Merry Christmas! Payroll error hurts

The Puyallup School District planned to tell its 2,600 employees in a letter late Monday that it didn’t withhold enough federal income tax from the paychecks of most workers from January through October, and many will have to pay back the difference.

The largest sum any employee owes is about $480, the district said. Some don’t owe anything.

The total amount that was under-collected is about $850,000, school district officials said.

The district won’t automatically deduct the amount from workers’ December paychecks; instead, it will cover the total shortage upfront and collect repayment from employees.

Workers can choose to have the full amount taken from their December or January paychecks, or deducted in installments from Jan. 30 through June 30 the district said.

“We apologize for and regret this terrible error,” said Superintendent Tony Apostle. “We stand accountable for making it right for every employee. We wish we had not experienced this human error – but it is just that, and human errors happen from time to time.”

Puyallup is Pierce County’s second-largest school district. An employee recently caught the mistake, which wasn’t obvious because the amount withheld isn’t a flat percentage but instead is based on workers’ taxable wages and W-4 information, according to information from the district.

WHY IT HAPPENED

The error happened because revised 2011 federal income tax withholding tables weren’t loaded into the district’s new software system, officials said.

The district switched to new financial software last fall, a move that was especially complicated for the payroll department, district officials said.

Last December, about 85 percent of the workforce was paid a day late for one paycheck because of a wrong date that was entered.

District officials said they’re conducting an internal investigation of the tax mistake to find out how it happened, and they are putting extra oversight in place so a similar error doesn’t happen again.

LETTERS GOING OUT

The Puyallup School Board has been notified. In addition to the group letter was scheduled to go out Monday night, another letter will be sent to individual workers with the amount – if any – they owe. Letters also will go to affected employees who retired or no longer work for the district.

Three question-and-answer sessions for employees also are scheduled with district payroll staff members in December.

The correct amounts now are being withheld, so employees may see a change in their net pay, officials said. They said employees’ 2011 W-2 forms will be correct.

“If we had not discovered this error now, employees would end up having a larger tax bill next April,” Corine Pennington, executive director of business services, wrote in the letter to employees.

“Because we discovered this error now, we are able to correct your W-2 tax reporting, we won’t have to deduct the tax shortage from your December check and we are able to allow employees the ability to have the tax payments taken out of their check over six months (next year).”

NEW JOB

Pennington recently took over the position. Her predecessor, John Knutson, left earlier this year; district officials said Monday his departure was unrelated to the payroll problems.

The district is required to collect federal income tax and can’t make up the difference itself because that would amount to an illegal gift of public funds, Puyallup officials said.

Neither the school board president nor the president of the Puyallup teachers union could be reached Monday for comment.

Sara Schilling: 253-552-7058 sara.schilling@thenews tribune.com blog.thenewstribune.com/street