Dept. of Revenue is cross matching state emp. KPERS for correctness???

[Guest LSKCK1]

Comments on the following??? Is this legal?

Department of Revenue has matched the list of those state employees paying into KPERS with their income tax filing for the last three years (1999, 2000, and 2001). The purpose of this matching is to determine if state employees are filing correctly by adding back their KPERS contribution to their federal adjusted gross income as required by state law. If the return has not been filed correctly, additional tax and interest will be due. This project will affect employees in most state agencies.

If you have not added back your KPERS contribution, the Department of Revenue will make an on-line adjustment to your account. You will then receive a letter from the Department of Revenue reporting the amount of tax, penalty and interest due. Penalty will be waived if full payment is received within 60 days.

[MGB]

There are a number of issues that "is this legal" could be questioning.

The IRS and state tax agencies have long shared information for cross-checking. That is obviously legal.

As far as what the state defines as taxable income, that is set by the legislature in the state. The state tax agency does not make that decision. Presumably, the law in that state does not recognize the reduction in taxable income that the feds allow. Differences between state and federal income tax laws are very common (some states have thousands of differences).

Each state has its own statute of limitations. I presume this one has a three-year and that is why they are checking the three returns.

Something more disturbing than this sharing of information is the SSA's recent announcement that they will be sharing all the personal information (address, phone, DOB, etc.) they have on people with any state agency (family services, law enforcement, etc.).

[Guest LSKCK1]

My real concern is singling out "State Employees" for matching purposes. I wouldn't be so concerned if it was a over all match with all "employed" persons. It's seems like discrimination in the respect that it's not a general match but specific to state employees.

[MGB]

The difference is that state employees have a special provision in the federal tax code which allows the employer to "pick up" the contribution. This effectively keeps the contribution subject to federal tax and is similar to a deduction for federal tax purposes. At the state level, they are not allowing this deduction, so the contribution must be added back to the federally-derived taxable income.

This provision of the federal tax law is only applicable to governmental employees, so there is no reason to have a cross-check with other employees (they don't have this deduction).