The taxman taketh
Published 10:27 pm Thursday, June 30, 2011
Some school employees surprised by the bite
More than 2,000 teachers and other employees of the Suffolk Public School system received bonuses on Thursday, thanks to a surplus in tax collections by the city of Suffolk.
But at least some of those school employees thought they would be exempt from returning a portion of that money in taxes, and they kept administration officials busy Thursday afternoon explaining some of the intricacies of federal tax law.
When bonuses were deposited into bank accounts today, some school employees were surprised to see they received less than they were expecting.
As a result, Suffolk Public Schools’ finance office received calls from about 20 employees complaining that too much money had been taken out of their bonus checks, according to school officials.
The School Board voted on June 21 to award experience-based bonuses to all employees using a portion of a $4.1-million city revenue surplus.
The bonuses ranged from $520 to $1,240, depending on how many years the employee had been with the division.
But the announced bonuses were pre-tax figures, and the lower amounts prompted some phone calls.
Director of Finance Mike Brinkley said many of the employees were upset because a higher percentage of taxes had been charged to these bonuses than to those that were awarded in December.
Brinkley said the December bonuses were included in regular payroll checks and subject to the same taxes as the employees’ regular pay.
However, the new bonuses had to be given out as lump-sum amounts and were taxed at a flat rate, as per Internal Revenue Service guidelines.
School employees lost 36.4 percent of their bonus checks to taxes. Instead of $520, an employee who had been with the division for up to four years took home $330.
One SPS teacher assistant who called the Suffolk News-Herald said she was told the bonuses would be pre-tax and that she had prepared to use the $520 to pay her mortgage early.
“We expect to get what was offered to us,” she said.
In a June 20 memo to the employees about the bonuses, superintendent Deran Whitney made no mention of how the bonuses would be taxed.
Brinkley said he doesn’t know where employees heard the bonuses would not be taxed.
“All income is taxable,” he said. “They know taxes are going to come out. They are just surprised at the flat rate. Most of these people expect taxes to come out, but they didn’t expect that much taxes to come out.”
Once finance workers explained the flat rate to the employees, Brinkley said, they didn’t have any other complaints.