B-153699, MAR. 30, 1964

B-153699: Mar 30, 1964

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WHEREIN PROTEST IS MADE OF THE DEDUCTIONS OF FEDERAL INCOME TAXES FROM THE AMOUNT ALLOWED BY OUR OFFICE FOR TRAVEL EXPENSES AS AN EMPLOYEE OF THE DEPARTMENT OF THE NAVY. THE RECORD BEFORE OUR OFFICE SHOWS THAT A SETTLEMENT WAS ISSUED BY OUR OFFICE AUTHORIZING REIMBURSEMENT TO YOU OF THAT PART OF YOUR TRAVEL AND TRANSPORTATION OF YOUR HOUSEHOLD EFFECTS FROM WOONSOCKET. YOU WERE AUTHORIZED REIMBURSEMENT OF $1. OF THAT AMOUNT $193.34 WAS WITHHELD FOR THE PURPOSES OF INCOME TAX. HIS FAMILY AND HOUSEHOLD GOODS TO THE NEW PLACE OF EMPLOYMENT ARE. WERE COMPENSATION FOR PERSONAL SERVICES AND THEREFORE INCLUDIBLE IN GROSS INCOME. HE WOULD HAVE BEEN REQUIRED TO WITHHOLD SUCH TAX AT THE TIME THE TRAVEL WAS PERFORMED IN 1961 IF YOU HAD BEEN REIMBURSED THEN.

B-153699, MAR. 30, 1964

TO MR. ANTON M. ZIEGLER:

THIS REFERS TO YOUR LETTER OF FEBRUARY 23, 1964, WHEREIN PROTEST IS MADE OF THE DEDUCTIONS OF FEDERAL INCOME TAXES FROM THE AMOUNT ALLOWED BY OUR OFFICE FOR TRAVEL EXPENSES AS AN EMPLOYEE OF THE DEPARTMENT OF THE NAVY.

THE RECORD BEFORE OUR OFFICE SHOWS THAT A SETTLEMENT WAS ISSUED BY OUR OFFICE AUTHORIZING REIMBURSEMENT TO YOU OF THAT PART OF YOUR TRAVEL AND TRANSPORTATION OF YOUR HOUSEHOLD EFFECTS FROM WOONSOCKET, RHODE ISLAND, TO SEATTLE, WASHINGTON, INCIDENT TO YOUR RECRUITMENT FOR EMPLOYMENT AT ADAK, ALASKA. YOU WERE AUTHORIZED REIMBURSEMENT OF $1,074.09, OF THAT AMOUNT $193.34 WAS WITHHELD FOR THE PURPOSES OF INCOME TAX.

THE COMMISSIONER OF INTERNAL REVENUE HELD IN REVENUE RULING 59-236, CUMULATIVE BULLETIN 1959-2, 234, AMPLIFYING REVENUE RULING 55-140, THAT:

"AMOUNTS PAID BY AN EMPLOYER TO OR ON BEHALF OF A NEWLY HIRED EMPLOYEE FOR THE EXPENSES INCURRED BY SUCH EMPLOYEE IN MOVING HIMSELF, HIS FAMILY AND HOUSEHOLD GOODS TO THE NEW PLACE OF EMPLOYMENT ARE, UNDER THE CIRCUMSTANCES WAGES FOR FEDERAL EMPLOYMENT TAX PURPOSES AND FOR PURPOSES OF WITHHOLDING OF INCOME TAX AT SOURCE ON WAGES.'

IN UNITED STATES V. WOODALL, ET AL., 255 F.2D 370, CERTIORARI DENIED, 358 U.S. 824, THE COURT HELD, IN EFFECT, THAT AMOUNTS RECEIVED BY TWO EMPLOYEES AS REIMBURSEMENT FOR THE COSTS OF MOVING THEMSELVES AND THEIR FAMILIES FROM TEXAS AND KENTUCKY TO THEIR PLACE OF NEW EMPLOYMENT IN NEW MEXICO, WERE COMPENSATION FOR PERSONAL SERVICES AND THEREFORE INCLUDIBLE IN GROSS INCOME. THE RULING APPLIES EQUALLY TO NEWLY HIRED FEDERAL AND NON-FEDERAL EMPLOYEES AS STATED IN MEMORANDUM OF THE SECRETARY OF THE TREASURY DATED OCTOBER 2, 1962, ISSUED TO HEADS OF DEPARTMENTS AND AGENCIES CONCERNING THE FOREGOING RULE.

SECTION 3402 OF THE INTERNAL REVENUE CODE OF 1954, AS AMENDED, RELATING TO THE COLLECTION OF INCOME TAX AT SOURCE OF WAGES, PROVIDES THAT EVERY EMPLOYER MAKING PAYMENT OF WAGES SHALL DEDUCT AND WITHHOLD SPECIFIED AMOUNTS OR A PERCENTAGE FROM SUCH WAGES. THE DEFINITION OF THE TERM ,WAGES" IN SECTION 3401 (A) OF SUCH CODE, AS AMENDED, REQUIRES APPLICATION OF THE ABOVE PROVISIONS OF SECTION 3402 WITH RESPECT TO ALL REMUNERATION PAID BY THE UNITED STATES. WHILE IT MAY BE, AS STATED IN YOUR LETTER OF FEBRUARY 23, 1964, THAT THE DEPARTMENT OF THE NAVY HAD NOT ISSUED INSTRUCTIONS PRIOR TO APRIL 23, 1963, FOR TAX WITHHOLDING FROM AMOUNTS ALLOWED FOR REIMBURSEMENT EXPENSES OF EMPLOYEES IN MOVING, UNDER THE ABOVE -CITED REVENUE RULING, HE WOULD HAVE BEEN REQUIRED TO WITHHOLD SUCH TAX AT THE TIME THE TRAVEL WAS PERFORMED IN 1961 IF YOU HAD BEEN REIMBURSED THEN, SINCE THE RULING BECAME EFFECTIVE IN 1959.

ACCORDINGLY, OUR OFFICE HAD NO ALTERNATIVE BUT TO MAKE THE DEDUCTION AS COVERED IN THE SETTLEMENT. HOWEVER, IT SHOULD BE POINTED OUT THAT THE ACTION TAKEN BY OUR OFFICE DOES NOT PREJUDICE YOUR RIGHT TO FILE A CLAIM WITH THE COMMISSIONER OF INTERNAL REVENUE IN ACCORDANCE WITH THE PROVISIONS OF SECTION 6402 (A) OF THE CODE, FOR REFUND OF ANY AMOUNT WITHHELD ON ACCOUNT OF TAXES IN EXCESS OF YOUR PROPER TAX LIABILITY.