Western to pay $118,000 after IRS audit

June 25--Missouri Western State University will pay more than $100,000 in past-due taxes following a government audit that found tax compliance problems involving international faculty members and students.

The university made the announcement Thursday in response to an Internal Revenue Service audit, also called an "exam," that was launched last year. Western will pay $112,443 in back taxes from 2012 to 2014, with most of the sum related to issues with wages earned by international faculty and scholarships awarded to international students. In addition, Western will pay $6,400 in penalties for failing to file 1099 forms on 32 individuals or businesses that the university paid in the tax year 2012.

Dr. Cale Fessler, vice president for financial planning and administration, explained the situation to the university's Board of Governors during a finance committee meeting Thursday morning. He explained that while $118,000 was not a small amount of money, it represented about one-half on 1 percent of Western's federal tax burden during the three years covered by the audit.

"We certainly don't want to minimize that, but we do keep that in perspective with respect to what we're doing," Dr. Fessler said.

Dr. Fessler said the rules and treaties governing taxation of international residents were complex and frequently changing. With international enrollment growing from single-digits to hundreds in recent years, the surrounding tax issues became more complex.

"Understanding that nobody loves an IRS examination, we tried to view it as a learning experience," Dr. Fessler said. "It was an opportunity to find any issues that we might have had. We didn't anticipate any major issues and we didn't find any major issues, but we anticipated there would be some things found. We're happy to be able to address those, make corrections, and keep those in place going forward."

For example, the university has added new software to better identify international faculty and students and track any changes that affect taxation for citizens of other countries.

Last fall, the IRS randomly selected Missouri Western for an examination of its tax returns for 2012. The university agreed to expand the examination to cover 2013 and 2014 with a focus on international faculty and international student taxation as well as non-compensatory benefits, such as university housing and the use of vehicles donated to the university.

A representative of a CPA firm that worked with the university said the examination of tax records went smoothly and described Western as "trying hard to follow the rules."

In other news, the Board of Governors adopted a $53.5 million budget for the 2015-16 fiscal year, down from the current year's budget of about $54 million.

The board also approved a $13.7 million bond issue to fund construction at Spratt Stadium and to refinance a series of bonds from 2010.

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