Three Things the Public Should Know About Tax Collector Bonds

July 13, 2011

The following is from a guest contributor to the Tax Policy Blog. All opinions expressed are those of the author.

Citizens have often heard the term “licensed and bonded” in reference to business professionals and elected officials, but they often don’t fully understand what it means. When individuals are licensed and bonded, they’ve met certain licensing requirements that include providing a surety bond as financial security. Government agencies enforce surety bond laws to keep fraudulent or otherwise unethical individuals from accessing positions that would allow them to take advantage of consumers. Countless surety bond types exist to protect against the failures of those who provide services to the public, whether they be commercial businesses or public officials. Tax collector bonds are one such risk prevention tool, and every citizen should know three important things about them.

1) Tax collector bonds are legally binding contracts.

Since tax collector bonds are a specific type of surety bond, they function as do other surety bonds. Tax collector bonds essentially guarantee that tax collectors will adhere to certain laws. Each tax collector bond that’s executed legally binds three parties together.

  • The principal is the tax collector who buys the bond to financially guarantee all applicable regulations will be adhered to when completing duties associated with the position.
  • The obligee is the specific government agency that requires the tax collector to provide the surety bond to protect against potential financial loss due to a mishandling of tax funds.
  • The surety is the company that issues the bond and provides a financial guarantee that the tax collector will fulfill the position’s duties as required by the obligee.

If the tax collector fails to perform duties as outline in the bond’s legal language, the surety will be held accountable for compensating resulting damages or losses up to the bond’s full amount.

2) Tax collector bonds guarantee officials will perform their duties honestly.

The goal behind tax collector bond requirements is to guarantee that hired or elected tax officials will fulfill assigned responsibilities, especially handling tax funds, according law. They are most often used to cover officials who collect taxes for local municipalities, such as city or county government agencies. Thousands of unique tax collector bonds are available because every individual jurisdiction that requires tax collectors to be bonded uses a bond form specific to its needs. Surety bond regulations for tax officials can be tricky depending on how each individual jurisdiction manages its tax bureaus.

For example, a small county in rural Missouri might give the responsibilities of tax assessor, tax auditor-controller and tax collector to just one person. Conversely, areas responsible for significantly more tax funds, such as Los Angeles County, spread tax management duties among multiple officials. Some states, such as Alabama, simply require tax officials to supply general public official surety bonds.

No matter the specific surety bond form requested, government agencies typically require tax collector bonds be in the amount of 100% of all public funds the official will manage. Some jurisdictions, however, place a maximum cap on the amount for which a surety bond can be requested. Otherwise, having the financial credentials needed to qualify for such a high bond amount would be virtually impossible.

3) Tax collector bonds protect the public.

Local government agencies require tax officials to be bonded because it holds them financially accountable for completing duties in an appropriate manner. If a tax collector should misappropriate funds, the government can recover the loss via the surety bond. Thus, as a preventative measure, surety bonds ensure that public taxes are allocated appropriately. Depending on the bond’s contractual language, a tax collector bond might also cover liability in the case of uncollected taxes. If a bonded tax collector fails to complete the duties of that position according to the bond’s terms, the bond acts as a safety net that allows governing agencies to collect losses. As the bond’s obligee, the government agency can make a claim on the bond to gain compensation for the mishandling of tax dollars and thus recover public funds.

The degree of tax collector bond protection also varies widely depending on the jurisdiction. For example, the state of Mississippi requires deputy tax assessors to maintain a $10,000 surety bond while deputy tax collectors are required to attain a $50,000 surety bond. In this instance, public funds managed by a deputy tax collectors receive a greater degree of protection than do those of deputy tax assessors. To find the exact bond form that’s needed for a specific position, a tax collecting official must contact the government agency requiring the bond. With the help of tax collector bonds, the public can rest assured that government agencies take worthwhile preventative measures to provide the public with accurate and ethical tax collection services.

This article was provided by Kristen Bradley of SuretyBonds.com, a nationwide surety bond producer. SuretyBonds.com provides educational resources to help consumers understand benefits that stem from surety bond protection.


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