B-105872, OCTOBER 10, 1951, 31 COMP. GEN. 139

B-105872: Oct 10, 1951

Additional Materials:

Contact:

Edda Emmanuelli Perez
(202) 512-2853
EmmanuelliPerezE@gao.gov

 

Office of Public Affairs
(202) 512-4800
youngc1@gao.gov

TAXES - FEDERAL - SOCIAL SECURITY WITHHOLDING TAXES IN THE WITHHOLDING OF EMPLOYMENT TAXES FROM THE WAGES OF EMPLOYEES WHO ARE SUBJECT TO THE SOCIAL SECURITY ACT EACH GOVERNMENT AGENCY IS A "SEPARATE EMPLOYER" WITHIN THE PURVIEW OF THE INTERNAL REVENUE CODE. SO THAT AN EMPLOYEE WHO TRANSFERS FROM ONE DEPARTMENT TO ANOTHER IS SUBJECT TO THE MAXIMUM EMPLOYMENT TAX DEDUCTION IN HIS NEW POSITION. NOTWITHSTANDING THAT THE MAXIMUM AMOUNT WAS ALSO WITHHELD DURING THE CURRENT YEAR IN THE POSITION FROM WHICH HE TRANSFERRED. 1951: REFERENCE IS MADE TO YOUR LETTER OF SEPTEMBER 29. IT IS STATED. THE QUESTIONS WHICH YOU PRESENT ARE STATED AS FOLLOWS: 1. WAS IT PROPER TO INFORM MR. WAS IT PROPER TO INFORM HIM THAT A REFUND FOR ANY OVERDEDUCTION COULD BE OBTAINED BY HIM IF HE MADE CLAIM TO THE BUREAU OF INTERNAL REVENUE AT THE END OF THIS YEAR?

B-105872, OCTOBER 10, 1951, 31 COMP. GEN. 139

TAXES - FEDERAL - SOCIAL SECURITY WITHHOLDING TAXES IN THE WITHHOLDING OF EMPLOYMENT TAXES FROM THE WAGES OF EMPLOYEES WHO ARE SUBJECT TO THE SOCIAL SECURITY ACT EACH GOVERNMENT AGENCY IS A "SEPARATE EMPLOYER" WITHIN THE PURVIEW OF THE INTERNAL REVENUE CODE, SO THAT AN EMPLOYEE WHO TRANSFERS FROM ONE DEPARTMENT TO ANOTHER IS SUBJECT TO THE MAXIMUM EMPLOYMENT TAX DEDUCTION IN HIS NEW POSITION, NOTWITHSTANDING THAT THE MAXIMUM AMOUNT WAS ALSO WITHHELD DURING THE CURRENT YEAR IN THE POSITION FROM WHICH HE TRANSFERRED.

COMPTROLLER GENERAL WARREN TO JOHN N. LEEBRICK, DEPARTMENT OF COMMERCE, OCTOBER 10, 1951:

REFERENCE IS MADE TO YOUR LETTER OF SEPTEMBER 29, 1951, TRANSMITTING A PAY ROLL FOR PERSONAL SERVICES IN FAVOR OF G. WARREN MORGAN, AND REQUESTING MY DECISION UPON SEVERAL QUESTIONS IN CONNECTION THEREWITH.

IT IS STATED, IN EFFECT, THAT MR. MORGAN BECAME SUBJECT TO THE SOCIAL SECURITY ACT UPON APPOINTMENT IN THE NATIONAL PRODUCTION AUTHORITY, DEPARTMENT OF COMMERCE, EFFECTIVE SEPTEMBER 24, 1951, AS A LABOR REPRESENTATIVE, GS-14, $8,800 PER ANNUM, AND THAT MR. MORGAN HAS PROTESTED THE DEDUCTION OF THE EMPLOYMENT TAX FROM HIS COMPENSATION AS PROPOSED ON THE VOUCHER, UPON THE BASIS THAT THE ANNUAL AMOUNT OF THE EMPLOYMENT TAX DEDUCTIBLE FOR THE CURRENT CALENDAR YEAR ALREADY HAS BEEN DEDUCTED BY THE GOVERNMENT AS AN EMPLOYER IN CONNECTION WITH A PERIOD OF SERVICE BY MR. MORGAN DURING THE FIRST HALF OF THE CALENDAR YEAR AS AN EMPLOYEE OF THE ECONOMIC COOPERATION ADMINISTRATION.

SECTION 1400 OF THE INTERNAL REVENUE CODE (1FEDERAL INSURANCE CONTRIBUTIONS ACT), AS AMENDED BY SECTION 201 (A) OF THE SOCIAL SECURITY ACT AMENDMENTS OF 1950, PUBLIC LAW 734, 64 STAT. 524, IMPOSES AN EMPLOYMENT TAX OF ONE AND ONE-HALF PERCENT OF THE WAGES RECEIVED DURING THE CALENDAR YEARS 1950-1953, AND SECTION 1426 (A) (1) OF THE INTERNAL REVENUE CODE, 64 STAT. 525, LIMITS THE AMOUNT OF WAGES TAXABLE DURING A CALENDAR YEAR TO $3,600. SECTION 1410 OF THE INTERNAL REVENUE CODE, AS AMENDED BY SECTION 201 (B), PUBLIC LAW 734, 64 STAT. 524, IMPOSES A SIMILAR TAX UPON EMPLOYERS.

THE QUESTIONS WHICH YOU PRESENT ARE STATED AS FOLLOWS:

1. WAS IT PROPER TO INFORM MR. MORGAN THAT DEDUCTIONS WOULD BE MADE FROM HIS SALARY EVEN THOUGH HE HAD CONTRIBUTED THE MAXIMUM AMOUNT (1 1/2 PERCENT OF $3,600) UNDER THE FEDERAL INSURANCE CONTRIBUTIONS ACT BEFORE ENTERING ON DUTY WITH THE NATIONAL PRODUCTION AUTHORITY?

2. WAS IT PROPER TO INFORM HIM THAT A REFUND FOR ANY OVERDEDUCTION COULD BE OBTAINED BY HIM IF HE MADE CLAIM TO THE BUREAU OF INTERNAL REVENUE AT THE END OF THIS YEAR?

IN VIEW OF THE ABOVE SHOULD EACH DEPARTMENT AND ESTABLISHMENT OF THE GOVERNMENT BE CONSIDERED AS A SEPARATE AND DISTINCT EMPLOYER OR SHOULD THE GOVERNMENT BE CONSIDERED AS ONE EMPLOYER? IF THE DEPARTMENTS AND ESTABLISHMENTS OF THE GOVERNMENT ARE TO BE CONSIDERED AS SEPARATE AND DISTINCT EMPLOYERS WOULD THE BUREAUS WITHIN SAID DEPARTMENTS AND ESTABLISHMENTS BE CONSIDERED AS ONE EMPLOYER EVEN THOUGH SEPARATE ACCOUNTS ARE MAINTAINED? BUT, AS YOU KNOW, THE JURISDICTION OF THIS OFFICE UNDER THE PROVISIONS OF 31 U.S.C. 82D TO RENDER A DECISION TO A CERTIFYING OFFICER IS LIMITED TO SPECIFIC QUESTIONS IN CONNECTION WITH A VOUCHER PRESENTED TO HIM FOR CERTIFICATION AND DOES NOT INCLUDE AUTHORITY TO RENDER A DECISION UPON GENERAL QUESTIONS SUCH AS THOSE INCLUDED IN YOUR SUBMISSION. HENCE, THE SPECIFIC QUESTION AS PRESENTED WHICH ARISES IN CONNECTION WITH YOUR CERTIFICATION OF THE PAY ROLL VOUCHER IN FAVOR OF MR. MORGAN IS, IN EFFECT, AS TO WHETHER IT IS PROPER TO DEDUCT THE EMPLOYMENT TAX FROM MR. MORGAN'S COMPENSATION EVEN THOUGH THE MAXIMUM, UPON THE BASIS OF $3,600 PER ANNUM, ALREADY HAS BEEN DEDUCTED DURING THE CURRENT CALENDAR YEAR, AND IT WOULD FOLLOW, OF COURSE, THAT IF SUCH DEDUCTION IS PROPER, IT WOULD BE PROPER TO CHARGE APPROPRIATED FUNDS WITH AN AMOUNT REPRESENTING THE TAX REQUIRED BY SECTION 1410 OF THE INTERNAL REVENUE CODE TO BE PAID BY THE GOVERNMENT AS AN EMPLOYER.

SECTION 1401 (D) (4) (A) OF THE INTERNAL REVENUE CODE, AS AMENDED BY SECTION 203 (C), PUBLIC LAW 734, 64 STAT. 527, PROVIDES THAT IN THE CASE OF REMUNERATION RECEIVED FROM THE UNITED STATES EACH AGENT WHO IS DESIGNATED TO MAKE RETURNS ON THE EMPLOYMENT TAX SHALL BE DEEMED TO BE A "SEPARATE EMPLOYER.' TREASURY DEPARTMENT LETTER DATED DECEMBER 6, 1950, OFFICE OF THE SECRETARY, TO THE HEADS OF DEPARTMENTS AND ESTABLISHMENTS, ON " WITHHOLDING AND PAYMENT OF TAXES FOR FEDERAL EMPLOYEES UNDER THE FEDERAL INSURANCE CONTRIBUTIONS ACT, AS AMENDED," ELABORATES, IN SECTION 5, UPON THE ABOVE-STATED DEFINITION OF AN EMPLOYER BY STATING THAT---

THIS MEANS THAT THOSE INSTANCES WHERE A GOVERNMENT AGENCY HAS SEVERAL WITHHOLDING AGENTS SUBMITTING TAX RETURNS FOR EMPLOYEES IN DIFFERENT ORGANIZATIONAL UNITS, EVEN THOUGH PAID FROM THE SAME APPROPRIATION OR FUND, EACH SUCH WITHHOLDING AGENT WILL BE CONSIDERED AS A SEPARATE EMPLOYER FOR PURPOSES OF THE FEDERAL INSURANCE CONTRIBUTIONS ACT. ALSO, IT IS STATED IN SECTION 7 OF THE SAID LETTER OF DECEMBER 6, 1950, THAT WHEN THE $3,600 LIMITATION HAS BEEN REACHED NO FURTHER DEDUCTION IS REQUIRED TO BE MADE OR EMPLOYER TAX PAID WITH RESPECT TO SUCH EMPLOYEE IN THE SAME CALENDAR YEAR BY THE SAME EMPLOYER. HOWEVER, THAT---

* * * EACH SEPARATE EMPLOYER MUST DEDUCT AND WITHHOLD FROM THE EMPLOYEE'S WAGES THE EMPLOYEE'S TAX AND PAY THE EMPLOYER'S TAX UP TO THE FIRST $3,600 OF WAGES PAID BY EACH SUCH EMPLOYER IN ANY CALENDAR YEAR. THIS IS IRRESPECTIVE OF WHETHER OR NOT ANY DEDUCTION WAS MADE DURING THE SAME CALENDAR YEAR BY A PRIOR EMPLOYER. IN SUCH INSTANCES, WHERE DEDUCTIONS ARE MADE BY MORE THAN ONE EMPLOYER ON WAGES IN EXCESS OF $3,600, THE EMPLOYEE MAY CLAIM THE EXCESS OVER $54. ( FOR YEARS 1951-53) EMPLOYEE TAX AS FEDERAL INCOME TAX WITHHELD WHEN FILING HIS INDIVIDUAL INCOME TAX RETURN FOR 1951 OR SUBSEQUENT YEAR. * * *. ALSO, SEE GENERAL ACCOUNTING OFFICE, GENERAL REGULATIONS NO. 96 SUPPLEMENT NO. 5, DECEMBER 19, 1950.

ACCORDINGLY, SINCE IT APPEARS THAT THE WITHHOLDING AGENT OF MR. MORGAN IN HIS PRESENT POSITION IN THE NATIONAL PRODUCTION AUTHORITY AND THE WITHHOLDING AGENT IN HIS FORMER POSITION IN THE ECONOMIC COOPERATION ADMINISTRATION ARE EACH TO BE DEEMED A "SEPARATE EMPLOYER" WITHIN THE MEANING OF THAT TERM AS USED IN SECTION 1401 (D) (4) (A) OF THE INTERNAL REVENUE CODE, THE WITHHOLDING OF THE EMPLOYMENT TAX FROM HIS CURRENT COMPENSATION AS PROPOSED ON THE VOUCHER IS PROPER.

HENCE, THE VOUCHER, IF OTHERWISE PROPER, MAY BE CERTIFIED FOR PAYMENT.