After W-2 mistakes, Rhode Island’s top union demands state reimburse any tax refiling fees

Tax Day has come and gone. 

But just before filings were due to the Internal Revenue Service and the state Division of Taxation, the Rhode Island AFL-CIO asked Gov. Dan McKee’s administration to reimburse public service workers who had to refile returns because of multiple W-2 errors by the state over the past two months.

AFL-CIO President Patrick Crowley made the demand a little after 2 p.m. Wednesday, noting many public workers across Rhode Island were “frustrated by the ongoing payroll problems.”

Those errors included mailing incorrect W-2 forms, sending out paperwork that may have exposed workers Social Security numbers, and Health Savings Account miscalculations reported just days before taxes were due.

McKee fires Department of Administration director after another payroll system debacle

“Our members shouldn’t pay for mistakes they didn’t make,” Crowley said in a statement.

Tax problems arose in February after W-2s were mailed with  “State of Rhode Island Umbrella Company” listed as the employer visible through the return address window.

The state mailed corrected tax forms at the end of February, but some may have had state employees’ Social Security numbers visible through the envelope. That mistake led to the firing of Jonathan Womer as head of the state’s Department of Administration (DOA) on March 6 and offer credit monitoring to all state employees.

Problems persisted in the post-Womer era. WPRI-12 reported in late March that the state was working to correct a “$220,000 payment error that resulted in 9,000 state workers receiving union dues rather than those funds going directly to their labor groups.” Then on April 6, the state admitted it miscalculated the data for state employees’ Health Savings Account contributions.

Each error was connected to the state’s new payroll system, part of the state’s new backend for numerous finance functions, the Enterprise Resource Planning (ERP) system. The large-scale software infrastructure upgrade finished its transformation late last year after a multi-year makeover that cost upwards of $90 million.

Rhode Island’s new ERP system already had its critics before the W-2 errors, as state employees had noted missing wages, benefits and other incorrect data caught in their pay stubs around the start of the year. 

The IRS can penalize employers for late or incorrect information on returns. The size of a penalty depends on how much time has passed since the original deadline. A correct filing within 30 days of the due date allows for a $60 penalty per W-2, up to a maximum of $698,500 per year in penalties. The penalty fee rises to $130 for forms filed more than 30 days post-deadline but before Aug. 1. That penalty maxes out at $2,095,500 per year.

Olivia DaRocha, a spokesperson for McKee’s office, told Rhode Island Current Thursday the governor’s team was aware of the AFL-CIO’s request for reimbursements to state employees.

“We’ve already begun working with DOA to look at possible strategies to support impacted employees and will continue to be in touch with RI AFL-CIO and union leadership as that work continues,” she said in an email.

Rhode Island Current requested the number of extension requests received by the Department of Revenue’s Division of Taxation by the April 15 deadline. Data was not immediately provided. 

Even if the data had been available, a breakdown of how many were sent by state employees would not be noted, Department of Revenue spokesperson Paul Grimaldi said.

“We cannot disclose taxpayer information,” Grimaldi said in an email.