Bismarck Tribune - North Dakota News - City to pay IRS back taxes bill

City to pay IRS back taxes bill

Jun 18, 2008 - 04:07:01 CDT

DICKINSON (AP) - The city of Dickinson has decided to pay the entire amount of back taxes that the city and its employees owe the Internal Revenue Service.

The bill adds up to about $95,000. The city and its workers each owe $47,552 in unpaid taxes because of a payroll accounting error that went unnoticed for years. The city commission this week voted to cover the whole sum.

"It's too hard to go back and apply that to the individual employees when we have some that are no longer employed with the city," City Administrator Greg Sund said. "It ends up more or less punishing the (employees) that stayed here."

Since 1992, the city had been deducting Social Security and Medicare taxes from workers' paychecks after contributions to retirement plans had been subtracted. The Internal Revenue Service a few years ago declared that such taxes must be withheld before retirement contributions are made, City Attorney Matthew Kolling said.

The city's matching contributions to workers' plans also were going untaxed because of the error, meaning the city also owes the IRS money.

The money to pay the back taxes will come from the city's general, library and utility funds, according to Tina Johnson, the city's accounting manager. Under the IRS's statute of limitations, Dickinson will have to pay back taxes only going back to 2005.

City workers are not entirely in the clear. The city's payment of back taxes will be taxable as wages, Sund said.

The error was caught earlier this spring when Johnson and a Minneapolis-based firm handling retirement plans for Dickinson were reviewing the city's books.

News > State

Printer friendly version City to pay IRS back taxes bill

Comments

IllinoisCPA wrote on Jun 20, 2008 7:15 AM:

" The taxes the city had to pay were social security that should have been withheld for the employees wages plus the employer matching amount. They are not paying taxes on taxes. The tax is something the employee should have paid in the first place. If your employer pays your bill (whether it be tax, grocery or housepayment) it is income.

Bottom line, the City messed this up. "

tax reform wrote on Jun 18, 2008 1:28 PM:

" Just another example of why we need tax reform. Paying taxes on taxes. If we had a flat tax we could reduce the size of the IRS to about 100 workers. "

My Opinion wrote on Jun 18, 2008 7:54 AM:

" Where's the City Auditor and City Treasurer in all this? Did the city use a payroll company or do their own? No wonder we're in such a mess in ND. Even a City can't figure out how to do a payroll. Ever heard of Quick Books? Ever heard of an accountant? This isn't just an oversight - this is plain and simply foolishness. "

Post Your Own Comment

All online comments are limited to 350 words total.
Comments are reviewed for taste, tone and language before posting.
Some comments may be used in the Tribune's print edition.
We value and respect your privacy, but The Bismarck Tribune might
disclose certain information to governmental entities if served with subpoena.