A review of Rangeley town records revealed monetary penalties against the Town by the IRS for tax years 2017 and 2018. The proposed tax liability and penalties for 2017 was $275,216.77 and was $126,018.86 for 2018 as outlined in letters from the IRS dated 1/7/2020. The IRS letters were addressed to the Office of Treasurer and cited a failure to file correct information returns(Forms 1099-MISC).
The Office of Treasurer filed and furnished 43 Forms 1099 without a taxpayer identification number (TIN) in 2017. Only 11 of those forms were required to be reported. A claim that payee TIN’s were not recognized in the computer system resulting in Form 1099’s being printed for payees that should not have received them and some not containing TIN’s at all was a portion of the Town’s response to the IRS. The IRS sent Notice CP2100 notifying the Office of Treasurer of the missing TIN’s on Forms 1099 filed for 2017 but no one responded. In an email to Town legal the Treasurer stated she had not seen a CP2100.
In 2018 the Office of Treasurer failed to file 6 correct information returns. These Form 1099s were issued without a TIN. Because there was no TIN on file at the time the 1099’s were filed, those payments were subject to backup withholding tax. The Office of Treasurer did not begin backup withholding tax or file the required Form 945.
The Office of Treasurer responded to the IRS by providing all of the information they requested. The Office of Treasurer also reached out to Town’s legal authority requesting a letter be drafted asking the IRS to waive civil penalty fees.
The IRS responded to the Town attorney’s letter with leniency reducing the tax fees to $2,190.89 for 2017 and $3,403.20 for 2018 for a two year total of $5,594.90. The IRS declined to waive all penalties and fees because they determined that the failures were attributable to the absence of adequate payor internal controls and acquisition of required recipient tax information.
To protect the public’s interest, laws require Selectmen to discuss financial matters such as these publicly. The Rangeley Board of Selectmen never discussed any of these IRS matters publicly. The reason for this is that only Select Board Chairman Steve Philbrick had any knowledge of these issues and chose not to share his information with any other Selectmen. Town policy requires that the Selectmen be informed when Town legal is engaged for any situation. The Selectmen were unaware of the IRS complaint and any Town legal involvement pertaining to it. Selectman Philbrick signed the IRS Settlement Agreement as Board Chair on 8/13/20. No individual Board member is authorized to sign on behalf of the Board of Selectmen without a majority vote of the Board. No Selectmen discussion or vote on the IRS Settlement Agreement occurred.
Some Selectmen want to improve the transparency and procedures of the Select Board.
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