In hopes of avoiding substantial Internal Revenue Service penalties, SIUC officials have hired an outside tax consulting firm to correct withholding oversights made over the last several years.

The withholding oversights are the result of changes made to tax laws that started with the Tax Reform Act of 1986 and continued until last year. The changes have redefined the classification of student and faculty non-resident aliens.

According to the tax reforms, colleges are now responsible for withholding taxes from non-resident aliens who receive wages high enough to be taxed.

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Bert Harding, a partner with the Washington D.C.-based law firm Baker & McKenzie said the changes mean SIUC must pay back money to the IRS that it should have been withholding since the changes in the tax laws were enacted.

We are helping the University determine its liability, Harding said. We are also working with the IRS to make sure everything works out.

Harding said by SIUC taking the initiative and trying to work with the IRS, the University hopes to get a break from the government. Harding said SIUC is counting on the IRS to limit the fines the University could receive Dave Oehmke, SIUC’s assistant treasurer and assistant to the vice chancellor for financial affairs, said the law basically deals with the classification of international students and staff.

Oehmke said the University has taken steps to fix the problem and prevent it from happening again.

The rules are more stringent, Oehmke said. It’s a lot more complex than we anticipated.

We have hired a director of tax management and compliance, we have hired an outside tax adviser who specializes in international taxes and we are putting together policies and procedures to put a system in place, he said.

Harding said his firm has been representing a lot of colleges and universities, which are having the same problem as SIUC.

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Most schools have not been aware of this area and most are not in compliance with it, Harding said. The IRS was virtually unaware of it until the last year or two.

Oehmke said SIUC has been withholding some money from the non-resident alien’s taxes, but the complex law is difficult to understand and follow.

We could have the problem solved within six to eight months, he said. The system we put in place will prevent further problems.

In a memo to the College of Liberal Arts staff, students and faculty on Sept. 11, COLA Dean John Jackson estimated that SIUC would have to pay back $1 million to the IRS because of this law catching up with it.

SIUC President John Guyon said the amount has not yet been estimated and Oehmke said he does not think the $1 million estimate is accurate because the information has not been processed yet.

There are too many factors involved, Oehmke said. He said that some countries have tax shelters and the amount of wages non-resident aliens make are all different.