D.C. Withholding Income Tax for Unpaid Fines

Thousands of District taxpayers are getting smaller income tax refunds this year because of a new law that many people don’t even know about.

The District has withheld hundreds of thousands of dollars from refunds of taxpayers who have outstanding traffic or parking fines as part of an ongoing effort to collect hundreds of millions of dollars owed to the District.

The most recent figures show the District is owed more than $380 million for unpaid parking, red light, speed camera and other traffic fines. According to the District’s chief financial officer, as of January 2012, $40,721,776 is owed by drivers licensed in the District.

Last year the D.C. Council and mayor approved the “Taxpayer Refund Offset for Department of Motor Vehicle Liabilities Act of 2012" as part of the Fiscal Year 2013 Budget Support Act.

The new law allows the District’s Department of Motor Vehicles to request the Office of Tax and Revenue offset the money owed in fines from any refunds owed to individuals. Businesses are not affected by the new law. If a taxpayer is having fines withheld from a tax refund, they are sent a notice informing them of the offset, identifying the unpaid tickets and informing the taxpayers they can appeal the decision through the DMV. According to Lucinda Babers, director of the DMV, most of those taxpayers receiving notices have tickets that are at least three months old.

“It’s mostly outstanding tickets issued more than 120 days ago,” Babers wrote in an email.

As of Tuesday, 3,587 taxpayers have had money withheld from their refunds to pay outstanding fines. The total collected so far is $682,320 according to a spokesperson for the OTR.

District officials anticipate collecting about $2 million per year through the new program.

While the District is able to compel the payment of unpaid fines by denying renewals of vehicle registration and driver’s license permits, according to a spokesperson for the OTR there are numerous advantages to withholding the money from tax refunds.

Among other things, collecting parking tickets through offset:

  1. Raises the money now and not years from now
  2. Collects money from people who move to another jurisdiction (in fact or in subterfuge) and do not renew DC licenses
  3. Collects from people who die before their licenses need to be renewed or decide they no longer need a license
  4. Collects from people whose vehicles are stolen or destroyed
  5. Avoids the necessity of paying collection agencies to collect funds already in the District’s hands
  6. Saves employee time spent in collection activities (of particular benefit to the new Central Collection Unit)
  7. Eliminates the expense of processing payments one at a time
  8. Eliminates time spent collecting these sums in lines at the DMV
  9. Encourages the timely payment of other tickets to avoid future offsets
  10. Encourages compliance with parking regulations by collecting fines more swiftly

The District isn’t alone in collecting traffic fines from tax refunds. Virginia has a similar system that allows counties, cities, courts and government agencies to submit claims on tax refunds for debts such as child support and traffic fines. According to the Virginia Department of Taxation, for fiscal year 2012, 293,985 claims were offset totaling $53,707,799. Maryland does not collect traffic fines from tax refunds but like most jurisdictions does offset other debt owed to the state. According to the Maryland State Comptroller’s Office, in the 2011 tax year Maryland had 257,956 offsets totaling $128,206,525.50.

Follow Mark Segraves on Twitter at @SegravesNBC4

Contact Us