Orem official hasn't repaid lien

OREM — In May 2004, the Internal Revenue Service issued a $126,613 tax penalty on Orem City Councilman Stephen Sandstrom for not paying employee withholding taxes. Two years later, the business owner, who is running for a seat in the Utah Legislature, hasn't paid the full debt, and he said he doesn't know where all the money went.

"I guess that's the big question," Sandstrom said. "I don't know if that went to pay other bills. I didn't know it hadn't been used to pay (some of the) taxes. It was hard to prove (where it went)."

Sandstrom blames the expensive mistake on a bookkeeper who filed erroneous employee payroll tax reports. Sandstrom said he didn't find out about the errors for years.

Sandstrom, who is challenging Rep. Jim Ferrin, R-Orem, for House District 58 in the June 27 Republican primary, refused to name the woman he fired or provide copies of tax documents from the years in question.

This tax issue, which has been chatted about in political circles for the past few weeks, has become a campaign issue for Ferrin, who said he doesn't want someone who is irresponsible in personal dealings to be making financial decisions for a state government.

For three years — 11 tax quarters from 2000 to 2002 — Sandstrom's self-titled architectural firm failed to pay the full tax amount to the government.

During those years, he said, he didn't know anything was wrong, he just signed the forms his bookkeeper told him were correct.

According to IRS policy, a person can be responsible for the mistake even if there is no evil intent or bad motive. Plain indifference to the law is also sufficient, according to the agency's Web site.

As an employer, Sandstrom is required to withhold federal taxes such as FICA and Medicaid from his employees' checks. Each quarter, those funds are then sent to the government with Sandstrom's matching employer donation.

"These taxes are called trust-fund taxes because you actually hold the employee's money in trust until you make a federal tax deposit in that amount," according to the IRS Web site.

Because of that position of trust, there's an extra penalty assessed when people don't pay them — The Trust Fund Recovery Penalty (TFRP).

If the IRS discovers the taxes haven't been paid, a series of three computer-generated reminders are sent to the business.