CHATTANOOGA, Tenn. (AP) -- The Internal Revenue Service insists the Hamilton County School system must pay $650,000 dollars in penalties and interest for under-reporting payroll taxes.
The amount is much more than the 27-thousand dollars the schools failed to pay in the first three quarters of the 2006 calendar year.
School officials say they discovered a computer glitch that caused the under-reporting and they paid the taxes in January.
The IRS came back with a $944,000 bill for interest and penalties.
The school system filed an appeal the waive the bill in May, but found on August 9th the federal government was willing for forgive only part of the penalty.
Chief Financial Officer Tommy Kranz told the school board the error came in January 2006 when the computer payroll accounting system erroneously generated two payroll tax numbers. The district then based its calculations on the wrong number.
(Copyright 2007 by The Associated Press. All Rights Reserved.)