I-Team 8: Overpaid tax, unpaid refunds

INDIANAPOLIS (WISH) - First, the state of Indiana found $320 million of misplaced money. Then it found $206 million more. And the latest goof: State money managers learned they had paid some Indiana counties too much while giving others too little. Now I-Team 8 has discovered the state likely owes taxpayers money and isn't telling them.

When I-Team 8 interviewed state field auditor Cathy Luff, she acknowledged that she was putting her career at risk by talking to us.

"This isn't about me," she said, quietly. "It's about how could I live with myself knowing that we are cheating honest people? I couldn't. It's wrong for us to keep money that doesn't belong to us."

Luff was referring to tax dollars -- money she says the state should give back.

"I think it’s immoral and unethical that we are keeping money that we know does not belong to us. We're keeping money that we know employers paid in error, and the error, although they made it, was caused by the confusion that was created that year," Luff said.

That year was 2010. And the confusion was created during the legislative session. That year, businesses were facing a hike in their payroll taxes - taxes employers pay on the salaries of each of their employees. But in March, on the last day of the session, legislators voted to delay the tax hike for one year.

Some employers - like Andy Mohr Chevrolet in Plainfield - had already paid the higher rate that quarter. Erik Spersrud is Mohr's operations manager and once ran the Chevrolet store in Plainfield.

I-Team 8 learned that the Chevrolet store was owed a refund of $2,045.99. We were the first to tell Spersrud.

"Oh that's great! That's great!" he said.

According to Luff, Andy Mohr Chevrolet in Plainfield is likely one of many.

• CLAIM YOUR REFUND | Think you're owed money? Here's the form you need to submit

"Whenever we would audit those people, we would give them a credit for what they overpaid,” she said And my concern became we only audit 2 percent of employers every year. What about the other 98 percent? Are we going to give their money back?"

I-Team 8 checked the state's revenue for the first quarter 2009 and 2010. We found that the state took in millions more in 2010 than the year before, despite the fact that payrolls and unemployment were virtually flat. And according to Luff, DWD has made no effort to inform taxpayers - a fact that troubles her.

Luff estimated conservatively that 15 percent of employers overpaid. She took the issue to her boss.

"He said: 'I know. There's nothing we can do about it,'" Luff said.

So she took the matter to the chief financial officer of the Department of Workforce Development, Randy Gillespie.

"He told me that he would get back to me about the issues that I've raised, but he has not," Luff said.

So I-Team 8 took the matter to Gillespie. We asked him whether it is the state's responsibility to inform taxpayers that they overpaid when one considers the fact that the Legislature changed tax rates in March, just weeks shy of when taxes were due.

“It's not our responsibility to tell businesses how to go out and manage their business," Gillespie said.

He added that DWD informed the public of the law changes and the effective dates, satisfying its responsibility. But Spersrud, Andy Mohr's operations manager, disagrees. He believes the state should have told employers they had overpaid. I-Team 8 took the question to the top.

"Anybody who has overpaid or underpaid, we want to square up over time," said Gov. Mitch Daniels.

But if you want your money back, you must call them. When it comes to your refund, they're not calling you.

The Department of Workforce Development has a new spokesperson. His name is Joe Frank. I-Team 8 sent five emails and left 10 voicemails, asking for the information the Department sent to the public informing taxpayers about the many changes in 2010. DWD has not responded to any or our requests.

Employers should check your records. The wage base in 2010 was $7,000. In 2011 it increased to $9,500. If you overpaid your payroll taxes, you need to file an employers contribution adjustment report .

For questions, you can call the Department of Workforce Development's Unemployment Insurance tax assistance at 1-800-437-9136.