Lenoir County Schools failed to meet tax guidelines on supplemental pay

For the past seven years, Lenoir County Schools incorrectly processed its employee’s supplemental paychecks, failing to follow federal and state withholding requirements.

The Lenoir County Board of Education approved a motion Tuesday to allow Lenoir County Schools finance director Lisa Davis to make changes to the district’s supplemental tax withholding policy to comply with the law.

Lenoir County Schools Superintendent Terry Cline said the school district could have faced fines from state or federal authorities if the withholding policy hadn’t been revised. Cline commended Davis for discovering the school district’s error and for making the adjustments necessary with the supplemental tax withholding’s policy.

“We want to be fiscally responsible,” Cline said. “It’s something we had to do.”

According to Davis, the state Department of Public Instruction sent a memorandum to superintendents statewide in January 2002 about how to proceed with federal and state withholding requirements on supplemental pay.

Davis said she recently discovered that Lenoir County Schools had failed to meet the state and federal guidelines.

“We attempted to make the correction in September by using the method of combining regular and supplemental wages to compute taxes and this drastically impacted the employees who received a longevity check mid-month and their regular check at the end of the month,” Davis said. “We received several complaints and calls concerning this issue.”

After further discussion, Davis decided that employees’ supplemental and regular wages should be added together for the month and let the tax withholding be figured as if the total were a single payment.

Her approved plan subtracts the tax already withheld from regular wages and withholds the remaining tax from the supplemental wages. The school board unanimously approved Davis’ new plan, which now meets state and federal guidelines. She offered two options for the school board’s consideration.

“No matter which option we use, either option is going to take out more taxes than what has been taken out in the past on employees’ supplemental wages,” Davis said. “I just want to make sure we are correctly following guidelines.”

Davis said the school district doesn’t expect to be fined during the future for failing to meet the tax withholding guidelines for supplements. Employees also shouldn’t see any fallout from the mistake, according to Davis.

According to Davis, teachers who received annual supplements didn’t pay as much in taxes as they should have since 2002. The amount of supplement pay distributed to teachers is based on each teacher’s experience.

Davis said supplement pay isn’t bonus pay for employees. Supplements are provided to employees in addition to their regular pay.

Chris Lavender can be reached at 252-559-1078 or clavender@freedomenc.com.