5.2. ERMUSR 01-10-2006 - Laserfiche WebLink

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. "'~i ilk River .; 1Vlunicipal Utilities 13069 Orono Parkway Elk River, MN 55330 January 5, 2006 To: Elk River Municipal Utilities commission Jerry Takle Jim Tralle John Dietz From: Theresa Slominski Re: Update on IRS and sales tax issues phone: 763.441.2020 Fax: 763.441.8099 Attached is an itemization of the IRS amounts that were paid for penalties, interest, and taxes in 2005. As you can see, there was a "snowball effect" that was started when the civil penalty was assessed. There was an error in the filing date for the 3`d quarter of 2004 payroll tax deposits, and it was viewed as an overpayment that was taken and applied to the civil penalty. This created an underpayment situation for the 3`d and 4rn quarters of 2004 payroll tax deposits, and penalties and interest assessments followed. To recap, this civil penalty resulted from IRS and Social Security inquiries when the W2s and the 941 s for the year 2001 were not in agreement. They were not in agreement due to the manipulating of the W2s that occurred. The penalty itself was paid in March of 2005 and so we are working with our auditors to see if the "snowball effect" for penalties and interest for payroll tax deposits in 3`a and 4`h quarters 2004 can be abated. It will take some time before we have any response from the IRS on the abatement. Of the $98,063 paid, our out of pocket amount is $42,933.38. (This amount is included in the restitution we have submitted for reimbursement from Pat Hemza's court case.) We are meeting with the county attorney on Tuesday morning and will have an update at the commission meeting. Corrected W2s for all years for Pat Hemza are being filed now rather than waiting for the court case to be finalized. The Minnesota Department of Revenue still has not made a final determination on the sales tax abatement of $15,270. The last conversation that I had with them though was not promising. There was another late payment (9 days late) from July 2003 that was working against us. It was stated that while the process is slow, probably the only thing missing in our case is the formality of a letter denying our request. This was also included in the restitution request.