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Lorain pays IRS $246,000 for 2011 tax form error


LORAIN — The city of Lorain paid $246,376.25 to the U.S. Internal Revenue Service in May to settle issues raised by an audit that showed the city had failed to send out proper tax forms to some vendors in the 2011 tax year.

Lorain City Auditor Ron Mantini said that he hopes that some of the money paid to the IRS will be returned if the city can convince vendors to fill out some forms and then turn those documents over to the federal government.

“There’s a good chance we can get a good chunk of this back,” Mantini said.

The damage also isn’t as bad as it was when the IRS sent its original round of figures to the city last year, indicating a potential liability of $775,631.08.

But Mantini said the city worked to get that figure down by seeking to prove that although the paperwork might not have been in order, the various vendors had paid the proper taxes.

The IRS found that the city hadn’t been sending out 1099 forms, which detail what vendors were paid in a given year. Although Mantini said his office didn’t send out the proper paperwork in many instances, the bulk of the problem originated in the Lorain Municipal Clerk of Courts office, where the documents weren’t sent out to several law firms.

The city was fined $200 for each of the 152 forms that weren’t sent out, for a total of $30,400 in fines. Mantini said the city won’t be able to recover that money.

In addition to the fines, the city was penalized $170,267.49, or 28 percent of the amount of money that should have been reflected on the 1099 forms, Mantini said. He added that the city will renew efforts to recover that money by working with vendors in the coming months.

The IRS audit also turned up problems with how the city had been paying some benefits, such as uniform allowances and medical reimbursements paid to employee spouses. Paying taxes properly on those issues accounted for the remainder of the settlement figure, according to documents provided to The Chronicle-Telegram on Wednesday.

Mantini said he and other city officials have taken steps to make sure the forms are being sent out properly.

He said the IRS has assured the city that it won’t be looking at the same issues in other tax years as long as the paperwork is handled properly.

Contact Brad Dicken at 329-7147 or bdicken@chroniclet.com. Follow him on Twitter @BradDickenCT.

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