Greeley — Weld County government was informed today that it is under an Internal Revenue Service audit for tax year 2015.
The audit stems from the county’s practice to reimburse mileage to commissioners for travel to and from their home to the county offices in north Greeley. By some estimates, over the past 25 years, the county has paid nearly $500,000 in fringe benefits that have not been taxed.
IRS Letter – March 15, 2017_Redacted by Sherrie A Peif on Scribd
The IRS was alerted to the practice by former Weld County Council member Jeffrey Hare, who is a Certified Public Accountant, and for years while he was a council member objected repeatedly to the practice.
Hare said on Wednesday that he held up on a promise he made the county just before his term of office ended, which was to get the county somehow to recognize its practices were against IRS codes.
“When I was on the council, I made it clear it was wrong,” Hare said by phone Wednesday. “I don’t think Don Warden (finance manager) or Bruce Barker (county attorney) sought outside council to determine if they were right.”
Neither Barker or Warden could be reached for comment.
The current County Council has also questioned the practice. Barker and Warden have defended the practice at several public meetings saying it has been done this way for decades, and Hare provided Complete Colorado with an email that confirmed the county continues to follow the same practice to date.
Hare said he was announcing the audit as the first step in making sure the practice stops.
“This is really preemptive to stop the county from reimbursing them money for commuting mileage,” Hare said, adding he has additional reasons for coming forward as the whistleblower. “I want to make sure that neither Warden or Barker play a role in any appeal that may be brought because of the audit because they are the ones that got the county into this mess in the first place.”
Hare said he planned to send a prepared statement to the media on Friday after confirming with the IRS that his case was open. However, because of Colorado Open Records Act requests that Hare had been filing for the past couple of weeks, Hare received confirmation from the county late Wednesday and escalated the timing.
“I am 100 percent confident in my understanding of the IRS regulations in this situation, which is why I filed the appeal with the IRS,” Hare said in the news release. “I have consulted with other CPAs in public practice as well as those (who) manage these issues for large multi-national organizations. If the appeal with the IRS is successful, it will have meant that the county overpaid hundreds of thousands of dollars to various county commissioners over the past 25+ years. It will also mean that the county has unreported tens of thousands of dollars in payroll taxes and potentially are subject to tens of thousands of dollars in interest and penalties.”
In a letter from the IRS it states the audit is scheduled for 8 a.m. on April 5 unless the county asks to reschedule. It further states that the auditor will review “books and records, discuss the expected duration of the audit, and answer questions about your federal employment tax responsibilities.”
The audit is for the 2015 tax year, but the letter also states it may ask for more records once the audit begins. The auditor, Carlos Chavez, has asked for (in part):
- Copies of all employees benefit packages and/or policies. The packages are requested for all classes of employees (rank & file, management, upper management, executive, elected, etc).
- Copies of any employee manuals, including any literature or other information provided to employees regarding participation in deferred compensation, cafeteria or other optional plans.
- Copies of any independent or outside financial audit reports for most recent audit conducted.
- Copies of all employment contracts for administrators, department heads, and all other employees with employment contracts (eg. Board Members).
- Directory of accounts for accounting system.
- Disbursements/Accounts payable records with directory of fields.
- Calendar year 2015 end payroll records with directory of fields, with summary of deductions and whether each deduction was subject to federal income tax, social security tax and Medicare tax.
- A report summarizing all payments to employees in 2015 for allowances, reimbursements, or benefits that were paid through accounts payable and not payroll.
- All w-9 for current vendors or contractors.
- Copies of reimbursements for various items, meal allowances, employee auto allowances and housing and moving expenses.
Also requested are items pertaining to a “four page list” of employees who had no social security wages/taxes, “a list of employees” with wages of $50,000 or more for 2015 with no minimal federal income tax withholding, “one employee” with no Medicare wages, “two employees” with deferred compensation contributions more than annual limits of $24,000 if age 50 or older, “three vendors/payees” with invalid taxpayer identification numbers, “six vendors” who have had inconsistencies between personal information on Forms W-2, 1098, and 1099 and their personal tax return for two out of the past three years.
Hare said he filed a whistleblower complaint with the IRS in October of 2016. The whistleblower program is a program started by the IRS to uncover tax fraud. The program rewards the whistleblower with up to 30 percent of the back taxes, penalties and interest of the amount collected. There are several levels of awards based on amount owed and collected.
Hare said this is not about the reward and if he receives anything he plans to donate it to charity.
“I could not stand by and watch the county provide reimbursement for commuting miles for county commissioners that should have been classified as compensation and charged to them as wages,” Hare said in his news release. “Further, as a former county council member, I could not stand by and allow county commissioners to receive benefits that have not been approved by the county council and that are not available to the rest of the County employees.”
Hare said he began filing CORA requests a couple of weeks ago because it had been almost three months since he received confirmation from the IRS that his claim had been assigned a case manager. Barker notified him late Wednesday of the audit.
He plans to ask both Barker and Warden as well as Barbara Kirkmeyer, who is the only commissioner currently receiving the mileage reimbursement, to recuse themselves from the process.
“If all the county commissioners have a conflict of interest or would rather not take the lead on this issue, then the issue should be remanded to the county council to pursue,” Hare said, adding if the county is found at fault Barker and Warden should resign.
“If the IRS sides with me in finding the county was errant or negligent on this issue, I will be calling for the resignation of Bruce Barker and Don Warden,” the news release said. “When on the County Council, both came before us and adamantly argued their position. Their implementation and oversight of this policy would be to blame from a legal sense. They should not have allowed county commissioners to be reimbursed for these commuting miles.”
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