Tax goof could cost work­ers

Au­dit finds as many as 1,000 state em­ploy­ees could owe back taxes.

The Denver Post - - DENVER & THE WEST - By Brian Ea­son

The state of Colorado for years has been run­ning afoul of state laws and the fed­eral tax code in its ad­min­is­tra­tion of a take-home ve­hi­cle pro­gram for pub­lic em­ploy­ees, a state au­dit has found.

As a re­sult, as many as 1,000 state em­ploy­ees who ben­e­fited from the pro­gram could be on the hook for back taxes and fines from the In­ter­nal Rev­enue Ser­vice, and the state also could face IRS penal­ties.

The re­port from the Of­fice of the State Au­di­tor was pre­sented to state law­mak­ers at a Mon­day meet­ing of the Leg­isla­tive Au­dit Com­mit­tee.

Un­der the pro­gram, state em­ploy­ees can take home a state car, as long as they meet cer­tain re­quire­ments: mainly, that the agency can show it’s an ef­fi­cient and cost-ef­fec­tive use of the state fleet.

But the au­dit found that in 2015 close to 90 per­cent of the $1.54 mil­lion the state spends on the pro­gram was for com­mut­ing that didn’t meet those re­quire­ments.

And the prob­lems don’t end there.

The IRS con­sid­ers com­mut­ing to be a per­sonal use of a state ve­hi­cle, mak­ing it a ben­e­fit that qual­i­fies as tax­able in­come.

But in hun­dreds of cases, the state ei­ther failed to with­hold fed­eral in­come taxes from em­ploy­ees who re­ceived the ben­e­fit, or with­held too much.

The au­dit iden­ti­fied “spe­cific con­cerns” in 327 cases, but said there was a risk that the state im­prop­erly re­ported tax­able ben­e­fits for vir­tu­ally every­one who took a car home.

In one case, the state un­der­re­ported the em­ploy­ees’ tax­able in­come by up­ward of $9,000.

The au­di­tors’ re­view cov­ered the year 2015, but state staffers ap­peared to be aware of the risks as early as 2009.

If ben­e­fits weren’t prop­erly re­ported, an in­ter­nal anal­y­sis said, “the in­di­vid­u­als in­volved would then owe back taxes to the IRS for mul­ti­ple years, and they would then likely sue the state for caus­ing them to break the law.”

Au­di­tors found that the state, too, could be sub­ject to IRS penal­ties.

Of­fi­cials with the Depart­ment of Per­son­nel and Ad­min­is­tra­tion, which over­sees the fleet, agreed to im­ple­ment the au­dit’s rec­om­men­da­tions.

Some of the prob­lems flagged by au­di­tors would re­quire a change to state law.

High­way con­struc­tion work­ers, law en­force­ment and avalanche fore­cast­ers were of­ten granted com­mut­ing ve­hi­cles to speed up re­sponse times in case of emer­gency, but pub­lic safety isn’t a valid rea­son for a take-home car un­der the law.

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