The Española School District’s failure to deposit payroll taxes in a timely manner could cost taxpayers more than a quarter-million dollars.
District finance officials recently paid the Internal Revenue Service $186,206.96 and $73,547.30, for a total of $259,754.26, to cover penalties the IRS levied against the District for failing to deposit its quarterly federal payroll taxes on time.
The fines surfaced because the District didn’t submit 2016 federal tax deposits to cover payroll for the first and second quarters of the fiscal year, which respectively ended Sept. 30 and Dec. 31.
Outgoing Business Services Director Myrna Garcia attempted to solve the District’s tax troubles by asking the IRS to waive the penalties.
The letters dated March 20 and April 21, attributed the District’s tax issues to inconsistency with the Business Office staff and the Nov. 17, 2016 Public Education Department takeover of the Española School Board’s financial authority.
“The Española Public School District has undergone emergency situations which have resulted in late filings of the September 30, 2016 and December 31, 2016 tax deposits,” Garcia wrote in both letters. “Situations including staff turnover in the business office to include the Finance Director Jeanette Trujillo, and the Benefits Specialist Minnie Martinez.”
Trujillo and Martinez left their positions with the District in early 2016, long before the tax issue surfaced.
Garcia also contends the state’s takeover of the Board’s finances deprived the District of the resources needed to stay on top of the tax deposits. Specifically, the takeover meant the loss of access “to bank account, accounting systems and online federal tax filing” capabilities.
She requested the IRS waive the payments because not doing so could create harm for the District and its ability to provide instruction to the District’s 3,626 students.
“The penalty will cause economic hardship to the District as its finances were recently reduced by $1,000,000 due to reduction in state funding,” Garcia wrote. “The penalty could result in the non-hiring or reduction in teaching staff for the school district.”
Request denied
Ginnie Redfern, a program manager for the IRS’s Ogden, Utah, office, denied the request, after determining Garcia’s explanation didn’t set a solid foundation for forgiveness.
Specifically, Redfern cited an undisclosed court decision that determined an entity or employer can’t absolve themselves of the failure to pay taxes by handing the duty off to another party.
“The courts have held the responsibility for making timely deposits can’t be delegated,” Redfern wrote. “Thus, the fact that your employee handled all of your tax matters isn’t a mitigating circumstance. You are responsible for making a timely deposit and someone else’s failure can’t be a basis for removing the penalty.”
District officials can appeal the decision and possibly recoup the $259,754.26.
However, Superintendent Bobbie Gutierrez said she doubts the appeal will be successful because of Garcia’s attempt to convince IRS officials to waive the penalties.
Garcia’s action
draws criticism
While some may see Garcia’s efforts to resolve the District’s tax issues as a proactive attempt to correct a problem, others believe her actions represent an attempt to cover the tax mishap.
Both notices and Garcia’s responses came well after November 2016, when Public Education Department officials stripped the District of its financial authority. The timing is important because some believe Department-mandated contract Business Manager Maria Fildalgo should have been made aware of the District’s tax woes.
According to an email Fildalgo sent to her immediate Department (PED) supervisor, she didn’t learn of the issue until June 14, after a Business Office employee gave her the letter Garcia wrote to the federal regulators. The letter in question indicates then acting-superintendent Denise Johnston was copied on Garcia’s IRS correspondence.
“She tried to appeal to the IRS and send a letter, attached, I found it yesterday during my research, and cc (sic) Denise Johnston, neither one communicated anything to me about late penalties,” Fildalgo wrote to Department Budget Analysis Director David Craig. “I am not sure if Denise received a copy of the letter or if Myrna told her anything about this (the tax issue).”
Johnston didn’t respond to a request for comment as of presstime.
Garcia wouldn’t comment on the matter, but did say she gave Superintendent’s office Executive Assistant Eileen Ulibarri a copy of the IRS correspondence to pass along to Johnston.
She also said she informed the independent auditors who are working on completing the District’s 2016 Fiscal Audit.
Fildalgo told Craig, via the June 14 email, that she came across a tax payment and asked Garcia about it, only to be given incorrect information.
“I asked Myrna when she was doing the payments, if EPS was up-to-date and she said yes,” Fildalgo wrote to Craig. “When I was doing the cash reconciliations I saw the payments to the IRS and I thought it was for the current period. She hide (sic) all the information and didn’t say the truth (sic).”