LIMESTONE, Maine — The Internal Revenue Service is ordering Limestone to pay more than $50,000 in under and unpaid employment taxes and related penalties dating back to 2019 by Nov. 3.
According to letters the town received from the IRS on Oct. 10, the secretary of state has placed a tax lien on Limestone for $41,879, which covers under and unpaid employment taxes and related interest, penalties and late fees that accumulated between January 2019 and December 2022, said Interim Town Manager Alan Mulherin.
Also on October 10, the town received additional bills totaling $4,877 for underpayments, interest and penalties for November 2021 to January 2022; $972 for underpayments and $2,009 in penalties, fees and interest for January to March 2023 and $564 for late tax filings and related fees for April to June 2023.
In addition, the IRS made an adjustment for an alleged error in the town’s 2021 tax filings, for which the town owes $4,729, Mulherin said. Earlier this month, Limestone officials had thought the town only owed that amount until receiving further letters from the IRS on Oct. 10.
All together, Limestone’s total tax bill to $52,007, Mulherin said. If the town does not pay back all taxes, not including fees and penalties, by Nov. 3, it could be faced with another tax lien.
“We will be asking for an extension [of the Nov. 3 deadline] to see where we can come up with the money [to pay the $52,007],” Mulherin told the town’s select board Wednesday night.
The unexpected tax bill is the latest problem confronting the Aroostook County town of approximately 1,500 residents, which has experienced frequent turnover of town managers, budgetary irregularities and the disbanding of its police force in recent months.
Employment taxes involve withholding federal income tax, Social Security and Medicare taxes from employees’ paychecks. The town must make sure income tax withholding is paid to the IRS, and pay employer shares of Social Security and Medicare taxes.
Mulherin said he will also speak with IRS officials about the town getting a waiver for penalties and fees, which total $29,000.
If the IRS denies that waiver and the Nov. 3 deadline extension, town officials would need to hold a special town meeting so residents could approve paying the tax bill, fees and penalties from the town’s administrative budget, Mulherin said.
A previous town manager oversaw the payment of $50,000 in late and underpaid taxes, interests, penalties and fees for taxes spanning from 2015 to 2018, Mulherin stated.
Mulherin, who became interim town manager in August, was unsure exactly which town manager authorized that payment but said that Limestone’s frequent administrative turnover may have played a role in any errors. The town has had 13 town managers, including Mulherin and previous manager Alvin Lam, since 2015.
“We’re trying to reconcile the accounts and see if any payments should have been placed in a different tax quarter, and if it was the IRS or the town’s error,” Mulherin said. “There is $10,480 that was placed in the wrong quarter.”
The issues behind Limestone’s tax lien also seem to be affecting the town’s 2022 audit, which is still in progress, Mulherin said. The Buxton-based company RHR Smith has made numerous requests for town financial documents that current staff has not found. Auditors have also made note of payroll information from Limestone Community School that supposedly was submitted late.
Select board members stated Wednesday that the town should consider hiring a payroll company to submit the town and school’s information.
This year, former interim town manager Walt Elliot opted not to consider that option and instead focus more on training the town office’s two full-time clerks. But the clerks can only do so much on their own, said board member Irma Labreck.
“We need to look at hiring a payroll company. We cannot go on like this,” Labreck said.
Mulherin agreed to gather quotes from various payroll companies and present those to the select board in a future meeting.
