Weld County — The Internal Revenue Service has dinged Weld County for more than $30,000 in back taxes and late fees for improper reporting of commuting mileage taken by County Commissioner Barbara Kirkmeyer and for failing to file 1099s on other vendors.
According to a news release from the county, the IRS looked at 24 specific areas, including all payroll transactions; all employee benefit packages; employment contracts; all employee allowances, reimbursements, deferred compensation plans, retirement plans, Social Security withholding, Medicare withholding, and W2’s; all payroll deductions; accountable reimbursement policy; election judge payments; all third-party payments; all 941s; 218 agreements; all W-9s; and all 1099s.
The county now owes the IRS $33,680.47. Of that, $3,000.47 is for taxable commuter mileage and $30,680 in late fees on 59 form 1099s.
A 1099 is form given to contract workers and others who received money from an entity that is considered taxable wages under IRS rules
“I feel vindicated,” said former Weld County Councilman Jeffrey Hare who filed the whistleblower complaint in 2016 after what he said was years of being ignored by the county. “It’s nice to proven right, but it’s also sad to be proven right. It’s sad that we had to force the county’s hand when they weren’t doing the right thing to begin with.”
The audit stems from years of Kirkmeyer and other past commissioners being reimbursed for mileage to and from their home to the Greeley office without the county taxing the mileage as a fringe benefit or taxing Kirkmeyer for the reimbursements on her W-2.
Although the news release does not name Kirkmeyer, she is the only county employee or elected official to be getting reimbursed for commuter mileage. In 2014, three sheriff’s deputies under then Sheriff John Cooke attempted to claim commuter mileage based on Kirkmeyer’s arguments, but were refused.
It is unknown if Kirkmeyer continued to claim the mileage reimbursement during the audit. Complete Colorado has filed a Colorado Open Records Request for her mileage reports along with any communication from the IRS. This story will be updated when received.
The IRS informed the county of the audit in March. It was completed this month, the news release states.
“When I was on the council, I made it clear it was wrong,” Hare said when he first learned the whistleblower suit had been accepted. “I don’t think Don Warden (finance manager) or Bruce Barker (county attorney) sought outside council to determine if they were right.”
The monetary damage to the county could have been much worse had the IRS chose to go back further than just 2015.
However, according to the news release, the IRS will not ask for additional years’ information and did not access further penalties on the county because it used outdated and/or wrong information to base its business practices on, including a 1978 Larimer County ruling and a 1955 Federal Court case.
It is not known whether Kirkmeyer was also audited or for how many years, as her taxes are not a matter of public record.
In 2014, while Hare was on the County Council, which just survived an attempt by four county commissioners to disband it, he and other board members argued commuter mileage was a fringe benefit and should be taxed at the very least, but believed the council had authority to determine whether it should even be reimbursed.
The county continued the practice. The news release confirmed the council’s assessment.
“The IRS determined the commuter mileage is an allowable business expense, but the amount is taxable to the employee,” the news release said.
The IRS also found 59 other accounts payables where the county failed to send 1099’s, each one was assessed at $520 late fee.
The news release said because no other county had ever been audited based on some unique filings concerning Medicaid recipients, it thought it was following standard business practices of all counties.
“Weld County believes it had reasonable cause and followed an ordinary prudent business practice used by many Colorado counties in the same situation,” the release said.
The IRS audit of Weld County could lead to more audits across the state as many counties have the same practices.
Hare said the decision to not go back further years was bittersweet, he said in one way it’s better for Weld County taxpayers not to have to pay any more in back taxes and penalties, but on the other hand, Hare said, it means some past commissioners who also took advantage of the practice got away with it.
“But it should save the county money going forward,” Hare said. “It brings to light that commuting mileage is compensation rather than a benefit and that decision should go to the county council.”
The new release also stated the county has received guidance from the IRS as it moves forward and will make changes in policies because of that guidance.
“Weld County accounting has taken steps to avoid adverse IRS audit findings in the future,” the release said. “Prior to any payment being made to a vendor or third party, the county will require the payee to have a W-9 form on file certifying their IRS filing status to determine if a 1099 form is required to be filed by Weld County. In addition, all commuter mileage paid will be taxable and reported on W-2s.”
The county will pay the bill from the 2017 budget. It will not require a supplemental budget.
“Weld County Government works to continually improve all our processes and is committed to managing tax payer dollars responsibly,” the release said. “We take the results of the audit seriously and have implemented new policies, based off audit recommendations, to make sure the liabilities addressed in this audit do not occur again.”