Errors in tax return reviews cost state millions

Legislative auditors said Wednesday that Nevada may be losing millions in taxes because of confusing statutes and missed communications between the Insurance Division and Department of Taxation.

Auditors presented their report before the legislative Audit Subcommittee headed by State Sen. Sheila Leslie, D-Reno.

"The bottom line is there's just a lot of money out there in insurance premium tax that we're not receiving," she said.

"Due to insufficient review of returns, more than $5 million in taxes went uncollected in tax years 2007 to 2009 because errors, inaccuracies and unsupported deductions were not identified or corrected," auditors wrote in their report.

They also said there were numerous errors in reporting and paying on dividends and annuities that resulted in more lost revenues to the state.

Auditors said a potentially bigger problem resulted from the spotty reviews of deductions listed as "other considerations" which they said were not identified well enough to determine if they should be subject to taxation.

"Although 'other considerations' may not qualify as taxable products, if subject to taxation, as much as $32 million in additional taxes could be due for tax years 2007 to 2009," according to the report.

Taxation Director Dino DiCianno agreed the department and insurance division must learn to communicate better to catch errors costing the state money. He said his department has to rely on the division because, "we have one individual that does this on an annual basis."

"To expect this individual to do desk audits will just not happen," he told lawmakers.

DiCianno accepted the audit results, saying he would work more closely with the Insurance Division to close those gaps in the system for collecting insurance premium taxes.

Leslie also raised questions about the annual audit of facilities in the state that care for children. There are 57 government operated and private centers for children ranging from the Nevada Youth Training Center in Elko to group homes, mental health and substance abuse treatment operations. Altogether, they care for an average population of about 1,800 juveniles.

Leslie pointed out that every annual audit makes the same criticism, that workers in those centers need more training in medication management and handling disciplinary issues.

Improper treatment of juvenile offenders at the Elko center resulted in a federal investigation of abuse charges several years ago.

"The medication issue has been such an ongoing problem and the risk of harm is so great," she said.