IRS AUDIT RECAPChris Street, CPA

Chief Business Officer

Summary

• 2017 audit covering the 2014 tax year

• Years 2015, 2016, and 2017 will not be open if issues are corrected as of 1/1/18

• Total payment of $70,000 for 2014 errors

Pick-up Trucks

• Issue:• Personal use of pick-up trucks is subject to FICA and income tax withholding

• Resolution:• Odometer photo submitted quarterly to payroll and daily commute mileage reported

• Taxable fringe amount equals $3 multiplied by number of days worked

Split-Dollar Life Insurance

• Issue:• Imputed income benefit must be reported each year on W-2• Cash value at retirement should be reported on W-2• Guidance on policy changed in early 2000’s

• Resolution:• Policy changed to death benefit only policy which does not require yearly reporting of

imputed benefit• Upon retirement, cash value is reported as taxable benefit on W-2• 2014 W-2’s reissued

Independent Contractor vs. Employee Status

• Issue:• Should not issue an employee a W-2 and 1099 in same year.

• Some workers receiving 1099s should have received W-2s instead.• Assessment/testing, homebound, extra-curricular workers, safety officers/attendance

liaisons, Title 1 interventionists, physical therapists, speech therapists, etc.

• Resolution:• Control is key component. Most workers will be issued a W-2.

• Payroll department processes most payments now.

W-9s and 1099s

• Issue:• All payees should submit Form W-9 with records kept for at least 3 years

• Resolution• W-9s are requested for all payees, even corporations, and stored electronically

• 1099s are checked against IRS database before issuance

Retirement Incentives

• Issue:• If plan allows retire to elect cash benefit rather than insurance benefit, both options are

taxable

• Resolution:• Educational Support Staff handbook will remove language allowing cash benefit

Thank you. Questions?