Officials’ Perks Ruled Taxable in Grafton Township

An IRS finding handed down January 31st will surely be the talk of the next meeting of the Township Officials of Illinois.

Use of Grafton Township Road Commissioner Jack Freund’s truck has been ruled taxable by IRS.

It says that heretofore fringe benefits, such as the Grafton Road Commissioner’s vehicle and the reimbursement for dinners at the McHenry County Council of Governments, are income for Federal tax purposes.

And, since the state tax code is built upon the national one, probably subject to state income tax as well.

The Internal Revenue Service writes that Grafton Township owes the Federal government $2,030.36 for 2010 for income, Social Security and Medicare taxes.

“Fringe Benefit Issues” is what the Internal Revenue Service investigator was looking at.

A topic subject to a tirade by Trustee Gerry McMahnon at one of the last meetings I attended was the taxability of reimbursements for dinners at the McCOG. [I have to tell you, except for the volume of his voice, he seemed to be making sense.]

But the IRS Specialist disagreed.

The “audit,” for lack of a better term, specifically addressed this topic:

“In 2010, the elected officials and trustees of the Township received a stipend varying from $26 to $40 per month to attend monthly dinners for the McHenry County Council of Governments. The Township does not require these members to attend these meetings. The total amount of stipends issued to all officials and trustees was $1,300 for the year. These stipends were provided under a non-accountable plan.”

If I am interpreting the documents correctly, the Trustees, in toto, will owe taxes on an additional $729 because of the McCog dinner reimbursements.

Road Commissioner Jack Freund had similar $200 of non-accountable reimbursements, Supervisor Linda Moore $253 and Clerk Harriot Ford $118.

Freund was also cited for $3,125.70 which he received for “medical reimbursements made to the elected official. However, there was insufficient substantiation provided to receive reimbursement. Thus, the payment falls under a non-accountable plan.”

Freund was further cited for getting reimbursement for his spouse’s travel expenses. This included $120.56 for a number of meals, plus “a $35 spouse fee for the conference.”

Township Road Commissioner Jack Freund’s Ford F250 pickup truck was the subject of the final finding.

Purchased on December 8, 2010, “for the Road Commissioner’s use. The vehical was inspected by the Specialist and the vehicle is not deemed to fall into the category of a Qualified Nonpersonal Use Vehicle.

“There was no adequate substantiation of business uses v personal use of the vehicle.

“Therefore, the automobile lease value for this vehicle is $7,250 (see tables in Publication 158). As it was used for 23 days in 2010, the calculation is as follows:

  • Annual Lease Value = $7250
  • Days of Use in 2010 + 23.365
  • %7,250 X (23/365) = 456.85

Also targeted by the IRS were meals provided by Assessor Bill Ottley’s office when employees were not away overnight. Called “Day Meals” by IRS Examiner John Lauer, the reimbursements of those and non-overnight meals for Ottley and Moore totaling $369.28 have been deemed taxable.

Also mentioned are uniforms costing $480.01, but detail is not given regarding the employees affected. The report sys that “under an nonaccountable plan” are considered “wages and are treated as supplemental wages”…”reportable as wages on the employee’s Form W-2.”

“It as been determined by the FLSG Specialist that the taxpayer is wiling to correct all the above mentioned isues found during the examination,” one report concludes.

Implications for the 2011 tax year were not addressed in the report.

Linda Moore

“I was instructed to follow the precedent sent by the 2010 audit when amending the 2011 W-2’s,” Supervisor Moore said.

“All taxpayers know they that have to comply with IRS regulations.

“It’s important that township officials are IRS compliant, too, but I don’t look forward to delivering this bad news to my colleagues.”

It is not clear whether the elected officials will have to repay the township the cost of the fringe benefits targeted by IRS.

The State Constitution says that no elected official can earn no more or less than what was set before he or she was elected:

Illinois Constitution Article 7
Section 9 Salaries and Fees

(b)An increase or decrease in the salary of an elected officer of any unit of local government shall not take effect during the term for which that officer is elected.

Some of the documents can be found here.


Officials’ Perks Ruled Taxable in Grafton Township — 8 Comments

  1. I know of a couple of white Tahoe(s) that are used (for personal reasons) by an elected official. I wonder if he pays taxes based on his use of the vehicles.

    If I remember correctly there is documentation to show that the Tahoe(s) were used to go to Rhinelander Wisconsin.

    have also heard that road trips to Florida aren’t uncommon.

  2. All Public vehicles should be CLEARLY labeled to ensure that taxpayers know that they are public vehicles!

  3. Please remove the close-up picture of that mug, I can’t stomach it!

  4. I understand why SOME employees should be driving municipal or township vehicles home if they are “on call”. In some cases, it can reduce the response time for municipal services.

    I wonder if ALL of the local government employees that drive OUR vehicles to and from work are paying taxes on that “benefit”.

    The taxpayers are again paying for this benefit regardless if the employee is “on call” or not. With high gas prices this is a great perk.

    From the IRS:

    If an employer-provided vehicle is used for both business and personal purposes, substantiated business use is not taxable to the employee (see Substantiation Requirements, below). Personal use is taxable to the employee as wages. The employer can choose to include all use as wages; in this case, the employee may pay the employer for personal use rather than having it treated as wages.
    Reg. § 1.61-21(c)

    It seems like there was something in the NWH about this perk a while ago but like most things in government, nothing changes!

  5. Glad Linda had so much time on her hands to research all of this with the IRS. Time for this, yet still NO audit of the townships books. Interesting. Makes you go “Hummm.”

    In addition to redoing all of Grafton’s W-2’s, Will Linda be redoing her own? I have seen Linda driving the GA vehicle around town. I have seen the GA vehicle at Linda’s home. Linda attends MCGO dinners. What’s good for the goose is good for the gander, after all. Interesting.

  6. Ditto on taking that picture off!

    Who is this IRS guy? A friend of Linda Moore’s.

    Maybe you should check the facts, other than Linda Moore’s ramblings.

    I cannot believe you continue to be so one sided after all that has transpired at Grafton.

  7. Cal, could you please remove that picture of Linda and add a picture of the Grafton General Assistance van? With so few Grafton residents being served by GA, why the need for a van? Should that vehicle be used personally or driven by her daughter (who is not a GA employee). If a family member got into an accident while driving the GA van, would township insurance cover any claims?

    Wow, township employees will now have to pay taxes on the uniforms that they wear on the job. Will there be any tax savings because of this uniform issue for a taxpayer in Grafton? If so, how much? What would motivate Linda to go to the IRS with this stuff? Vendetta? I’m sorry, I don’t see this as a feather in Linda’s cap because of this issue. Remember all – half a million Grafton Taxpayer dollars spent on Linda’s lawsuits because she WON’T get along with anyone. One could say Linda wants to do everything by the book. If that’s the case, why no audit(s)? Will anyone go to a MCCOG gathering anymore?

  8. Next, I expect that we’ll be hearing about moore suing the IRS so that she doesn’t have to pay taxes on all her violations and added income.

    That ought to keep her legal meter dinging on her way to $650,000 by the end of 2012.

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