Once the error was identified in 2018, the school uploaded the required forms to the government portal in August of that year, attempting to correct the reporting oversight. Despite the corrective submission, the IRS subsequently issued a late-filing penalty totaling roughly $219,000, plus additional interest charges.
Schoolcraft argued that the filing failure was unintentional and resulted from reasonable administrative miscommunication rather than deliberate noncompliance. The college also contended that federal authorities did not provide an adequate opportunity to demonstrate reasonable cause before imposing the financial penalty.
Legal filings from the institution claimed that the IRS enforcement approach was unusually aggressive given the school’s public educational mission. The college asserted that a revenue officer assigned to the case concluded that reasonable cause did not exist, which the school disputed.
The government initially maintained that the college had failed to meet regulatory filing obligations and noted that the institution had experienced prior reporting issues. Federal lawyers argued that internal management problems within the payroll department contributed to the compliance failure.
