TAX NEWS - JUNE 2010

Indiana Tax: Software issues incorrect tax bills for rental owners

Deadline extended for faulty tax statements

ANDERSON, Ind. — Rental property owners just received a potential big headache in their property tax bills, but seemed to bite the bullet and be a bit pleasant about the software mistake that capped their taxes at 3 percent instead of 2 percent this year.

"The people in the courthouse were really accommodating; they were hustling to make it right," said Mike Caudill, who owns about 12 rental properties — 11 of which were incorrectly taxed.

Though lines extended outside three county offices all week to correct the mistakes, county staff and taxpayers managed smiles Friday afternoon. While county officials said they're working diligently to fix bills and will extend the deadline for a "reasonable amount of time," a mortgage lender says it could spell frustrating times for residents who pay their property taxes through an escrow fund if they don't take quick action.

"We are correcting the problem," said Madison County Assessor Cheryl Heath. "We just have to do the correction of errors."

For taxpayers to fix their bills, the property owners must start at the assessor's office where they will receive a "correction of error." The correction of error is then taken to the auditor's office, where a new bill is printed. Then, the bill can be paid in the treasurer's office.

However, if the bill has already been paid through an escrow account, the homeowner must make a trip or phone call to his escrow company.

"They need to make sure those figures are the same," said Stephen Davis, a mortgage lender with Main Source Bank.

Davis said someone who doesn't bring the discrepancy to the attention of his escrow and mortgage companies quick enough could end up with higher mortgage payments based on the incorrect tax bill. Since most escrow companies review taxes only once a year, a diligent taxpayer may prevent a financial headache, he said.

"In most situations, if they get it situated quick enough, they'll probably get it done and get it changed before their payment even changes," Davis said.

For those who do not, it could be months before the ripple-effect trickles back around, Davis and Caudill said.

Caudill said he had problems with his taxes last year when a property was assessed as if in a different neighborhood. It all started in January and didn't get resolved until September, he said. He said it was more logistical problems than inability on the county offices' part.

"It was upsetting that you didn't do anything wrong and it takes so long to get around to get it right," he said.

For all rental property owners seeking refunds (whether paid through an escrow fund or not), there is a state form that must be signed first, Stoops-Wright said.

"It'll either be mailed to them or they will sign it here," she said.

Stoops-Wright is also extending the deadline for taxpayers who may not have their bills corrected by the June 10 deadline, but only for those with a tax cap problem.

"For taxpayers who are appealing the assessment of their property; payment must be paid on or before June 10, 2010, or a penalty will be charged," she said in a memo.

Heath said a computer glitch in the Hamer Enterprises software that tax bills are configured through, created the inaccurate billing. Stoops-Wright said her office, the treasurer's office and the assessor's office spent two years searching for a vendor that would work with all three offices.

"Hamer Enterprises presented up a process that we were very pleased with," she said, adding that the county saved money because their databases were already compatible.

Rental property owner Tom Morgan, who has been a software programmer for 17 years, said someone should have tested the system with trial tax bills before running the entire county's.

"It just frustrates me that they got this wrong; it's huge," he said. "A mistake on this magnitude on a piece of software? What kind of testing was done?"