Request for Reconsideration of Waiver Denial

B-199108: Mar 10, 1981

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Shirley Jones
(202) 512-8156


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A service member requested reconsideration of a previous decision which denied his application for waiver of his debt to the United States. The debt arose from erroneous payments of pay and allowances attributable to undercollection of Federal Income Tax Withholding paid on the service member's behalf and erroneous credits for housing allowance while the service member was assigned to Government quarters. The record showed that the service member filed an Employee Withholding Allowance Certificate when he began active duty, requesting a Federal Tax Withholding at a rate based on being married with two dependents. Apparently, this document was never received by the Navy Finance Center and the service member's centralized pay account was established with his tax liability reported to the Internal Revenue Service (IRS) indicating tax withholding at a rate based on being single with no dependents. An audit of the service member's pay account indicated that overpayment occurred when the Navy transmitted an amount consistent with the higher withholding rate to the IRS and that amount was reflected on the employee's Wage and Tax Statement. The service member therefore received credit for the higher withholding rate although only the lower amount had actually been withheld from his pay. The service member was overpaid an additional amount because the computation of his normal pay for these months included an erroneous credit for housing allowance to which the member was not entitled. In his appeal, the service member indicated that repayment would cause him a financial hardship and that his Leave and Earnings Statements (LES) had been consistently delayed. Thus, he was unable to verify for accuracy in a timely manner. GAO held that the service member should have been aware of the overpayment made to the IRS on his behalf at the time that he filed his tax return. Additionally, financial hardship resulting from collection is not a sufficient reason for a debtor to retain payments which did not belong to him. Thus, waiver of the undercollection was denied. With respect to the overpayment resulting from the erroneous crediting of housing allowance, GAO held that the service member could not have reasonably relied upon his LES even if he had received them on time. Accordingly, waiver was granted for these erroneous credits.

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