MADISON – The City of Madison owes up to $622,000 in federal taxes dating back to 2016, according to city officials who say that a state forensic audit is near completion.
Included in the tax debt are approximately $346,000 in federal income withholdings and another estimated $200,000 in FICA deductions that were never paid.
Because there is an ongoing forensic audit in place, Mayor Sonny Howell said he would not comment on specifics until he has the results in his hands.
"Once we were made aware of a potential problem, we acted fast and did everything we could to get to the truth," Howell said. "We don't have all of the answers yet but with the completion of the forensic audit we'll have a much more clear picture of what has happened and why."
Officials confirmed that the Internal Revenue Service has placed liens on all properties owned by the City of Madison and there is no indication whether those liens will be lifted to facilitate the possibility of bank loans for the city, which they would seek for the sake of combining and paying the tax debts.
The City became aware that there was a potential problem in October of 2017 when City Manager and Police Chief Chet Burgess found a piece of mail in the office that led him to believe that the city had problems regarding State of West Virginia taxes, which have since been resolved, according to officials.
Through that investigation, in May of 2018 it was discovered that the city was in arrears in some capacity with federal taxes, as well.
According to officials, notices were sent from the IRS but they weren’t delivered to the hands of Recorder Randy Foxx, Mayor Howell or the City Council.
Prior to the state audit, the city hired an independent auditor to comb financial records with that process ending in December 2019.
The city has no indication what penalties and interest they are on the hook for but will have specific figures in the coming weeks. Officials say that cumulative debt could meet or exceed $1.3 million. The city hopes that swift action can avert a large portion of those penalties and interest.
Councilman Buddy Hudson expressed a desire for transparency within the city government.
“The council wants to be transparent regarding the audit findings,” he said on Thursday evening. “Currently, we don’t know what the auditor’s findings are. We self-reported our findings once we were made aware of the discrepancies and we’ve cooperated fully with both state and federal agencies. We look forward to understanding the complete magnitude of those findings very soon.”
On Jan. 7, the city extended a lump sum total to the IRS of $230,000 with details of any payment schedule unavailable at this time with officials stating that when that schedule is secured, the details will be provided to the public.
Charleston-based firm Kay, Casto & Chaney was retained by the City of Madison in recent months to represent them in the matter. Beyond the state auditor’s office, an internal investigation is still ongoing.
Reporter Phil Perry can be reached at email@example.com or at 304-307-2401.