CCP 03-08-1993 - Laserfiche WebLink

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------------- -------- . Arden Hills Council 4 February 22, 1993 Post reported that, after being in contact with the IRS payroll tax compliance unit, the IRS would expect the employer and the employee to correct this mistake in the following manner: 1) The City would be responsible to pay the employer's share of back FICA taxes. The employee's share of back FICA taxes could either be paid by the affected employees or by the employer (the City) on behalf of the employees; and 2) For the affected employees to amend income tax returns for the affected years and pay the appropriate federal and state tax liability due. Post stated that if the City chooses to pay both the employee's share and the employer's share of FICA taxes, there is a formula which would be used (called "circular computation") in calculating the employee's share of back FICA. Post added that, since the error is considered by the IRS to . be an "honest error", no penalties or interest will be imposed on back FICA. He added that the "honest error" defense could be used by employees so penalties would not be imposed on the corrected federal and state tax liability, however, employees would be liable for interest. Councilmember Malone said ther~ is no question that the City is responsible to pay the employer's share of FICA, and th~ question is whether the City will accept responsibility to pay the employee's share also. He asked if there will be an impact on state taxes as well as Federal taxes as a result of this misreporting. Post answered yes. Councilmember Aplikowski stated that since this error was not the fault of the affected employees, she would prefer that the City accept both the employee's and the employer's share of back FICA. Post stated that the tax liability impact on each individual employee will be determined by their income level and their dependent health deductions in the years in which they are affected. Councilm~mb~r Probst asked if there is any way the City can . assist the affected employees in amending th~ir tax returns for the affected years. Person suggested that. for employee income privacy purposes. perhaps the City could offer a fixed allowance to each affected employee as reimbursement for tax preparation costs.