North Miami - NMB

North Miami meets with IRS to discuss payroll taxes

North Miami officials met with an investigator from the Internal Revenue Service Friday to discuss the agency’s review of four of the city’s 2012 payroll tax returns. The initial meeting did not prompt any action or fines and was described as positive by city staff.

City Manager Aleem Ghany said that while the city was selected at random for the review, which requested information about current and former employees and vendors that have worked for the city, there were other neighboring municipalities that were also selected for review.

“It’s basically to make sure the city is up to date with all the IRS laws and regulations,” Ghany said. “The majority of the stuff on that list is basically compliance issues.”

The IRS examiner requested documents including correspondence between the agency 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 IRS is also requesting year-end payroll summaries and accounts payable records for two employees who were apparently acting as independent contractors.

Although cities do not pay income taxes, they do have to file returns for Social Security and other payroll taxes.

City spokeswoman Pam Solomon said the meeting was not “antagonistic” and there will be additional meetings to determine what steps the city will need to take. The meeting did not prompt any fines, but Ghany said if there’s any change he will prepare a budget amendment.

The IRS investigation was initially brought to the City Council’s attention earlier this month when Ghany notified the elected officials about his initial conversation with the IRS examiner about the selected documents and some of the decisions made in the city’s returns.

“My accountants are very confident with the info and all the backup information we’ve provided,” Ghany said. “There might be two or three areas on there that might be gray areas.”