According to a Notice of Federal Tax Lien from the Internal Revenue Service, the Borough of Shenandoah was listed as the taxpayer for three unpaid Form 941 employment tax liabilities. The balances listed were $9,197.50 for the tax period ending December 31, 2021; $1,512.04 for the period ending June 30, 2022; and $10,492.06 for the period ending September 30, 2022. The three amounts total $21,201.60.
The IRS notice was prepared on May 1, 2024, and lists the Schuylkill County Prothonotary's Office in Pottsville as the place of filing.
Borough officials announced the discovery Friday as part of what they described as an ongoing review of historical financial practices.
Borough Says Taxes Were Withheld From Employees
According to the borough, its review has determined that federal payroll taxes were withheld from employee paychecks, but the corresponding federal tax obligations were not remitted to the IRS as required.
The current administration says it is now attempting to determine how the unpaid liabilities occurred, why they remained unresolved and what corrective action is necessary.
Officials also say they have been unable to locate borough records documenting correspondence concerning the unpaid taxes. The federal lien states that a demand for payment had been made and the liability remained unpaid.
The borough says it is contacting the IRS to obtain historical correspondence, notices and demands for payment. Officials plan to compare those records with borough payroll, financial and administrative records in an effort to determine what notices were received, who received them and what action was taken.
Borough Reviewing Who Was Responsible
The unpaid liabilities cover periods in 2021 and 2022.
According to the borough's historical review, Anthony Sajone was serving as Borough Manager during that timeframe. Gordon Slater served as Council President during the earlier portion of the period, followed by Catherine "Katie" Catizone in 2022. The borough also says former Borough Manager Joseph Palubinsky was assisting and training Sajone during the period.
Borough officials stressed that identifying those individuals establishes the administrative timeline and should not be interpreted as evidence that any particular person was responsible for the unpaid taxes.
The borough says its review is attempting to determine who was responsible for preparing, reviewing, authorizing and remitting the payroll taxes, as well as who received notices from the IRS and what actions were taken in response.
Council President Calls for Accountability
Council President Joe Boris said the borough is taking the discovery seriously and residents and employees deserve an explanation.
"Borough Council takes the discovery of these unpaid federal payroll taxes very seriously," Boris said. "Employees had taxes withheld from their paychecks with the expectation that those obligations were being properly paid to the federal government."
Boris said the current council intends to address the issue even though the liabilities originated years ago, including strengthening financial controls and increasing oversight of public funds.
Council supports efforts to obtain records from the IRS, work with the borough's accountants and determine what happened to the payroll taxes that were withheld, Boris said. He also said the borough would pursue possible recovery through insurance, bonds or other lawful means if available.
Information Forwarded to IRS Criminal Investigation
Borough Manager Mike Cadau said transparency is important as the administration works to determine what occurred.
"The concern is that payroll taxes were taken from employees' paychecks, but the corresponding federal tax obligations were not paid to the IRS," Cadau said. "The employees had every reason to believe that the taxes withheld from their wages were being properly remitted."
Cadau said the borough is working with accountants to determine the full scope of the matter and resolve outstanding obligations while attempting to reconstruct the history of the issue.
The borough also announced that information concerning the matter has been forwarded to IRS Criminal Investigation for an independent review.
Officials emphasized that forwarding the information does not establish that criminal wrongdoing occurred. Any determination about whether federal law was violated would be made by the appropriate federal authorities.
Part of Broader Financial Review
The tax issue is part of a larger review by the current administration into historical borough finances.
According to the borough, that review includes payroll records, workers' compensation practices, pension matters, unpaid invoices, insurance obligations, tax liabilities, authority-related transactions and other financial matters originating in prior years.
Officials are also examining whether historical financial losses could potentially be recovered through public-official bonds, fidelity coverage, crime insurance, Directors and Officers insurance or other applicable coverage.
"This administration did not create these historical obligations, but we have a responsibility to address them," Cadau said. "Our objective is to determine what happened, correct what can be corrected, recover taxpayer money wherever legally possible, strengthen our internal controls, and make sure these problems are not repeated."
Despite the discovery, borough officials say Shenandoah remains financially stable and continues investing in roads, infrastructure, public safety, blight elimination, parks, recreation and municipal facilities.
The borough says it will continue reviewing historical records and release additional information as facts are verified and can be made public without interfering with ongoing reviews or investigations.