It’s been more than a year since the city clerk at the center of the City of Oak Park’s financial woes resigned from her post, but the issues continue to linger and the City now owes more to the IRS than it did in 2018. Worse, city officials cannot find documentation that indicates any money was paid to the IRS after the initial discovery.
Flashback in Time
City Clerk Monica Slater stepped down from her position after a number of conflicts with city officials and allegations of mismanagement of city funds. Among the largest and most impactful was the failure by Slater to pay federal payroll taxes, an error that left the City with an estimated $151,000 IRS bill. [You can read the full explanation of what occurred here and the determination of the $151,000 here.]
At the time, Slater told AllOnGeorgia that the entire ordeal was a ‘major oversight’ and claimed full responsibility. Attorney George Rountree of Brown Rountree and Certified Public Accountant Tal Johnson, both of Statesboro, were supposedly helping Slater get the City in compliance and to arrange a payment plan with the IRS as the federal agency was adding interest and penalties daily. The interest and penalties were temporary halted and Slater presented a breakdown to Council in June 2018 after a $45,000 payment was made to the IRS with another $31,000 expected to be paid in July.
|Form 941 Liability|
|3/31/17||$13,930.52||$5,750.43||$807.99||Marked “need to amend”|
|6/30/17||$14,767.37||Marked “no return”|
Slater assured council members that the money due to the IRS was accounted for and merely set aside in different accounts, a claim which has unfortunately been found to be untrue.
Oak Park is still three years behind on having financial audits conducted, however, an up-to-date audit would have reflected the IRS payment error in the first year.
A new mayor, council, and administration hasn’t been sufficient for Oak Park to pull itself out of the hole. As of October 2019, the City of Oak Park owes the IRS a whopping $162,397.42 – more than the amount due in April 2018. The amount is increasing every day.
City officials say the most recently departed Clerk, Michele Soto, failed to file two quarters of federal tax paperwork which put the City in delinquency with the IRS, meaning the payment plan was null and the penalties began compounding again alongside the interest.
The City also has significantly less revenue coming in due to the suspension of the Oak Park Police Department, a decision council members were forced to make after it was revealed that the City was relying too heavily on police department revenue to conduct city operations. While expenditures have also been slashed and employee hours reduced to nearly half, there is still not enough to make a dent in the city’s obligation.
The IRS told Mayor Mickey Lindsey, who reported to a packed room of citizens on Thursday evening, that the agency would not file a lien against the city and would send a field agent down to the city by January 2020. Interest and penalties will continue to accrue until then.
City officials also told citizens that evidence at City Hall does not reflect that any payments have been made to the IRS as promised in 2018. The $105,000 promised in the June 2018 meeting does not appear in bank statements from April to December 2018. Bank accounts which were supposed to contain the money set aside as stated by the former clerk have yet to be located.
The IRS also has no record of the appropriate city documents that are required to be filed despite statements by Slater to Council 16 months ago that all paperwork had been sent off in the beginning of the resolution phase.
Government Entities with IRS Problems
Municipalities owing the IRS for penalties and unpaid taxes is not all that uncommon. Here are just a few examples:
- In 2017, the City of Boston was ordered to pay more than $1 million in penalties to the IRS for payroll issues and defunct Medicare withholdings. The City was able to negotiate with the IRS, but had to have a check ready for pickup by the IRS.
- Earlier this year, Mound Bayou, MS started collecting donations to pay off the city’s $350,000 owed to the IRS in taxes and penalties. (Population 1,400)
- In 2018, Missoula County (MT) was ordered to pay just over $20,000 in penalties to the IRS after an audit revealed incorrect payment amounts.
- Just last month, the City of Lawton in Oklahoma had to make an urgent payment to the IRS in the amount of $5,700 plus interest. (Population ~93,000)
- The Claremont School District in New Hampshire was slapped with a $320,00 fine in June 2019 over Affordable Care Act non-compliance. The IRS later let them off the hook entirely.
- In the same month, Beaver County (PA) was hit with $387,000 in penalties even though a tax lien was lifted.