The Oneida Tribe of Indians is a sovereign tribal government occupying 102 square miles of land near Green Bay, Wisconsin. Like most federally recognized tribes, The Oneidas are exempt from local property taxes. A recent internal audit stemming from the tribe’s housing authority revealed the tribal government had improperly paid county property taxes for years. In some cases, the tribe both paid the tax and also made payments in lieu of taxes on the same property! The overpayment is estimated at over $1 million.
It’s rare to find tribal governments or businesses that pay taxes on the same property twice but overpayments, missed deductions and rate errors are commonplace. Often the error is only caught when the taxpayer conducts an internal audit.
Most publicly traded companies have an audit committee and use the self audit process not only to avoid tax overpayments but also to detect fraud, insure compliance with state and federal laws and insure proper financial accounting. Smaller businesses, unfortunately, often forego a regular internal audit. That can mean overpayments and potentially costly compliance problems in the future.
The Oneida Tribe says it is not asking for a refund of taxes already paid to the county. Going forward, however, they will not be paying taxes on property within the county. That could mean a revenue shortfall for the county and city or Green Bay, both of which occupy some of the tribe’s reservation. When private businesses overpay property taxes, it is often impossible to recover the money.
We share this story as a reminder of the importance of conducting a periodic internal audit. Company bookkeepers and accountants at small and medium business often spend much of their time preparing tax returns. Periodically, however, these businesses should bring in an outsider or a dedicated internal auditor to determine if the company is taking full advantage of all tax incentives and available credits.
In another recent internal audit story, the California Department of Forestry and Fire Protection learned that it wrongfully took $3.6 million in legal settlement monies. Those funds were supposed to go to the state’s general fund. Because internal controls at the agency were so poor, administrators cannot account for much of the equipment purchased with the money.
There is a difference between poor internal controls within a corporation versus a government agency. A proper internal audit can save both groups money, however.
The tax and IRS attorneys at Mahany & Ertl help businesses of every size pay the minimum of amount of tax owed. There is a clear line between tax reduction and tax evasion; our team can keep your business out of trouble, help you save money and avoid costly government tax audits and penalties. For a no obligation consultation, contact attorney Brian Mahany at or by telephone at (direct). All inquiries are protected by the attorney client privilege and kept in strict confidence.
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Posted by Brian Mahany, Esq.