When former Gov. Roy L. Schneider and 36 of his administration stalwarts helped themselves to $383,000 in lump sum payments three weeks ago, they used an irregular procedure to dip into the territory's meager funds.
In his State of the Territory address Jan. 11, new Gov. Charles W. Turnbull charged the departing government employees with circumventing income tax and Social Security payments by using government Miscellaneous Disbursement Vouchers to hand themselves the lump-sum payments, which were for unused annual leave.
But a closer look at the circumstances points to another reason for utilizing the vouchers.
An employee leaving government service has the right to exchange unused leave for cash. Sources familiar with the procedures say this normally is carried out by cutting extra payroll checks for the claimants.
Income tax withholding and Social Security contributions are deducted from those checks and appear on the W-2 form used to report salary income to the Internal Revenue Bureau.
By using the Miscellaneous Disbursement Vouchers, Schneider and his colleagues might well end up owing the IRB more money than if they had gone the route of the familiar W-2 form, these sources maintained.
Miscellaneous income — with no deductions — is reported to the lRB on another record, Form 1099. People receiving 1099 forms are expected to pay not only the income tax on that money but also both parts of the Social Security tax—their employer's contribution as well as their own contribution.
Schneider and company must have known they were risking having to pay additional Social Security; their numbers included such experts as Management and Budget Director Nellon Bowry and Internal Revenue Director Joseph Aubain.
Why did they accept the risk?
The best answer seems to be that they knew that going the regular route — the payroll route — would mean a delay well into January for cutting those additional payroll checks. That would have put them at the mercy of a Turnbull Finance Department, which could well have decided that they should wait in line behind all those people owed all that money in income tax refunds.
Why wait in line, they must have reasoned? Why not use the Miscellaneous Disbursement Vouchers and jump the line? Grab the money and run. Worry about the IRB later.
Editor's note: Frank J. Jordan is a radio commentator, former UVI journalism professor and former NBC news executive.
