IRS Retirement Distribution Letters

Dear Great Falls Public Schools Employees and Retirees,

First, if you are currently working for us or you have retired from GFPS let me say thank you for your service to the children and the staff of this school district. Secondly, if you have received a letter from the IRS regarding possible inaccurate withholdings during a previous tax year, I would like to apologize to you for any inconvenience or angst that you may have experienced as a result of the “IRS Letter”.  Recently, my wife and I also received one of those letters, so I understand the feeling of frustration and confusion.

If you have received a letter from the IRS and have not already done so, please come in and see Katie Allen in the GFPS Payroll Department. She will provide you with a letter from the School District to be sent to the IRS. The letter indicates the School District did not issue the 1099-R forms.

In working with a Local Tax Advocate who has the ability to deal directly with the IRS, it has been determined that the letters being sent out to our current and former employees was the result of an incorrect file being sent to the IRS from the District.  This eliminates the possibility of an outside hack or breech of our information.   The District is completing a thorough investigation as to how this happened so we can put safeguards in place to prevent it from happening again.  The Tax Advocate will also work with any employees who face unresolved issues related to the 1099-R submission.  If you have individual issues to address, you may contact the Local Tax Advocate at the following:

Karen L. Alvear
Local Taxpayer Advocate – Montana
Phone:  406-444-8612
Email: Karen.L.Alvear@irs.gov

*The IRS Advocate is not allowed to respond by e-mail, but will contact individuals by phone.  In an e-mail message, please leave your phone number and the best time to call.


History and Background:
  In mid-April, the District Business Office became aware of letters that past and current employees had been receiving from the IRS.  The correspondence indicated that the employee who received the letter needed to pay additional taxes on a Retirement Distribution.  According to the information received, the District had paid the employees a Retirement Distribution.  Obviously, this was in error as GFPS cannot and did not pay out retirement benefits.  Only the Teachers’ Retirement System (TRS) or the Public Employees’ Retirement System (PERS) can create and issue the 1099-R Form.  We immediately contacted the IRS to make them aware of this situation.  The IRS indicated that they do not respond verbally to incidents of this nature, and the issue must be addressed in writing with a response to be expected within 30-45 days.  At that time, the IRS gave the District language for a letter to provide to our staff in response to this issue.  Also, at this juncture, we had no idea as to how the letters were being triggered.

By the end of May, the District was aware of a total of 23 letters that had been received.  With the expectation that the IRS would respond with a correction to the situation, the District waited for a response.  Toward the end of June, the number of letters being brought to our attention increased to 45.  The District continued to analyze the staff members who received the letters to determine if there was a pattern.  After receiving many more letters in July and no contact from the IRS, the District contacted the State Attorney General Tim Fox, Senator Jon Tester, Senator Steve Daines, and Congressman Greg Gianforte for assistance.  Through this correspondence, the District was able to make contact with an IRS Tax Advocate for Montana. With the Tax Advocate involved, the District was able to get the count of people who received the letter and from there was able to identify how this might have occurred. We contacted the advocate who confirmed that the people who received the letter were employees who received a W-2 in 2012.

In further discussions with the Tax Advocate during the week of August 12, 2019, the IRS has been able to stop the automatic generation of letters to the remaining staff who have not yet received them.  There may still be some in the pipeline that will be sent out.  The advocate also indicated that by receiving one of the letters, it will not, by itself, flag the person for additional scrutiny in future tax years.  Also, if one of our employees made payments to the IRS, they can contact the District so the Tax Advocate can work with them to get this money recovered.

Here is what we know: The District Data System Has Not Been “Hacked”.   In 2018, the District Data Office inadvertently submitted to the IRS a file of employees who had received a W-2 in the 2012 tax year. The IRS incorrectly processed this as a 1099-R file submission which then generated a list of GFPS employees with erroneous retirement earnings information. That triggered the generation of a letter to those employees on the list, referencing this erroneous information.  Like me, if you received this letter, you were probably very confused.

You may ask why the District did not send out some type of notice to all employees warning them that they may be receiving this IRS letter and what to do if they received one. We did not feel that it was prudent to send a letter to employees that had vague or inaccurate information about this situation. The District posted information on the GFPS website in early July informing employees to contact the Business Office if they had received a letter from the IRS.   We found out this past week exactly who was on the list to receive the IRS letter. There were over 2000 employees listed. It appears that around 600 current or previous employees may have received the letter. Now that we know exactly what happened, we are notifying all of our employees, past and present, what has transpired.

I appreciate the patience and hard work of our Human Resources and Business Office staff who have helped our employees and retirees through the process of responding to the IRS letter. We would like to thank the Teachers’ Union for working with the District to inform employees earlier this summer, as well.  In addition, to all of you who have worked through this with our Business Office, thank you for your time and patience.

Again,  If you have received a letter and have not yet responded, please come in and see Katie Allen, Lead Payroll Technician, or call her at 268- 6064 for information on the correct response.

Sincerely,
Tom Moore, Supt. of Schools