City of Seaford receives fine from the feds

By Lynn R. Parks

As the result of an audit by the Internal Revenue Service, the city of Seaford has been fined $1,000. The city paid the fine in June, along with back taxes amounting to $896.

The fine was levied because the city failed to provide two vendors at Riverfest with appropriate forms on which income from the city is reported.

Half of the fine, $500, was for not providing the vendors with 1099 forms, the other half was for not having the forms on file.

The IRS said that because the city did not give the vendors the forms, the vendors may not have known that they were required to pay tax on the income.

Therefore, the city was held responsible for the taxes, 28 percent of the $3,200 paid to the vendors.

City manager Dolores Slatcher said that as a result of the audit, city policy now states that all vendors have to fill out W-9 forms, Request for Taxpayer Identification Number and Certification, before receiving any payments from the city. That form will ensure that a 1099 form is sent out to each vendor at the end of the year.

The IRS auditor also suggested another change, to clarify the city's policy on employees driving city-owned cars.

The policy now makes clear that the employees who are allowed to take city-owned cars home "drive them to and from work and do not use them for personal travel," Slatcher said.

There was no fine in connection with the auto policy clarification.

Slatcher said that the audit was the result of an anonymous inquiry to the IRS.

"We never knew how this occurred," she said.

In its audit, the IRS did a thorough examination of the city's records, including all checking accounts, the employee handbook, policies, retirement plans and benefits, employer contributions to the plans, employment contracts, union contracts, lawsuit settlements, settlement agreement for employee lawsuits, pay records for individual employees, IRS filings, comparisons of records of gross payroll to wages reported for Social Security, Medicare and income tax and accounts payable. The lack of the 1099s was the only violation that the audit found.

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