A surprise visit from an Internal Revenue Service agent on Thursday forced the city to pony up about $42,000 on the spot in federal tax penalties related to shoddy bookkeeping.
Chief Financial Officer James Brigham reported the agent’s visit to the city council during its Tuesday evening meeting at the Municipal Complex.
The agent brought seven demands for payment, totaling roughly $56,000, to City Hall related to the city’s failure to send in or document payroll taxes in a timely manner, Brigham said.
The largest was a $39,000 penalty dating back to 2017 — when Milton Rawle was CFO — due to the city not filing its employee W-2 and 1099 tax forms with the federal government by the annual deadline, Brigham said. All of the others came from several instances the city did not send in payroll taxes within five working days of issuing payroll.
Brigham told The Dispatch this morning two of the smaller demands, totaling about $14,500, were abated since he could show documentation the city followed federal guidelines. He made a federal deposit for the rest on Thursday to stop interest from continuing to accrue on those penalties, but he is hoping to convince the IRS to abate and refund the $39,000 demand.
“That’s a lot of money for the city of Columbus, and I will fight for it if I can,” he said.
Mayor Keith Gaskin told The Dispatch after Tuesday’s meeting the IRS had notified the city of the $39,000 penalty early in his administration, which began in July 2021. Then-CFO Deliah Vaughn and interim Chief Operations Officer Mark Alexander Jr. wrote a letter to the IRS requesting an abatement and tagging Rawle’s 2020 indictment for embezzlement as the reason the W-2 and 1099 filings were delayed.
“The IRS did not think that would suffice,” Gaskin said.
Brigham said the IRS agent provided him a copy of the original explanation last week, and it was easy to see why it wasn’t accepted.
“The reason given was simply theft by previous CFO Milton Rawle, and then it went into the indictment,” Brigham said. “But that doesn’t really explain why those documents were late, so we need a better explanation.
“If you have a good explanation for the IRS, they are usually willing to abate (these types of penalties),” added Brigham, who took over as CFO in March. “Not knowing what caused it, I’ll have to do a little research before sending another letter.”
On Tuesday, Brigham also told the council he is working on compiling a comprehensive and accurate debt schedule for the city, following the discovery of two other bookkeeping miscues that predate his hire.
He received and paid an invoice of about $611,000 on a bonded debt for 2014 road work that wasn’t on the books. The council refinanced the $3 million balance on the 15-year bond in 2021 to lower the interest rate. While the city retired the 2014 bond from the books, the 2021 refinancing was not documented, he said.
Further, Brigham reported a $1 million loan the city took after the February 2019 tornado had never been documented, per auditors with the Watkins, Ward and Stafford firm. While the payments have been made, Brigham said neither the debt nor those payments were ever budgeted.
“We just need to get better organized where it’s very clear what debt the city has,” Brigham told The Dispatch. “We’re going through and getting things squared away, little by little.”
Zack Plair is the managing editor for The Dispatch.
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