City Penalized by IRS for Late Tax Payments

August 18, 2020 - The City of Corvallis is facing fines and penalties from the Internal Revenue Service (IRS) for late payroll tax payments due to the federal government. The late payments over a period of more than three years resulted in IRS penalties totaling $243,267.

The City became aware of the penalties in early August. Over a period of more than three years, some payroll tax payments were transmitted late to the IRS – a few days late, in most cases, but long enough to warrant penalties. The City fulfilled its tax payment obligations, but the late payment penalties and interest added up over the years and were not addressed in a timely manner.

The City is conducting an investigation to determine the extent of the error.  Preliminary information suggests that an employee did not notify any supervisor of repeated warnings from the IRS about the compounding penalties and did not respond to those warnings. This employee left the City in January, months before the error was uncovered.

To be clear, all required taxes were paid, and this penalty does not represent a crime on behalf of the City.  New procedures and safeguards are being pursued immediately, and the City expects to file an appeal with the IRS to address the sizable fine.

“This singular incident, while serious and disappointing, does not reflect on the good work performed by the City of Corvallis each day in our community,” said City Manager Mark Shepard. “We will move forward and find an acceptable outcome for this issue, and we will redouble our efforts to improve transparency and accountability in all aspects of City services.”