MADISON — The City of Madison owes up to $622,000 in federal taxes dating back to 2016, according to city officials who say a state forensic audit is nearing completion.
Included in the tax debt is approximately $346,000 in federal income withholding and another estimated $200,000 in FICA deductions that were never paid. The funds were supposed to have been withheld from the paychecks of the city’s 18 employees and forwarded to the IRS.
Ultimately, City Recorder Randy Foxx is responsible for payroll proceedings for the City of Madison; he oversees staff who directly handle payroll. The city recorder is an elected position
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 IRS 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 of a potential problem in October 2017, when City Manager and Police Chief Chet Burgess found a piece of mail in the office that led him to believe the city had problems regarding State of West Virginia taxes; those have since been resolved, according to officials, but in the course of that investigation, it was discovered in May 2018 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 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 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, but details of any payment schedule were not made available by press time. Officials said those details will be provided once that schedule is finalized.
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.