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ITEM: |
CONSENT
CALENDAR |
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7. |
CONSIDER AUTHORIZATION OF
TAX PAYMENT TO INTERNAL REVENUE SERVICE |
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Meeting
Date: |
April 15, 2019 |
Budgeted: |
No |
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From: |
David J.
Stoldt, |
Program/ |
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General
Manager |
Line Item No.: |
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Prepared
By: |
Suresh
Prasad |
Cost Estimate: |
$18,000 |
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General Counsel Review: N/A |
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Committee Recommendation: N/A |
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CEQA Compliance: This action does not constitute a project
as defined by the California Environmental Quality Act Guidelines Section
15378. |
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SUMMARY: In September 2018, District was notified by
the Internal Revenue Service (IRS) that they will be auditing the District’s
2016 activities. As part of the audit, District
provided information that was requested by the IRS. District’s accounts payable, payroll, W2
& W3, 1099’s, employment contracts, benefit plans, retirement plans, and employee
reimbursements were all part of the audit.
As a result of the audit, the finding concluded that rebate customers
paid in excess of $600 did not have Tax Identification Number (TIN) on
file. The District’s past practice had
been issuing rebate payments and requesting TINs from the customers. IRS states that backup withholding tax should
be withheld from future payments if vendors do not provide W-9 Form. In the case of rebate payments, there are no
subsequent payments made since these are one time payments.
District submitted the rebate payment information to the IRS without
TIN. Since the backup withholding tax
was not collected, District is responsible for the outstanding tax in the
amount of $16,691.64 for the rebate payments.
As part of the audit, District contacted the rebate customers without TIN
to submit Form 4669 which requested by the IRS.
Some rebate customers complied with the request. District’s original tax liability of
$23,061.08 was offset by $6,369.44, which was based on received Form 4669.
As a result of this audit, District has modified its procedure where
payments are not released to vendors without a Form W-9. If the required form is not submitted within
60 days, than a check is issued minus the required backup withholding tax.
RECOMMENDATION: Staff is requesting the Board authorize payment to Internal Revenue Service in the amount of $16,691.64 plus any additional penalty and interest, for a not-to-exceed amount of $18,000.00.
7-A Correspondence from Internal Revenue Service
U:\staff\Boardpacket\2019\20190415\ConsentClndr\07\Item-7.docx