Thursday 5 May 2011

Take-home cars in Montgomery County a taxing concern

On top of questions about accountability, Montgomery County’s mismanagement of its fleet of take-home cars has also left officials scrambling to unravel troublesome tax issues.
Some employees have essentially treated government cars as a fringe benefit but might not have reported that extra income on their tax returns, county officials and tax experts said.
Employees who have used government cars for private purposes or failed to properly reimburse the county for the cost of their commutes should, in theory, send the Internal Revenue Service amended returns and a check to cover unpaid taxes, tax experts said.
Montgomery officials are also worried that the county could face financial consequences stemming from what they admit has been lax oversight and incomplete reporting. But at a public meeting Wednesday afternoon, they weren’t eager to discuss the issue out in the open.
“I’d like us to handle the details of reporting to the IRS not in a public session,” said Jennifer E. Barrett, Montgomery’s Department of Finance director, during a meeting between members of the County Council and officials responsible for overseeing the take-home fleet.
“We’re open to financial liability if we don’t take care of this,” said an analyst for the council, Susan J. Farag.
“I’m aware of that,” Barrett said.
Last week, council members said they planned to recommend that cars be taken away from certain employees as they finalized cuts during budget deliberations this month. Those affected were to have included department directors as well as employees who, despite queries from fleet managers, had failed to justify the need for vehicles , officials said.
But David Dise, director of Montgomery’s Department of General Services, argued for and got an extension from the committee until summer. Dise said that fleet managers have received the written justifications they were seeking from county departments and that top county officials, including Chief Administrative Officer Timothy Firestine, need time to sift through the justifications carefully.
Members of the council’s transportation committee agreed to give County Executive Isiah Leggett’s administration more time to figure out which cars are being used properly.
“We look forward to some badly needed reforms and reductions,” said council member Roger Berliner (D-Bethesda-Potomac). Dise said he expects “some very positive results,” given recent scrutiny.
A sharp reduction is “the only thing that’s going to ultimately satisfy me,” said council member Hans Riemer (D-At Large).
County officials this week released information showing that “evening meetings” was a frequent justification cited by those who have take-home cars. “I don’t find that to be a compelling justification. . . . It doesn’t work for me. Does it work for you?” Berliner asked Dise.
“I would prefer not to make a comment,” Dise said. Dise agreed to report back on July 1 about an ongoing review of categories for justifying take-home cars in county regulations.
The county is working to increase the number of employees who track and pay for each mile they commute in a county car, Barrett said.
There has been a policy shift toward requiring more people to reimburse the county for actual mileage, she said, rather than using accounting methods that cost employees less money. Some employees, under county rules, have put a $3 a day price tag on the cost of their commute.
Barrett said the county has faced obstacles when trying to deduct commuting costs from employee paychecks. “At times in the past, we were advised we couldn’t do that under collective bargaining,” she said. “We’re going to test that.”
The tax issues are under review, Barrett said.
Some tax experts said it was unlikely that employees would be audited by the IRS specifically for failing to account fully for their private usage of government cars. But the matter could come up in a routine audit.
“Montgomery County has a responsibility to report to the IRS fringe benefits that had been given for each employee,” said Mark Rosenberg, a Bethesda tax attorney who worked for Congress and the Federal Trade Commission before going into private practice.
“In theory, you go back and you submit an amended W-2,” which outlines wages and taxes, he said. The county could get an IRS letter, but any penalty would be unlikely, he said.
Employees, too, could have to amend their returns. For someone who wasn’t paying for his commute but should have been, the amount of taxes due would depend on the miles traveled, Rosenberg said. An eight-mile round-trip commute, at a 33 percent tax rate, would net a tax bill of about $400, he said.
“It’s kind of an easy one from the IRS standpoint. It’s like shooting fish in a barrel,” Rosenberg said. But whether the IRS would pursue it is another question, he said.
“They are so overwhelmed, it’s hard to believe they would take an aggressive role with respect to that.”
Source http://www.washingtonpost.com/


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