WINNSBORO – After a former interim Fairfield County Administrator paid out approximately a million dollars two years ago to the IRS without consulting council, those funds are now coming back to the county.
“We’ve made some tremendous progress in resolving the IRS American Care Act filing penalties from 2017 to 2021,” County Administrator Vic Carpenter told council during Monday night’s council meeting.
“We’ve secured significant abatements, refunds and credits, and are positioned for further recoveries through pending appeals,” he said. “And we’ve demonstrated fiscal responsibility and taxpayer protection in learning and understanding what led to the situation, ensuring that it will never happen again.”
The year 2017 has been fully resolved, with $350,740 in penalties abated, wiped out …$383,862 has been credited back to the county as the refund, and those credits were applied to future liabilities, according to Carpenter.
“So, the appeals process has been a complete success,” he said. “The liability has turned into an asset.
“We’ve also made significant progress in the 2019 appeals,” he said, “While $370,710 were the original penalties for that year, $282,690 of that has been removed. A refund of $221,390 was issued to us in July of this year, and we have an appeal currently pending for another $88,020 on that. So approximately 80% of that has been eliminated with still more recovery potential.
Carpenter said significant progress has also been made in recovering payments for 2020 IRS penalties. Of the original $386,230 in penalties, $295,400 has been removed, and a $226,859 refund was issued in July. Another appeal for $90,720 is pending.
“So the $357,000 in proposed penalties for 2021 were fully abated,” Carpenter said. “We owe nothing, and nothing will be required of us. We completely prevented any burden to tax payers there.
“The financial impact of this effort is that we’ve totally abated over $1.3 million of the penalties that were initially assessed,” Carpenter said. “We’ve recovered over $443,000 in refunds of penalties paid, and another additional potential of $178,740 in interest.
“There are no IRS accounts currently out there. There are zero balances right now. So, I would conclude to you that we took a proactive approach,” he said.
How it Began
It was in December of 2023, during a county council meeting that then Interim County Administrator Laura Johnson announced that the county had received notification of $1.4 million in fines and penalties from the IRS in May and June, 2023, and she paid them those same months. But she didn’t announce those notifications or the payments to the public and county council until six months later during the Dec. 11, 2023, county council meeting.
Two of her staunches defenders throughout the almost year-long debacle were Council Chair Douglas Pauley and Vice-Chair Clarence Gilbert.
While some council members criticized Johnson for unauthorized payment of the penalties and for not informing council of the issue when she was notified of the penalties, Pauley defended Johnson’s handling of the assessments and payments. He said no administrator should have to seek council permission to pay the IRS.
Gilbert also defended Johnson.
“I’m just not happy with the accusations and the way things are being presented,” Gilbert said.
Despite the large payout Johnson made for the IRS assessments, there is no record that she advised council to initiate a special called meeting to address the issue or seek solutions, or to amend the budget for the large payout as required.
Johnson left the county’s employ a year later after her husband was accused of threatening her critics.
Closure
On Monday night, Carpenter brought closure to the issue.
“We’ve now addressed it with the IRS and internally. We now have an understanding of the issues that led to the errors and have fully fixed them,” he said. “We’ve eliminated and/or reduced the vast majority of those penalties, have secured substantial refunds and credits, and positioned ourselves for greater recoveries for what is remaining. We are completely restoring our compliance and financial stability,” he said.
Carpenter concluded by saying, “We have addressed the fact that issues were there. We’ve resolved them to the satisfaction of the IRS with the result of almost $1.7 million in abatement or refunds to the county.
“It shouldn’t have happened,” he said, “and it won’t happen again.”