Correction of Payroll Deduction Errors

An advance decision was requested concerning a Federal employee who, through administrative error, had social security taxes instead of Civil Service retirement contributions deducted from her salary. She sought to have the error corrected. GAO held that the employing agency should: (1) claim a refund of erroneously paid taxes from the Internal Revenue Service (IRS); (2) deposit the correct amount with the Civil Service Retirement Fund; (3) advise the Social Security Administration of the correction of records; and (4) collect from the employee the overpayments of salary received as the result of the underdeduction of retirement contributions. The employee should then be restored to a position as though nothing had occurred. IRS has determined that it is bound to act on claims submitted by federal agencies for erroneously paid social security taxes, and GAO has no basis to question the propriety of the determination. IRS will determine the responsibility of the error, and if the employee is found not to be at fault the obligation to refund any unpaid retirement contributions could be waived. GAO has jurisdiction to decide questions related to the correction of errors in federal employee's payroll and the waiver of overpayments resulting from the errors. However, GAO has no jurisdiction to issue revenue rulings, and the income tax consequences of actions taken to correct payroll errors are primarily matters for consideration and determination by IRS. GAO concluded that any corrective action is a matter for submission to IRS.