Porter County attorney Gwenn Rinkenberger is trying to buy some time in
resolving issues in an audit report on county expenditures that was
conducted over the past year by the Internal Revenue Service.
The federal agency sent a letter to Porter County auditor’s office earlier
this month asking that the county review four separate Notice of Proposed
Adjustment documents and report back as to whether or not they wish to
accept or protest the adjustments no later than this Sunday, Sept. 5.
Rinkenberger said she has asked the IRS to extend the deadline to Oct. 1 so
that the county commissioners can have time to review the documents,
investigate if necessary, and decide whether they agree to the agency’s
The decisions may include the County Council as well since the actions could
influence county budgets. The county has made no official decisions so far
in regards to what action it will take.
“We’re not down the road far enough to know how we are going to settle
this,” said county auditor James Kopp.
The county ended up calling on an outside tax attorney to help decipher what
is presented in the documents and what possible actions the county may take.
Rinkenberger will make a presentation to the commissioners soon, possibly at
their next meeting on Sept. 7.
Rinkenberger said the IRS has never conducted an audit of the county apart
from the annual audit by the State Board of Accounts in her 15 years as
She said the state has not made the same criticisms as the IRS, supporting
the notion the county had not been wrong in the way it has made its
payments. “We’re going to look at the merit of their contentions,” she said.
The IRS had no comment as to whether audits have been done before citing
The audit is for years 2007, 2008 and 2009. The IRS stated in the documents
the issues to be resolved include reclassifying three persons hired as
contractors to county employees. The same is being urged for persons who
hold subcontracts with the county such as police/sheriff fair security staff
and those who sit on county boards.
Also in question are county vendor agreements from 2007 whose backup
withholding for Total Reportable payments tallied up to $1,243,973 and
Another issue being looked at is the county allowing certain members of the
highway and street department, the sheriff’s police, and the Enhanced 911
department to use county take home vehicles which the IRS considers “fringe
benefits” -- property or services provided to an employee.
Rinkenberger said the commissioners a few years ago decided it would be
practical to limit the county vehicles to those individuals who are on call
all hours of the day.
Rinkenberger still feels the need to give the employees vehicles for
emergency situations and is willing to protest the contention that the
vehicles are fringe benefits.
“We felt it was part of their job requirement,” she said.
The listed total amount for the use of vehicles in all three departments
came to $30,579 in 2007, $33,429 in 2008, and $31,873 in 2009.
Kopp said the IRS would like to see use of those vehicles declared as income
on the tax forms belonging to those specific employees. The IRS is asking
the county to redo the W-2s for those three years.
Rinkenberger said the county changed its policy regarding fringe benefit
vehicles by assessing the vehicles and putting it on employee’s W-2s. She
said the auditor has in fact corrected most of what the IRS has objected to
during the past year.
“Most of the issues in that report don’t exist now,” she said. “We’re going
to be (talking) about past practices, not current practices.”
The IRS has suggested the county start using W-2 tax forms for nearly all of
those who are on contract instead of 1099MISC tax forms generally issued for
The county generally issued Form 1099MISC for any payments to board members
or fair security that exceeded $600 because this is the way it has always
been done, the documents said. Some fair security workers were already
employees of the sheriff’s department and received W-2 forms.
Rinkenberger said the county either has or is in the process of
reclassifying the three contractors as employees: Deputy Prosecutor Bruce
Dumas, Memorial Opera House Facilities Director Brian Schafer, and Emergency
Response Coordinator Eric Kurtz.
Kurtz had already been signed on as a legitimate contractor after 2007,
correcting the problem. The county council earlier this year approved
arrangements for both Dumas and Schafer to be classified as county employees
instead of contractors.
Schafer also doubles as the manager of the Porter County Expo creating a
position that is essentially full time. Dumas worked as a part-time deputy
prosecutor for child support cases since returning to Porter County in 2004
after working briefly in St. Joseph County. It was reported by the
prosecutor’s office that Dumas retired recently.
The amounts for the reclassified workers indicated in the documents are
$155,096 for 2007 (including Kurtz), $104,591 for 2008 and $96,350 for 2009.
Even though the county has recently complied with paying board and
commission members through W-2s instead of 1099s, Rinkenberger said she did
not agree to the change because considering them as employees of the county
brings up the issue of liability.
Those who sign on as an independent contractor are not entitled to benefits
provided to county employees. Members of some county boards are paid $50 per
meeting. Others, including the Visitor Commission and Park Board, serve
The county has already made the effort to fix the issue with the vendors.
Kopp said he sent forms W-9 and 4669 to those who had not correctly filled
out those forms for 2007 and asked them to refile.
He said about half of the vendors have responded. He said he was going to
cut off payments to the vendors until they can provide the documentation.
The vendor issue is not expected to happen again because the vendors now
properly receive a Form 1099 from the county.
Rinkenberger told the Tribune she does not expect any charges of
wrongdoing against anyone in the county as a result of the audit.
It has not been determined yet if penalties will be issued.
Rinkenberger said her biggest hope is that the employees won’t have to amend
their tax returns from previous years.
Kopp said he is willing to pay the interest but hopes to get the penalties
removed. He said he would like to see the issues be resolved by the end of
this year when his term expires and not have to place the burden on the
shoulders of his successor.
“We’re pretty protected now,” he said. “It’s easier to try and do more now
than make it go away.”
Porter County Commissioner President Robert Harper, D-Center, although
admitting he had not yet examined the documents, pointed out that Porter
County is not the only county in the state to be delivered notices from the
IRS. He said the IRS has also been auditing a few local municipalities as