IRS dings Missoula County for withholding too few taxes in FY 2016

An Internal Revenue Service audit of Missoula County’s taxes filed in Fiscal Year 2016 found several discrepancies resulting in fines or penalties, the county auditor said Wednesday.

In one instance, auditor David Wall said, the county owes $847 for not withholding the proper amount of taxes from a settlement with a former employee. It also owes $640 for not withholding taxes from judges who fill in for a Justice of the Peace when they’re sick or on vacation.

“We’ve been treating those (sub-judges) like an independent contractor,” Wall said. “It comes through the claims process, just like paying bills, and we’ve not been taking out any of their taxes, and we should have.”

Starting this coming year, Wall said, those sub-judges will be placed into the payroll system to ensure taxes are withdrawn. The county has also made adjustments in other areas it was penalized for in the IRS audit.

That includes the use of vendors who earn more than $600 from the county but haven’t always filed a W-9 with the county. Without having that W-9 on record, the county never sent those vendors a Form 1099.

That resulted in an IRS fine of $17,160, Wall said.

“During FY 16, there were 33 vendors that we failed to send a Form 1099 to, and it’s a fine of $520 per vendor,” he said. “We can now flag any payments where a vendor doesn’t have a W-9 on record in our accounting system, and we stop the payment process at that point.”

The penalties were applied to a time that predates two out of the three current county commissioners, along with many sitting department heads.

As a result of that, the county also owes $1,946 for not withholding taxes for a stipend given to two elected boards, including the Conservation District and East Missoula Sewer and Water.

The IRS viewed that stipend as a form of pay.

“It’s important to point out those are not county boards, they’re elected boards,” said Chris Lounsbury, the county’s chief operating officer. “We in essence serve as their bank, so they’re running through our payroll or claims process. They’re employees of those districts, not the county. Those districts will need to reimburse the county for that piece.”