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School district paid $102,000 IRS penalty tied to missing 1095 electronic filing, will seek abatement
Summary
Administrators told the Arlington Public Schools board the district paid a $102,000 IRS penalty assessed for missing electronic filing of 1095 forms for 2020. The district says paper copies were distributed and has submitted documentation; legal counsel is drafting an abatement request.
The Arlington Public Schools board heard an update on a multiyear dispute with the Internal Revenue Service that culminated in a $102,000 payment this spring.
The matter stems from electronic filing of Form 1095 for tax year 2020. Dr. Morgan told trustees the penalty "was incurred in 2021 for our 2020 filings" after the district learned the IRS had no record of an electronic upload. Administrators said paper copies were printed and distributed to employees but IRS systems showed no confirmation of the online submission.
Board members and staff described a long, intermittent correspondence with the IRS and outside advisers. Jen, a district finance staff member responsible for the file submission, said the process has two steps: "You upload it, you get a confirmation, and then you have to go back and make sure that they approve it and take it." The district said it had evidence employees received paper copies but lacked a final IRS approval record.
Administrators said the initial assessment approached $180,000 before they were able to document distribution and secure reductions; the amount the district paid was $102,000. Legal counsel advised the district to pay by the IRS deadline to avoid enforced collection, the board was told, and staff will pursue an abatement to recover some of the assessed amounts.
Dr. Morgan said the payment came from the district’s general fund carryover and a "necessary cash reserve" line item. Trustees asked about internal controls and audit oversight; staff reported the auditor reviewed the records but that recordkeeping and the vendor/email trail for a prior bookkeeper remain incomplete. Dr. Morgan said counsel is preparing an abatement letter for submission to the IRS and that staff will share that letter with the board.
The board did not vote on further action during the meeting. Administrators said they will continue to pursue abatement and work with counsel and auditors to strengthen confirmation processes for federal filings.
