Midlands county missed years of IRS filings. Taxpayers now face more than $1M in penalties

Fairfield County owes the federal government more than $1 million in penalties and interest for missing filings going back as far as 2017, members of the county council learned Monday.

The penalties from the IRS came after administrators discovered several missed filings while new staffers were preparing year-end tax information, interim County Administrator Laura Johnson told county council members at their regular meeting this week.

“If we’re late, it starts calculating penalties and interest, and it goes and keeps accumulating until you pay that bill,” said Johnson, who was named interim county administrator in January.

The announcement met with audible surprise from the council. “Repeat that please,” one council member can be heard saying on the video of the council meeting after Johnson said Fairfield County had paid at least $1,184,417.11 in penalties and interest to the IRS.

The earliest issue staffers are aware of, Johnson said, are errors on employee health care 1094 and 1095 forms submitted for 2017. Those errors were not corrected until this past February, netting the county a penalty of $386,379.51.

“This was 2017 and it was submitted in 2023? Is that what you just said?” asked Councilwoman Peggy Swearingen.

In a statement on Wednesday, county spokesman Gene Stephens said the issue was that “the late filing was due to a lack of credentials by the human resource staff.”

“We learned earlier this year that the submissions were not filed correctly and not updated,” he said.

“The Human Resources Director is currently seeking the proper credentials to submit the forms in a timely fashion in the future,” the statement said.

The county encountered problems in filing several quarterly reports with the IRS, Johnson said during the meeting. She didn’t identify those forms, nor did Stephens’ statement.

In 2019, the county was late filing a quarterly report for the end of the year, resulting in another $378,682.76 penalty, Johnson said.

The same issue was repeated with another quarterly report in 2020, resulting in another $390,027.18 payment required of Fairfield County taxpayers.

The year-end report for 2021, in contrast, was found to have been submitted twice. Also, county staffers discovered the quarterly report due October 2022 was not submitted until June 2023.

For the latter report, Johnson said Finance Director Beverly Mozie had been told by the IRS that the county would have to pay a $214,196 penalty. Johnson told council members that Mozie was unavailable to answer questions about the matter on Monday because she was ill.

Staffers had also learned the health care forms for 2021 had never been submitted. Any penalties attached to that are unknown, Johnson said, because staffers are still awaiting the IDs and passwords from the IRS they will need to belatedly submit them. Stephen’s statement said both year’s health care forms have since been submitted and the penalties paid.

Johnson said she had received an email from the county’s former finance director explaining why the health care forms weren’t filed. But the email did not address the late quarterly reports. Johnson said the former director was unaware of any communication from the IRS about the quarterly reports, and Johnson said county staff have been unable to locate any.

Johnson noted that if the county appeals the IRS fines, it must include an explanation of why the mistakes occurred as well as any mitigating circumstances. ”Honestly I have yet to understand or know why all of this occurred,” Johnson told council.

As of this week, the county had paid the federal government $1.18 million from the county’s fund balance, with an additional $214,000 still to be paid. That brings the county’s liability to $1,398,551.07, not including whatever penalty may be attached to the yet-to-be submitted 2021 forms.

Council members Monday also sought more information about the IRS issues.

“That’s absolutely inexcusable,” Swearingen said. “(The taxpayers) want transparency. We need to know why this happened... If you’re the finance director, don’t you know when these things are due?”

County staff are investigating possible avenues of appeal with the IRS, the county statement said.

“In the future, all copies of submission confirmations of yearly and quarterly reports, including submitted errors or requests for additional information, along with any signed certified mail receipts will be saved and included in the financial and human resource files,” a county statement said Wednesday. “The County will request that (the) IRS use two contacts for all required IRS forms: one going to the department responsible for the submission and the second to County Administration.”

But as Monday’s council meeting broke up, council members walked away from a meeting table decorated with holly and poinsettias unsure of what the long term impact of the news would be.

“I hate to get this bad news right before Christmas,” said Councilman Dan Ruff.