Errors in payroll taxes have resulted in a whopping $1.7 Million fine for the Scarsdale School District, and its taxpayers. The news was released on March 30 at a school board meeting.
Underpayment of payroll taxes for staff in the Scarsdale School District during the 2020 and 2021 years, and penalties and interest from the IRS resulted in the Board agreeing to pay $843,558 for 2020 payroll taxes owed.
A memo from the Scarsdale schools reads, “Errors resulted in a late payment in the first quarter of 2020 and misallocating certain third and fourth quarter 2020 payments to the second and third quarters 2020, respectively. This series of events has resulted in penalties and interest being assessed against the District as well as a tax shortfall for the fourth quarter of 2020.” In addition, penalties have been assessed for an “unrelated” error in the second quarter of 2021.
The school district has requrested a refund for some of the penalties for both 2020 and 2021, as they are entitled to ask, now that they are cooperating with the IRS. If the IRS refuses, they can appeal in Federal court.
How did these costly errors occur? Nobody knows, and the school board nor the administration have given the taxpayers an answer.
Several questions include: when did they know about the million dollar error and when did the IRS notify the school district?
How did the school district’s auditors not flag this error?
The Superintendent of the Scarsdale Schools during this fiscal incompetence, Thomas Hagerman resigned.
At the last school board meeting, Assistant Superintendent for Business Stuart Mattay said, “We are in ongoing negotiations with the IRS and we have already met with our legal counsel. There is no timeframe for an IRS decision. We might not have a decision even in time for the 2023-24 school budget. The district has a right to appeal. The financial impact would be to our unreserved fund balance and will have no impact on our current budget. This will be a footnote in our financial statement.” He also noted that the $843,558 penalty payment for the first and third quarters of 2020 will be booked as an account receivable until such time a final determination is made by the IRS or the judicial system.
The residents and homeowners of Scarsdale pay the highest property taxes in Westchester and the country. For their large property tax bills, they are entitled to a quality education for their children, but also fiscal competency.
Not to mention the bad publicity that this episode have given to this quiet, upscale community.
