Kentucky's Republican Senate Primary Takes An UGLY Turn, As Trey Grayson Files "Tax Evasion" Complaints Against Opponent Rand Paul. Read More Below.

Grayson files complaints claiming Paul evades taxes
By Joseph Gerth

Secretary of State Trey Grayson’s U.S. Senate campaign has filed a series of complaints alleging that the campaign of his chief Republican opponent is evading federal, state and local taxes.

The campaign said it sent letters to seven enforcement agencies, including the U.S. attorney’s office, the Internal Revenue Service, the Warren County Commonwealth’s Attorney’s office and the Kentucky Department of Revenue, claiming that Bowling Green ophthalmologist Rand Paul has not paid withholding taxes on campaign employees.

The campaign first raised the issue last week.

David Adams, Paul’s campaign manager, said the campaign has done nothing wrong.

“The weird thing about interpreting tax laws, you can put five CPAs in a room and they’ll come up with five different answers,” Adams said.

The Paul campaign classified its employees as “independent contractors” on the advice of a certified public accountant, according to Adams. He said listing the workers as independent contractors was “easier” than defining them as employees.

But William P. Malone, a Louisville CPA whose firm has advised both Democratic and Republican campaigns over the years, said it is virtually impossible for a campaign worker involved in day-to-day operations to meet IRS guidelines for an independent contractor.

Basically, the IRS rules say that if the employer has the ability to direct or supervise the work being done, the person hired must be considered an employee — and withholding taxes must be paid.

During 2009, the Paul campaign paid more than $75,000 in wages to five employees but nothing in withholding taxes.

The Grayson campaign said it has paid more than $30,000 in federal withholding taxes since the campaign began.

According to the letters of complaint, signed by Grayson campaign manager Nate Hodson, “we request a full investigation of the Paul campaign’s willful evasion of required tax payments.”