Tax Tips: 5 things you should know about tax collector bonds

As taxpayers, we all want to know that our taxpayer dollars are allocated appropriately rather than being mishandled by corrupt officials. Tax collector bonds help protect against potentially unruly tax officials in five key ways.

1. Tax collector bonds are legally binding contracts.

Tax collector bonds function as do other surety bonds. Each bond that's executed provides a financial guarantee that a specific job will be done according to applicable regulations. Tax collector bonds bind three separate entities together in a legally binding contract.

The principal is the tax collector that purchases the bond as a promise that work will be completed appropriately.

The obligee is the entity that requires the principal to purchase a bond as a way to deter fraud and potential financial loss.

The surety is the insurance company or specialty surety agency that issues the bond as a financial guarantee of the tax collector's ability to do the job.

2. Tax collector bonds protect consumer interests.

As a specific type of surety bond, tax collector bonds provide protection to consumers. They're primarily used to guarantee the general public that hired or elected tax collecting officials will perform their duties appropriately. Government agencies establish surety bond regulations to deter fraudulent or otherwise unethical individuals from getting the position.

3. Tax collector bonds deter unqualified individuals from getting control of taxpayer money.

Before surety providers issue tax collector bonds, they always conduct thorough background checks of all applicants. To determine a tax collector's credibility, surety providers investigate the applicant's credit scores, financial records and work histories. Negative feedback will deter sureties from issuing a bond, as they tend to avoid bonding potentially risky principals.

4. Tax collector bonds guarantee that collectors will do their job appropriately.

Because tax collectors have access to a significant amount of taxpayer money, they need to be held accountable for their actions. If a tax collector fails to complete the duties of that position according to law, tax collector bonds provide a safety net for the governing agency. This prevents tax collectors from taking advantage of their position's power.

5. Tax collector bonds provide compensation if a tax collector should break the law.

If a tax collector breaks the law or otherwise fails to perform duties, tax collector bonds allow obligees or other harmed parties to collect on the bond. This enables government agencies and the general public to recover funds that were lost as a result of a tax collector's negligence.

This article was provided by Kristen Bradley of SuretyBonds.com, a nationwide surety bond producer. Because the surety industry is often misunderstood, SuretyBonds.com provides educational resources to the general public to help them understand the benefits provided by surety bonds.