North Miami is facing a review by the Internal Revenue Service, which is examining four tax return periods from 2012 and requesting information about current and former employees and vendors that have worked for the city.
City Manager Aleem Ghany notified the acting mayor and City Council earlier this week that he and the city staff spoke with an IRS examiner about the documentation and rationale for some of the decisions made in the city’s returns. He also said a meeting had been scheduled for the IRS to discuss the returns with members of the city’s finance department.
Although cities do not pay income taxes, they do have to file returns for Social Security and other payroll taxes.
“Depending on the findings of his audit, the city may face potential fines if not compliant to the attached IRS requirements,” Ghany wrote in the memo to the council.
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Pam Solomon, the city’s spokeswoman, said that Ghany believes the IRS selected the city for examination at random and that the city is cooperating with the federal agency.
“Aleem’s goal is to provide as much of the information that they’re requesting by the time of the meeting,” Solomon said. “They have indicated and clarified to Aleem that it’s an initial review that could lead to an IRS audit.”
The IRS examiner requested documents including correspondence between the IRS and the city about payroll taxes, employee contracts in force during 2012, copies of all retirement-plan documents, a list of fringe benefits provided to employees and the city’s personnel, policy or procedure manuals.
The agency is also requesting year-end payroll summaries and accounts payable records for two employees who were apparently acting as independent contractors.
The city’s next meeting with the examiner is scheduled for Sept. 18. IRS spokesman Michael Dobzinski said the agency could not comment on an open investigation.
City Council member Carol Keys, who called earlier this year for a forensic audit of the city’s finances, said she is not surprised by the investigation.
“They just want clarification on certain matters and on matters that occurred in the year 2012,” Keys said. “Would I be surprised if there were irregularities? No.”