Shirley Sherman suspects there are many others like her who were unaware the city has eliminated a day grace period for the payment of quarterly taxes.
Sherman and her husband got their Social Security payments on April 23, so she went to City Hall to pay her quarterly $1,020 tax bill the following day.
This is not the first time she hasn’t paid her taxes by the April 15 due date. She’s waited until closer to the end of the month because, on every other occasion, the city has given her until the end of the month before applying a late interest charge.
This time she was nine days late and was hit with a $102 penalty.
“I would get a better rate from a gangster on Federal Hill,” she said Saturday.
In fact, the $102 penalty works out to 10 percent of the payment. What aggravates Sherman is that she was never notified that the city would eliminate the grace period. She said she wasn’t alone when she went to pay her tax bill.
“Everyone going in there is shocked,” she said of the tax collector’s office.
But according to City Treasurer and Tax Collector David Olsen, the city has never had a defined grace period.
With the installation of a lockbox system, the city has expedited the deposit of tax payments, thereby increasing municipal tax flow and avoiding delays in the processing of individual checks. Run by Fidelity under a contract with Citizens Bank, the lockbox was implemented more than a year ago following delays of two and more months in the processing of tax payments.
Olsen acknowledged that in the past there was an unwritten grace period, and what’s happening now is clearly stated on the tax bill. In the case of the third quarter, the payment is due April 15. The interest is applied to the unpaid tax balance at 10 percent and climbs by 1 percent each month up to a total of 12 percent in June and the end of the fiscal year.
“There is nothing written down entitling you to a grace period. I’m just adhering to state law,” Olsen said. “I had nothing not to allow me not to do it.”
As a hard and fast deadline for payments is being applied, Olsen said he makes a sweep of all payments to the drop box as well as those dropped at the box inside of the City Hall Annex before applying interest penalties. He is not looking at the date on the check or the postmark. If the city or Fidelity does not have the payment by the 15th, the penalty is applied. If payments are made by mail, Olsen suggested taxpayers give themselves five days before the due date to send their check as a precaution.
Olsen also pointed out that residential property taxpayers are entitled to a one-time interest penalty waiver if they have paid taxes on time for the past five years. He urged those taxpayers who are not aware of the waiver and have paid the penalty to contact the office to ensure they get the waiver.
On average, Olsen said, the city receives $1.3 million in the course of the year in penalty interest payments.
Sherman reasons the city had a responsibility to inform taxpayers of the change in practice. Further, she questions if the change can be done without some form of legal notice.
Secondly, had she known the grace period was being eliminated, she would have paid by the 15th.
“I had the money in the bank, I would have paid it,” she said.
Olsen said he is working to revise the tax bill to more clearly state payment deadlines and the consequences. He is also hopeful of gaining the technology to process credit card payments at the counter. Currently, taxpayers can go online to make credit card payments. There’s a transaction fee of $1.50 to $2.50, he said, depending on the credit card.
Sherman was so annoyed that she paid the tax bill but not the penalty. She’s not so sure that’s a wise move.
“Are they now going to charge interest on the interest?” she questioned.
That won’t happen, said Olsen. He said any payment would be applied to the penalty, leaving the remainder as taxes unless she was eligible for the “good taxpayer” waiver – in which case she’s paid up.