Lawlah, who lives in Fort Washington.
“The state is picking on us,” she said. “We raise the highest amount of money for the state for lottery. We’ve turned in so much money for the state.”
-30- CNS 04-15-05