United Press International said Friday that it failed to pay $1.77 million in payroll taxes to the Internal Revenue Service in the fourth quarter last year -- the same period in which it posted its first quarterly profit in 20 years.

The troubled wire service said it has arranged with the IRS to pay off the delinquent tax bill and said it is up-to-date on its current payroll tax payments.

A UPI spokesman said the failure to pay the taxes did not mean that the company did not make the $1.1 million profit it reported in the quarter. Instead, he said, it merely represented a cash-flow problem during the quarter that was transferred into later periods.

"It's simply accounting, it's not cooking the books," said the spokesman, David Wickenden. He said the $1.77 million payroll tax bill had been included in the accounting assumptions that produced the $1.1 million profit, and -- as a result -- there is no need to restate the quarter's results. "It's an accurate statement of that quarter," Wickenden said.

UPI turned the profit in the fourth quarter after slashing staff salaries and reducing other expenses. Those efforts bolstered the company's cash flow, Wickenden said, leading creditors to demand repayment of longstanding bills. He said the demands on the cash from creditors left UPI without enough money to make its quarterly payment to the IRS. "It's just that the cash was not forthcoming from UPI to the IRS," Wickenden said.

The newly agreed-upon schedule to repay the IRS is secured by a lien against UPI by the IRS, Wickenden said. He would not give any other details of the lien.

UPI also said that it was negotiating with its creditors for a recapitalization plan that will allow it to begin repaying its other debts and that other creditors knew about the IRS situation and the IRS's lien and that IRS officials had sat in on some of the creditors negotiations.

In a related development, UPI said it had asked a brokerage house representing principal owners Douglas Ruhe and William Geissler to stop soliciting buyers for Ruhe and Geissler's 83 percent stake in UPI.

The owners and UPI's management got into a dispute earlier this month when it was learned that Ruhe and Geissler were trying to sell their UPI shares without approval of UPI's board, as required by an agreement that bailed out the wire service last month.

Under that agreement, Ruhe and Geissler's ownership stake is to be greatly reduced and replaced by ownership by the company's creditors, managers, employes and new investors. Wickenden said the brokerage house has apparently stopped soliciting buyers for the stock in the wake of the wire service's strongly worded request.