Tax Collector Bond
Tax collector bonds cover individuals who are hired to collect taxes for municipalities and other government agencies. The bond may cover liability in the case of uncollected taxes. It is also used to protect and guarantee the public that a hired or elected official will honestly perform their tax-collecting duties.
Officials are elected or hired as agents to perform the duties of assessing and collecting taxes in all areas of local government. Although they are elected or hired to serve the public, some tax collectors can behave unethically. Tax collector bonds ensure tax collectors abide by the government's rules and regulations.
How the bond works
A tax collector bond is a type of surety bond that is offered by many insurance companies. A surety bond is a type of insurance instrument that is underwritten by the insurance company, and it has three parties:
- principal—the individual or position applying for the bond. In this case the principal is the one who performs the duties of tax collector.
- surety company—the insurance company who issues the bond and assures the principal fulfills his or her duties as required by the governing agency. In this case the surety company sells a tax collector bond to the tax collector.
- obligee—the entity that requires the bond. In this case the obligee is the governing agency, whether it be a municipality, state or federal government.
When an insured principal (the tax collector) fails to abide by the law or overlooks an important aspect of his or her duties, the obligee can make a claim on the amount lost due to the tax collector's negligence.
Tax collecting duties
Tax collectors must perform many duties while collecting taxes. Tax collecting offices are usually divided into four divisions, each with its own primary function. Should specific individuals or positions fail to complete the duties of that position, a tax collector bond acts as a safety net for the governing agency.
- billing—responsible for determining the correct tax rate for each payee and setting up the billing system that prints and sends bills to individuals and businesses. The billing department is also responsible for providing and explaining information about each bill so the taxpayer completely understands the bill and when and how taxes must be paid.
- cashier—collects tax money from tax payers and assures that all amounts, including interest and/or penalties, are credited to the proper tax payer
- reports and remittance—remits all taxes collected to the governing authority treasurer and prepares reports for the governing authority at specific times each month and year. The reports should provide:
- all amounts given to the treasurer for the time period
- the total amount of tax collected
- the total amount yet to be collected
- a list of delinquencies that are being pursued
- enforcement—pursues delinquencies and collects all taxes, interest and penalties from late tax payers. The enforcement division may pursue legal action or even foreclosure action on property taxes.
As noted here, tax collectors must complete many duties. With the help of tax collector bonds, the public can be assured the local government is doing everything it can to provide the public with ethical tax collection services.
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