Cartwright told it faces about $2.1 million in IRS penalties dating to 2017 and 2023

Derek Ethridge, executive director of business services, told the Cartwright Elementary District governing board on Feb. 6 that the district faces roughly $2.1 million in penalties and fees owed to the Internal Revenue Service.

Ethridge said the largest portion — about $1.6 million — stems from a failure to furnish Form 1095 to employees for tax year 2017 and from not filing those forms with the IRS. He said a separate set of payroll-related errors tied to Form 941 filings produced roughly $500,000 in additional penalties, bringing the total to about $2,100,000. "Overall, the penalties and fees are about $2,100,000," Ethridge told the board.

Ethridge told the board the district has pursued legal counsel and appealed the larger 2017 penalty but the IRS denied the appeal; the transcript places the final denial in August 2020. He said the costs will be paid from the district's indirect cost fund, not from maintenance-and-operations dollars, and that the district has taken organizational steps — including hiring a payroll administrator and working with the Valley Schools Benefit Group and consultants — to prevent recurrence.

Board members asked clarifying questions about oversight. Ethridge said benefits administration historically sat with the human-resources function and that payroll is under his office; he acknowledged turnover in payroll staff after the longtime payroll specialist retired and said new staff and supervisory changes contributed to the filing errors.

Next steps recorded in the meeting include continued work with legal counsel, short-term payment planning from the indirect cost fund, and internal controls intended to ensure timely Forms 1095 and 941 filings going forward. The board indicated it wants follow-up financial reports and further detail at upcoming meetings.

The governing board heard the report during its Feb. 6 meeting and scheduled the next regular session for Feb. 20, 2025.