IRS offers help; Federal tax personnel hand out advice

Author:
Updated:
Original:

NEW YORK -- Conflicts with tax collectors are becoming a fact of life for
many tribes as their wealth and economic activity expand, but the
relationship doesn't always have to be a hassle.

The Seminole Tribe of Florida is dodging a major fight over tax-exempt
bonds by refinancing a controversial issue, in a nearly half-billion-dollar
deal announced Sept. 25. The move sidesteps a budding controversy between
tribal governments and the Internal Revenue Service which is still growing
in California.

At the same time, another IRS unit, the Office of Indian Tribal
Governments, is trying to prevent unnecessary problems through consultation
and information. Its regional offices are now circulating a quarterly
newsletter, reminding tribal officers of IRS deadlines and passing on
important financial tips.

Here are some items gleaned from the latest issue:

CONSULTATION WITH THE TRIBES

Christie Jacobs, head of the Tribal Government Office, has put a great deal
of effort into developing a consultation policy to govern relations between
tribes and the IRS. Several years of meetings have produced a series of
proposals that could be a model for the entire federal bureaucracy. But,
Jacobs reports, the draft continues "to work through the clearance process
internally and with the Treasury Department."

In the meantime, she said, her office plans to go ahead with the
recommendation for "a minimum of four annual listening meetings." She said
to watch the OITG Web site, www.irs.gov/tribes, for the schedule of the
first meetings as well as for further news on the policy. (The Alaska
meeting will be held in Anchorage in connection with the BIA Providers
Conference, the Alaska OITG newsletter added. The BIA meeting is scheduled
for Nov. 29 -- 30.)

In addition, the office has replies from its annual customer satisfaction
survey of all federally recognized tribes. It plans to publish the results
on its Web site by Nov. 15. Jacobs said that tribal feedback helps to shape
her annual Work Plan.

Past surveys, she wrote, led to such improvements as "staffing increases,
creation of new educational products, and the redesign of the IRTG Web
site." An equally important area, she said, is the OITG's work to meet the
federal tax administration needs of tribes.

HOW TO AVOID MISMATCH PENALTIES

As an example of administrative help, the newsletter tells tribal casinos
how to avoid penalties on mismatch notices. These are notices that go out
when taxpayer identification on a required form doesn't match IRS or Social
Security records.

One such form is the W-2G, which reports big gambling payouts. Although
you'd think gamblers wouldn't mind the paperwork if they hit a big jackpot,
there's always a chance they would give wrong information. And in that
case, the casino could receive an IRS letter threatening penalties if they
don't find the payee to get the right ID number.

The IRS emphasizes, though, that this letter is a "proposal to assess
penalties." The IRS can waive the fine with "reasonable cause"; that is, if
the casino shows that it is acting responsibly to get the correct match. It
has to make an initial request for the winner's name, address and Taxpayer
Identification Number. If the IRS notifies that the information doesn't
match, the casino has to try to notify the winner by letter, telephone or
e-mail and send a W-9 form for the correction. But if these documented
efforts don't work, said the newsletter, the casino is off the hook.

The IRS gave the example of a two-year-old mismatch. If the casino calls
the customer's number and finds it is out of service, sends a letter and
gets it back marked "return to sender" and finds it hasn't had any further
contact with the customer, it "is not required to try and contact the payee
any further."

The W-2G form is generally required, by the way, if winnings -- minus the
wager -- are $600 or more, or at least 300 times the amount of the wager.
It's required for bingo prizes of $1,200 or more. The gambling withholding
rate is 25 percent, unless the customer does not furnish a TIN. Then the
withholding with backup goes to 28 percent.

AVOIDING A CONTRACTOR RIP-OFF

The Tribal Government Office also passes on some helpful advice on avoiding
losses to contractors who don't perform the services they've been paid for.
In many cases, said the IRS, the losses came from lack of adequate controls
in awarding or monitoring the contracts. It said that many tribes have
developed procedures with four key steps:

1) Solicitation of bids for statements of work;

2) Formal award of the contract by a duly designated tribal body;

3) Validation of work performed; and

4) A documented formal payment process.

Payments, it said, generally come from a different body than the one that
awards and monitors performance. The money goes out only after a
certificate validates that work is completed.

"While there is no guarantee that losses can be avoided," wrote the office,
"the creation of internal checks and balances within the process by the
tribe can help ensure that work is performed as required and that payment
is not made until the tribe is satisfied that the contract has been fully
performed."