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Update: Smith says state is wrong



TRIBUNE FILE PHOTO - Loretta Smith shown knocking on doors during her successful 2010 campaign for Multnomah County comissioner. The county is now garnishing her wages for a $37,000 tax debt. Multnomah County Commissioner Loretta Smith’s public paycheck is shrinking by $805 this week as the state garnishes her wages for nearly $37,000 in unpaid taxes and penalties.

Smith, who makes nearly $101,000 a year, owes $26,695.92 in state taxes plus $10,077.07 in penalties, fees and interest, according to a June 3 garnishment warrant that the county received from the Oregon Department of Revenue. The document was obtained under the state’s public records law, and shows the debt stems from tax year 2012.

Contacted by the Portland Tribune, she expressed confusion over the debt, saying she knew she owed income tax, but not to the state. Later, she told the Portland Mercury that her accountant says the state is wrong about the debt.

Whatever it is, I will pay it," she told the Tribune.

Smith said she must have not received notices from the state because she had not alerted the county that she has a new address after buying a new home. Property records indicate she did so in November 2015.

“I bought a house and I did a forwarding from the post office, but I did not do a forwarding from the county, so they were sending mail to a different address," Smith said. "So I didn’t get the notice.”

After looking into the matter, Smith said Wednesday that the debt resulted from “some kind of audit that took place after I filed my taxes.”

She promised to get a full explanation of the matter to the Tribune.

“What I am going to do is have my accountant call you … If you’re going to write something about it I’d much rather you have all the information.”

Smith’s accountant never called. She and her staff did not respond to follow up messages to see if he would. She asked a county spokesperson to say she would have no further comment and asked that she not be contacted again.

When taxpayers are challenged by the state, they often face a similar situation with the federal government, according to tax professionals interviewed by the Portland Tribune. That could mean an even bigger bill for Smith. If, as it appears, the taxes stemmed from the house Smith sold in 2012, then the federal tax rate can run as high as 20 percent, well over the Oregon rate of less than 10 percent, said Susan High, an enrolled agent and licensed tax consultant for Clackamas Income Tax and Accounting Inc. She noted that she was speaking only generally, and in response to the scenario described to her.

"Without knowing all the details, it's hard to point fingers," High said. "But with an amount this large, that's shocking. And it's hard to believe that the first you would know of it was a garnishment."

David Kiser of Kiser Tax and Accounting in Jacksonville was more forgiving. Speaking generally, he called it "very possible" that a change of address could lead to a garnishment coming as a surprise. The state, he added, moves quickly to collect unpaid taxes. He said, however, that calculating taxes on real estate sales is typically "cut and dried."

Bob Estabrook, a revenue department spokesman, said the state typically sends multiple notices and makes one or two attempts to call a taxpayer on the telephone before garnishing.

The state garnishment notice bears the address of a Northeast Portland house Smith sold in December 2012 before moving to another address in North Portland, public records indicate.

It’s unclear why the state would be addressing information to a house Smith has apparently not occupied since 2012. Estabrook said the state would use the last address on file, such as in the most recent tax return filed.

However, the state might also send mail to multiple addresses if it was uncertain of a taxpayer's current address, he added.

It may be that Smith tried to claim a tax exclusion on her 2012 taxes that was not upheld. Property records suggest Smith realized a $180,000 capital gain on the property she sold in 2012. That, when coupled with her salary of more than $90,000 that year, could well explain $27,000 in base taxes, High said.

Records obtained under the state's records law show the county also has received a lien claim for $460.40 in unpaid charges that Smith owes the River View Village Homeowners Association in Tigard. Asked about that lien, Smith said her accountant would call to explain that as well, before then refusing to supply the information.

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