LITTLE ROCK — Interest and late fees on payroll taxes dating back to almost 10 years have already cost Craighead County about $288,000.
The city paid the amount in February after the Internal Revenue Service threatened to pose a lien - or a hold on the county’s assets - but now it’s asking for it back.
County Clerk Nancy Nelms, who files the tax payments, sent a request July 16 to the IRS seeking to waive all late fees, interest fees and penalties associated with late tax payments.
Nelms, whom the Craighead County Quorum Court has given until the end of July to resolve the issue, said a decision by the IRS could take several weeks.
The Quorum Court will decide whether it will pursue an independent audit of Nelms’ office and whether it wants to take any other action against Nelms on Aug. 1, Justice of the Peace Barbara Weinstock said.
The Quorum Court has already voted to hire an outside auditor but will wait until Nelms has a chance to get all her paperwork together, Craighead County Judge Ed Hill said.
“I’m pretty sure we’re going to pursue it,” he said.
Officials would limit the audit to the payroll tax payments.
Hill said Tuesday that the results of a legislative audit were not yet available.
“There’s errors on my part, and I believe there’s errors on their part,” Nelms said, referring to the IRS.
The IRS claims late payments have dated back to 2004 or 2005, she said.
Nelms said many of those payments were actually made on time but that some were late because she was busy with election season or failed to notify the IRS of a change in payment schedule.
“It’s just a bunch of little things,” she said.
Nelms said she did not send the payments via certified mail, so exact mailing dates can’t be confirmed.
Most of the money owed, if not all, is late fees, interest and penalties on the late payments, which stacked up over time, she said.
Craighead County is one of several Arkansas counties and cities that has dealt with steep penalties involving back payroll tax payments in the past couple years.
In March, Blytheville passed a 1 percent sales tax to cover $3.7 million in back payroll taxes owed to the IRS.
In Saline County, Bauxite and Alexander both set up monthly payment plans for the more than $30,000 they owed.
Helena-West Helena paid back the $429,000 it owed, and the IRS stopped trying to collect the more than $300,000 owed by Gould, unless more tax problems emerge or the city’s poor finances improve.
Craighead County paid the $288,000 out of its general funds “to stop the bleeding,” and no plan exists for what would happen if the IRS doesn’t grant Nelms’ abatement request, Hill said.
The county judge and the Quorum Court first learned of the back payroll taxes after Nelms requested the $288,000 in February.
“It’s not a new problem,” Weinstock said. “It’s a new problem to us.”
Weinstock said she isn’t sure how much power the Quorum Court has to take action against Nelms but that she believes something needs to be done with the county’s tax-payment system.
Arkansas, Pages 10 on 07/26/2012