IRS vs. Oxford American | Arkansas Blog

Thursday, February 19, 2009

IRS vs. Oxford American

Posted By on Thu, Feb 19, 2009 at 11:29 AM

I just got a letter from my former colleague, Warwick Sabin, whose current duties include being publisher of the Oxford American, the Southern lit magazine based at UCA.

The letter describes the magazine's shaky future on the account of the IRS' insistence for prompt payment in full of a tax debt, among the wreckage left by a former bookkeeper's alleged embezzlement. On the jump, Warwick lays out the case. Sure he mentions that the IRS is now overseen by a former tax cheat who you might say got a little forbearance from the government. It might be if the Faulkner County prosecutor would get off the dime and prosecute the embezzler, a restitution plan could be worked out to help ease the OA's problems.

Publisher, The Oxford American magazine

Would the IRS bankrupt a non-profit organization that was the victim of a high-profile embezzlement?  Simply to seize $31,000?

That is the question facing The Oxford American magazine, the critically acclaimed Southern literary publication that finds itself in a situation worthy of Kafka.


The Oxford American, a 501(c)(3) non-profit organization, was the victim of an embezzlement by its office manager that was discovered in January 2008.  This person stole over $100,000, mainly by writing checks on the books to creditors but never mailing them, and then writing checks off the books to herself for the same amounts, so that the accounts would balance.

As part of this scheme, she also never mailed the checks to the state and federal tax authorities, including the payroll taxes.  So besides emptying the OA's bank accounts, she left the magazine in debt to its many creditors, including about $57,000 owed to the IRS.

After I was appointed publisher of the OA in April 2008 to straighten out its business operations (a position for which I accept no compensation), we began contacting our creditors in a good faith attempt to resolve the debts.  The tax debt to the state of Arkansas was easily disposed.  But the IRS was unresponsive for months, despite weekly phone calls placed from the OA.

When the IRS finally responded, the OA made clear that it wanted to initiate an installment plan as soon as possible, so that it could begin repaying its debt.  The IRS said it would not consider an installment plan until the OA paid its full "trust fund" balance of about $31,000, representing the portion of payroll taxes directed to the Social Security and Medicare trust funds.

That amount represents the entirety of the OA's cash-on-hand at any given moment.  If the magazine sent that money to the IRS, it would not be able to pay its employees, its writers, its vendors, or any other creditors.  In other words, it would have to cease its operations.

I've met personally with the IRS to explain this.  We have provided all of the OA's financial records and any other information that has been requested.  Most recently, U.S. Rep. Vic Snyder's office has intervened with the IRS Taxpayer Advocacy Service to make the case in our behalf.  Still, the IRS wants its $31,000, and it looks like it would effectively bankrupt the OA to get it.

The OA understands that it owes money to the IRS, and we are not trying to avoid paying it.  We are simply asking for a reasonable payment plan.


The most frustrating aspect of this situation is the willingness of the IRS to punish an organization for being the victim of a crime.

Since the embezzlement was uncovered, the OA has paid all of its current taxes and indicated its willingness to resolve the debt.

Meanwhile, the former office manager is still free on $15,000 bail.  She has not been prosecuted yet, because the court is still awaiting the results of a "mental evaluation" that was requested in March 2008, almost one year ago.  How long does it take to conduct a mental evaluation?  (In another unbelievable twist, an Arkansas newspaper reported that this woman is attending a local college, where she has been elected secretary of the student government.)

So the OA is victimized by a thief, demonstrates its intention to make things right with its creditors to the best of its ability, and the IRS makes unrealistic demands while the thief is under no pressure whatsoever?

All this while the IRS is under the supervision of the U.S. Secretary of the Treasury, who recently was confirmed despite having evaded paying thousands of dollars worth of ... Social Security and Medicare taxes?

All this while the U.S. government is supposedly trying to stimulate the economy by preserving and creating jobs?


The Oxford American, which has been billed as "The Southern Magazine of Good Writing," and "The New Yorker of the South," has won two National Magazine Awards and other high honors since it began publication in 1992. Its pages have featured original work by William Faulkner, Eudora Welty, Walker Percy, James Agee, John Grisham, John Updike, Roy Blount, Susan Sontag, Steve Martin, Charles Portis, William F. Buckley, Carson McCullers, William Eggleston, Zora Neale Hurston, and many other distinguished authors and artists, while also discovering and launching the most promising writers in the region. The New York Times recently stated that The Oxford American "may be the liveliest literary magazine in America."

In the aftermath of the embezzlement, the OA rebounded with four well-received issues, including the most recent 10th anniversary Southern Music Issue, which has received national and international acclaim.  The next edition, which will be a provocative exploration of Race in the South, will be released at the end of this month.

Other signs of progress during the last few months include an increase in subscribers (from 17,000 to 18,900), an increase in overall circulation and newsstand sales, the OA's first-ever grant from the National Endowment for the Arts, and more efficient business operations.

But all of this progress could be lost if the IRS persists in demanding the $31,000 trust fund balance in one lump sum payment.

In addition to its eight employees, the OA supports hundreds of writers, artists, photographers, poets, and designers, all of whom would suffer further if the magazine had to cease its operations during this difficult economic climate.

Also, the OA is located on the campus of the University of Central Arkansas, a public institution where students are offered unique internship and work-study opportunities at a world-class magazine -- the kind of experiences that would be coveted in publishing meccas like New York City.

Does the IRS need $31,000 so badly that it is willing to bankrupt a celebrated non-profit magazine to get it?

And was the IRS telling the truth when it recently announced these measures?

IRS may go easier on taxpayers with hardships

IRS softens measures against taxpayers in hardship

If so, the message clearly has not filtered down to the employees dealing with our case.


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