B-39918, AUGUST 12, 1944, 24 COMP. GEN. 104

B-39918, AUGUST 12, 1944, 24 COMP. GEN. 104

WITHHOLDING TAX ON COMPENSATION IN ACCORDANCE WITH RULINGS OF THE COMMISSIONER OF INTERNAL REVENUE, AND REGULATIONS, PURSUANT TO THE CURRENT TAX PAYMENT ACT OF 1943, THE AMOUNTS TO BE DEDUCTED FROM SALARIES OF FEDERAL EMPLOYEES AND PAID OVER TO THE GOVERNMENT OFFICERS ACTING AS WITHHOLDING AGENTS ARE TO BE DETERMINED ON THE FOLLOWING BASES IN THE SEVERAL SITUATIONS SET OUT: WHERE AN EMPLOYEE IS TRANSFERRED FROM ONE DIVISION TO ANOTHER WITHIN THE SAME GOVERNMENT AGENCY HAVING DIFFERENT PAY ROLL OFFICES, OR FROM ONE AGENCY TO ANOTHER, THE AMOUNT TO BE WITHHELD AS A TAX DEDUCTION BY EACH SUCH DIVISION OR AGENCY IS THE APPLICABLE DEDUCTION SHOWN IN THE GOVERNMENT SALARY TABLES ( OCTOBER 30, 1943) FOR THE FRACTION (NUMBER OF DAYS) OF THE SEMIMONTHLY PAY ROLL PERIOD THE EMPLOYEE IS EMPLOYED THEREIN, WITHOUT REGARD TO THE EMPLOYMENT BY THE OTHER DIVISION OR AGENCY. WHERE AN EMPLOYEE RECEIVES A WITHIN-GRADE PROMOTION OR OTHER CHANGE IN STATUS NOT RESULTING IN A TRANSFER FROM ONE DISBURSING OFFICE TO ANOTHER, THE AMOUNT TO BE WITHHELD AS A TAX DEDUCTION MAY NOT BE DETERMINED BY REFERENCE TO THE DEDUCTION SHOWN IN THE GOVERNMENT SALARY TABLES ( OCTOBER 30, 1943) FOR EACH ANNUAL SALARY STEP, BUT MUST BE DETERMINED BY REFERENCE TO THE APPLICABLE DEDUCTION SHOWN IN THE " SEMIMONTHLY WAGE BRACKET AND WITHHOLDING TABLE," CONTAINED IN THE TABLES, FOR THE GROSS SALARY RECEIVED DURING THE PAY ROLL PERIOD. WHERE IT IS DESIRED TO COMPENSATE ON ONE PAY ROLL AN EMPLOYEE WHO ENTERED ON DUTY FROM ANOTHER AGENCY DURING ONE SEMIMONTHLY PAY ROLL PERIOD AND SEPARATED FROM SERVICE 15 OR MORE DAYS LATER DURING THE NEXT SUCH PERIOD, THE AMOUNT TO BE WITHHELD AS A TAX DEDUCTION SHOULD BE DETERMINED ON THE BASIS OF TREATING THE TWO PERIODS AS SEPARATE ITEMS SO AS TO ALLOW THE EMPLOYEE AN ENTIRE PAY PERIOD'S EXEMPTION FOR EACH PERIOD IN WHICH HE WORKED. WHERE A PER DIEM "WHEN ACTUALLY EMPLOYED" EMPLOYEE WORKS TWO OR MORE DAYS, EACH OF WHICH IS IN A SEPARATE PAY PERIOD, AND IT IS DESIRED TO COMPENSATE HIM ON ONE PAY ROLL FOR EACH OF THE DAYS WORKED, THE TAX DEDUCTION SHOULD BE DETERMINED FOR EACH DAY SEPARATELY BY REFERENCE TO THE WAGE BRACKET TABLE PROVIDED IN SECTION 1622 (C) OF THE INTERNAL REVENUE CODE, AS ADDED BY THE CURRENT TAX PAYMENT ACT OF 1943, FOR A DAILY OR MISCELLANEOUS PAY ROLL PERIOD. IN DETERMINING IN ACCORDANCE WITH THE RULE IN 23 COMP. GEN. 16 THE AMOUNT REPRESENTING TAX DEDUCTIONS WHICH MUST BE EXCLUDED FROM THE AMOUNT OF A SEPARATED EMPLOYEES RETIREMENT FUND CREDIT TO BE SET OFF AGAINST HIS INDEBTEDNESS FOR ADVANCED LEAVE AND RECREDITED TO THE SALARY APPROPRIATION, THE SAME METHOD SHOULD BE USED AS WAS USED IN COMPUTING THE DEDUCTIONS FOR THE SALARY PAID DURING THE ADVANCED LEAVE, THAT IS, BY THE USE OF THE SEMIMONTHLY WAGE BRACKET WITHHOLDING TABLE, SO THAT, FOR EXAMPLE, THE TAX DEDUCTION FOR 6 DAYS' ADVANCED LEAVE INDEBTEDNESS IS THAT SHOWN IN THE TABLE FOR A FULL SEMIMONTHLY PAY PERIOD LESS THAT SHOWN FOR THE SALARY FOR THE 9 DAYS TO WHICH HE WAS ACTUALLY ENTITLED.

COMPTROLLER GENERAL WARREN TO THE FEDERAL SECURITY ADMINISTRATOR, AUGUST 12, 1944:

REFERENCE IS MADE TO YOUR LETTER OF JANUARY 24, 1944, SUBMITTING FOR DECISION A NUMBER OF QUESTIONS WITH RESPECT TO THE WITHHOLDING TAX DEDUCTION ITEMS LISTED IN THE UNITED STATES GOVERNMENT SALARY TABLES, GENERAL REGULATION NO. 54, SUPPLEMENT NO. 17, DATED OCTOBER 30, 1943, 23 C.G. 995, AND PERTAINING PARTICULARLY TO THE APPROPRIATE DEDUCTIONS IN CERTAIN SITUATIONS INVOLVING PAYMENTS OF SALARIES FOR LESS THAN 15 DAYS' SERVICE. SINCE THE NET AMOUNT OF SALARY TO BE PAID IN EACH CASE, AND THE AMOUNT TO BE COLLECTED AND DEPOSITED, DEPEND UPON THE AMOUNT OF WITHHOLDING TAX FOR WHICH THE UNITED STATES AS AN EMPLOYER IS LIABLE--- THE AMOUNT OF WHICH TAX IS FOR DETERMINATION BY THE COMMISSIONER OF INTERNAL REVENUE--- THE CONTENTS OF YOUR LETTER WERE REFERRED TO HIM FOR CONSIDERATION. UNDER DATE OF JULY 29, 1944, THE COMMISSIONER REPLIED AS FOLLOWS:

FURTHER REFERENCE IS MADE TO YOUR LETTER OF FEBRUARY 24, 1944, SETTING FORTH THE QUESTIONS SUBMITTED BY THE ACTING FEDERAL SECURITY ADMINISTRATOR, FEDERAL SECURITY AGENCY, RELATING TO THE WITHHOLDING OF THE INCOME TAX ON WAGES, AND REQUESTING RULINGS WITH RESPECT TO THE AMOUNTS OF TAX TO BE WITHHELD.

SECTION 404.103, REGULATIONS 115, WHICH RELATES TO THE COLLECTION OF THE INCOME TAX AT THE SOURCE ON WAGES, READS IN PART AS FOLLOWS:

"SECTION 404.103 PAYROLL PERIOD--- THE TERM "PAYROLL PERIOD" MEANS THE PERIOD OF SERVICE FOR WHICH A PAYMENT OF WAGES IS ORDINARILY MADE TO AN EMPLOYEE BY HIS EMPLOYER. IT IS IMMATERIAL THAT THE WAGES ARE NOT ALWAYS PAID AT REGULAR INTERVALS. FOR EXAMPLE, IF AN EMPLOYER ORDINARILY PAYS A PARTICULAR EMPLOYEE FOR EACH CALENDAR WEEK AT THE END OF THE WEEK, BUT IF FOR SOME REASON THE EMPLOYEE IN A GIVEN WEEK RECEIVES A PAYMENT IN THE MIDDLE OF THE WEEK FOR THE PORTION OF THE WEEK ALREADY ELAPSED AND RECEIVES THE REMAINDER AT THE END OF THE WEEK, THE PAYROLL PERIOD IS STILL THE CALENDAR WEEK; OR IF, INSTEAD, THAT EMPLOYEE IS SENT ON A 3-WEEK TRIP BY HIS EMPLOYER AND RECEIVES AT THE END OF THE TRIP A SINGLE WAGE PAYMENT FOR THREE WEEKS' SERVICES, THE PAYROLL PERIOD IS STILL THE CALENDAR WEEK, AND THE WAGE PAYMENT SHALL BE TREATED AS THOUGH IT WERE THREE SEPARATE WEEKLY WAGE PAYMENTS.

"FOR THE PURPOSE OF SECTION 1622, AN EMPLOYEE CAN HAVE BUT ONE PAYROLL PERIOD WITH RESPECT TO WAGES PAID BY ANY ONE EMPLOYER. THUS, IF AN EMPLOYEE IS PAID A REGULAR WAGE FOR A WEEKLY PAYROLL PERIOD AND IN ADDITION THERETO IS PAID SUPPLEMENTAL WAGES (FOR EXAMPLE, BONUSES) DETERMINED WITH RESPECT TO A DIFFERENT PERIOD, THE PAYROLL PERIOD IS THE WEEKLY PAYROLL PERIOD. FOR THE COMPUTATION OF TAX ON SUPPLEMENTAL WAGE PAYMENTS SEE SECTION 404.206.

"THE TERM "MISCELLANEOUS PAYROLL PERIOD" MEANS A PAYROLL PERIOD OTHER THAN A DAILY, WEEKLY, BIWEEKLY, SEMIMONTHLY, MONTHLY, QUARTERLY, SEMIANNUAL, OR ANNUAL PAYROLL PERIOD.'

IF A PARTICULAR EMPLOYEE HAS AN ESTABLISHED PAYROLL PERIOD, THE AMOUNT OF THE WITHHOLDING EXEMPTION IN RESPECT OF THE WAGES PAID IS DETERMINED BY REFERENCE TO SUCH EMPLOYEE'S PAYROLL PERIOD AND WITHOUT REGARD TO THE TIME THE EMPLOYEE IS ACTUALLY ENGAGED IN THE PERFORMANCE OF SERVICES DURING SUCH PERIOD. FOR EXAMPLE, EMPLOYEE Y, A SINGLE PERSON WITH NO DEPENDENTS, HAS A WEEKLY PAYROLL PERIOD. HIS WAGES ARE DETERMINED AT THE RATE OF $10.00 PER DAY. DURING A PARTICULAR WEEK HE WORKED ONLY TWO DAYS AND RESIGNED. THE AMOUNT OF THE WITHHOLDING EXEMPTION ALLOWABLE IN RESPECT OF THE WAGES PAID SUCH EMPLOYEE FOR THE WEEKLY PAYROLL PERIOD IS $12.00. (SEE SECTION 404.202, REGULATIONS 115).

THE PROVISIONS OF SECTION 404.203 (B) OF REGULATIONS 115 AND THE PROVISIONS OF THE PARAGRAPH IN CIRCULAR WT HEADED "PERIOD NOT A PAYROLL PERIOD" HAVE NO APPLICATION TO INSTANCES WHERE THE PARTICULAR EMPLOYEE HAS AN ESTABLISHED PAYROLL PERIOD, BUT ONLY WHERE THE WAGES ARE PAID FOR A PERIOD WHICH IS NOT A PAYROLL PERIOD. THUS WHERE AN EMPLOYEE IS REGULARLY PAID SEMIMONTHLY AND THE EMPLOYER USES THE WAGE TABLE METHOD THE AMOUNT OF TAX REQUIRED TO BE WITHHELD IS DETERMINED UNDER THE TABLE APPLICABLE TO A SEMIMONTHLY PAYROLL PERIOD, EVEN THOUGH HE DID NOT WORK THE ENTIRE NUMBER OF WORK DAYS DURING THE PARTICULAR PAYROLL PERIOD.

SECTION 1622 OF THE INTERNAL REVENUE CODE, AS ADDED BY SECTION 2 (A) OF THE CURRENT TAX PAYMENT ACT OF 1943, (57 STAT. 128) PROVIDES, AT THE ELECTION OF THE EMPLOYER, ALTERNATE METHODS FOR COMPUTING THE INCOME TAX COLLECTED AT SOURCE ON WAGES. UNDER THE FIRST METHOD, REFERRED TO IN REGULATIONS 115, AS THE "EXACT COMPUTATION METHOD" THE EMPLOYER IS REQUIRED TO DEDUCT AND WITHHOLD A TAX EQUAL TO 20 PERCENT OF THE EXCESS OF EACH PAYMENT OF WAGES OVER THE FAMILY STATUS WITHHOLDING EXEMPTION OR 3 PERCENT OF THE EXCESS OF EACH PAYMENT OF WAGES OVER THE VICTORY TAX WITHHOLDING EXEMPTION, WHICHEVER COMPUTATION RESULTS IN THE GREATER AMOUNT OF TAX. UNDER THE SECOND METHOD, THAT IS, THE "WAGE TABLE METHOD THE EMPLOYER IS REQUIRED TO DEDUCT AND WITHHOLD A TAX DETERMINED IN ACCORDANCE WITH THE TABLES PROVIDED IN SUBSECTION (C) OF SECTION 1622. THE SPECIFIC WAGE LEVELS AT WHICH THE TAX UNDER THE EXACT COMPUTATION METHOD IS DETERMINED AT THE RATE OF 3 PERCENT ON WAGES IN EXCESS OF THE VICTORY TAX WITHHOLDING EXEMPTION ARE SHOWN IN THE TABLE ON PAGE 34 OF REGULATIONS 115, AND ON PAGE 11 OF CIRCULAR WT ISSUED ON JUNE 4, 1943.

THE TERM "EMPLOYER" IS DEFINED IN SECTION 1621 (D) OF THE CODE AS AMENDED, (57 STAT. 126, 127) AS THE "PERSON FOR WHOM AN INDIVIDUAL PERFORMS OR PERFORMED ANY SERVICE, OF WHATEVER NATURE, AS THE EMPLOYEE OF SUCH PERSON" WITH SOME EXCEPTIONS NOT HERE MATERIAL.

THE EMPLOYER IS REQUIRED TO COLLECT THE TAX BY DEDUCTING AND WITHHOLDING THE AMOUNT THEREOF FROM THE EMPLOYEE'S WAGES AS AND WHEN PAID, EITHER ACTUALLY OR CONSTRUCTIVELY. EVERY PERSON REQUIRED TO DEDUCT AND WITHHOLD THE TAX UNDER SECTION 1622 FROM THE WAGES IS LIABLE FOR THE PAYMENT OF SUCH TAX WHETHER OR NOT IT IS COLLECTED FROM THE EMPLOYEE. SECTION 1622 PROVIDES THAT EVERY "EMPLOYER" MAKING PAYMENT OF WAGES SHALL DEDUCT AND WITHHOLD UPON SUCH WAGES A TAX, AS SET FORTH THEREIN.

SECTION 1624 OF THE INTERNAL REVENUE CODE, AS ADDED BY SECTION 2 (A) OF THE CURRENT TAX PAYMENT ACT OF 1943, (57 STAT. 137) PROVIDES THAT IF THE UNITED STATES, A STATE, TERRITORY, OR POLITICAL SUBDIVISION, OR THE DISTRICT OF COLUMBIA, OR AN AGENCY OR INSTRUMENTALITY OF ANY ONE OR MORE OF THE FOREGOING, IS THE EMPLOYER, THE RETURN OF THE TAX MAY BE MADE BY THE OFFICER OR EMPLOYEE HAVING CONTROL OF THE PAYMENT OF WAGES OR OTHER OFFICER OR EMPLOYEE APPROPRIATELY DESIGNATED FOR THAT PURPOSE. THE LEGAL RESPONSIBILITY FOR WITHHOLDING, PAYING, AND RETURNING THE TAX AND FURNISHING THE STATEMENTS REQUIRED UNDER SECTION 1625 OF THE CODE, AS AMENDED, RESTS WITH THE ,EMPLOYER," WHICH TERM EMBRACES THE GOVERNMENT OF THE UNITED STATES, ITS AGENCIES AND INSTRUMENTALITIES.

IT IS PROVIDED ON PAGE 3 OF THE CIRCULAR ISSUED JUNE 29, 10943, BY THE OFFICE OF THE SECRETARY OF THE TREASURY TO THE HEADS OF DEPARTMENTS, INDEPENDENT ESTABLISHMENTS AND AGENCIES OF THE FEDERAL GOVERNMENT COVERING WITHHOLDING OF INCOME TAX AT SOURCE ON WAGES UNDER THE PROVISIONS OF THE CURRENT TAX PAYMENT ACT OF 1943, THAT "ALTHOUGH THE CURRENT TAX PAYMENT ACT OF 1943, GIVES EMPLOYERS THE OPTION OF DETERMINING THE TAX TO BE WITHHELD EITHER BY USE OF A WAGE BRACKET WITHHOLDING TABLE OR BY THE APPLICATION OF THE PRESCRIBED PERCENTAGE RATE TO THE AMOUNT OF WAGES IN EXCESS OF THE WITHHOLDING EXEMPTION, THE RATES IN THE TABLES PROVIDED BY SECTION 1622 OF THE ACT SHOULD BE UTILIZED IN THE INTEREST OF UNIFORMITY IN THE FEDERAL GOVERNMENT. THE SEMIMONTHLY TABLE PROVIDED IN THIS SECTION IS THE BASIS FOR SUPPLEMENT NO. 16 OF GENERAL REGULATIONS NO. 54, OF THE GENERAL ACCOUNTING OFFICE, WHICH SHOULD FACILITATE THE COMPUTATION OF WITHHELD TAXES FOR SEMIMONTHLY PAYMENTS. IN ADDITION, THE TABLE MAY BE USED FOR COMPUTING THE TAX TO BE WITHHELD FOR FRACTIONAL SEMIMONTHLY PAY PERIODS AS IN THE CASE OF EMPLOYEES WHO ENTER ON DUTY DURING A PAY PERIOD EITHER BY TRANSFER OR APPOINTMENT, OR ARE SEPARATED DURING A PAY PERIOD. IN SUCH CASES IT WILL BE NECESSARY TO USE COLUMN 1 OF THE TABLE " WAGE BRACKETS," RATHER THAN COLUMN 7, " ANNUAL SALARY," IN MAKING DETERMINATION OF THE AMOUNT TO BE DEDUCTED.'

SUPPLEMENT 16, REFERRED TO ABOVE, HAS NOW BEEN SUPERSEDED BY THE UNITED STATES GOVERNMENT SALARY TABLES ISSUED AS SUPPLEMENT NO. 17 DATED OCTOBER 30, 1943, OF GENERAL REGULATIONS 54 OF THE GENERAL ACCOUNTING OFFICE. SUPPLEMENT 17 HAS BEEN SO PREPARED THAT THE TAX DEDUCTIONS FOR EACH SPECIFIED NUMBER OF DAYS IN A PAYROLL PERIOD ARE BASED ON THE WAGE BRACKET IN WHICH THE AMOUNT OF ,TOTAL EARNED WAGES" FALLS, IN ACCORDANCE WITH THE SEMIMONTHLY WITHHOLDING TABLE IN THE CURRENT TAX PAYMENT ACT OF 1943 AND THE INTERNAL REVENUE CODE. ACCORDINGLY, THE " SUPPLEMENT 17" TABLES MAY BE USED FOR COMPUTING THE TAX TO BE WITHHELD FOR FRACTIONAL SEMIMONTHLY PAY PERIODS IN THE CASE OF EMPLOYEES WHO ENTER ON DUTY DURING A PAY PERIOD EITHER BY TRANSFER FROM ANOTHER AGENCY OR APPOINTMENT, OR WHO ARE SEPARATED DURING A PAY PERIOD. WHERE, HOWEVER, THE EMPLOYEE RECEIVES A RAISE IN PAY DURING A PAYROLL PERIOD IN WHICH SERVICE IS PERFORMED FOR THE SAME "EMPLOYER" OR AGENCY, THE TAX MUST BE COMPUTED IN ACCORDANCE WITH THE SEMIMONTHLY TABLE PROVIDED BY SECTION 1722 (C) OF THE CODE. WHERE THERE IS NO TRANSFER BETWEEN DIFFERENT DISBURSING AGENCIES, THERE IS NO AUTHORITY IN THE TAX REGULATIONS FOR WITHHOLDING LESS THAN THE AMOUNT REQUIRED FOR THE ENTIRE PAYROLL PERIOD IN ACCORDANCE WITH THE SEMIMONTHLY TABLE NOW CONTAINED IN THE CODE.

THE QUESTIONS PRESENTED BY THE ACTING FEDERAL SECURITY ADMINISTRATOR, FEDERAL SECURITY AGENCY WILL BE SET FORTH AND ANSWERED AS FOLLOWS:

QUESTION 1.--- "AN EMPLOYEE AT THE SALARY RATE OF $2,000 TRANSFERS, EFFECTIVE JANUARY 12, 1944, FROM REGIONAL OFFICE A TO REGIONAL OFFICE B. REGIONAL OFFICE A IS TO PAY HIM A TOTAL GROSS OF $40.55 FOR 6 DAYS AND REGIONAL OFFICE B IS TO PAY HIM A TOTAL GROSS OF $60.83 FOR 9 DAYS. THE EMPLOYEE WERE SINGLE WITH TWO DEPENDENTS (" S-2"), HIS WITHHOLDING TAX UPON THE 15 DAYS PAY WOULD BE $11.60 IF IT WERE PAID ALL AT ONCE BY ONE PAY-ROLL OFFICE. IN VIEW OF THE FACT THAT IT IS PAID BY TWO PAY-ROLL OFFICES, HOW SHOULD EACH PAY-ROLL OFFICE DETERMINE THE WITHHOLDING DEDUCTIONS? " ( REGULAR PAYROLL PERIODS ARE FROM THE SEVENTH TO THE TWENTY-FIRST OF THE MONTH INCLUSIVE, AND FROM THE TWENTY-SECOND OF THE MONTH TO THE SIXTH OF THE FOLLOWING MONTH INCLUSIVE.)

ANSWER.--- EACH REGIONAL OFFICE WILL DETERMINE THE WITHHOLDING DEDUCTION (TAX) BY LOCATING ON THE SEMIMONTHLY WAGE BRACKET WITHHOLDING TABLE THE TAX APPLICABLE TO SINGLE PERSON WITH TWO DEPENDENTS OPPOSITE THE AMOUNT BETWEEN WHICH THE SEMIMONTHLY WAGES FALL. THE TAX WITH RESPECT TO THE WAGES PAID BY REGIONAL OFFICE B WILL BE $3.60. THE SAME RESULT WILL BE REACHED IF THE DEDUCTION IS MADE BY EACH AGENCY IN ACCORDANCE WITH THE TABLES PROVIDED BY SUPPLEMENT NO. 17 TO GENERAL REGULATIONS NO. 54 OF THE GENERAL ACCOUNTING OFFICE.

QUESTION 2.--- "ASSUMING THE SAME CASE AS ABOVE BUT WHERE EMPLOYEE TRANSFERS FROM THE FEDERAL SECURITY AGENCY TO ANOTHER GOVERNMENT AGENCY WHICH FOR THE SAKE OF ARGUMENT HAPPENS TO HAVE THE SAME PAYROLL PERIOD AS OURS, HOW WOULD EACH PAY-ROLL OFFICE DETERMINE THE WITHHOLDING DEDUCTION?

ANSWER.--- THE FEDERAL SECURITY AGENCY AND THE OTHER GOVERNMENT AGENCY WOULD EACH DETERMINE THE WITHHOLDING DEDUCTION (TAX) BY LOCATING ON THE SEMIMONTHLY WAGE BRACKET WITHHOLDING TABLE THE TAX APPLICABLE TO SINGLE PERSON WITH TWO DEPENDENTS OPPOSITE THE AMOUNT BETWEEN WHICH THE SEMIMONTHLY WAGES FALL. THE WITHHOLDING DEDUCTION WOULD BE DETERMINED BY EACH AGENCY WITHOUT REGARD TO THE FACT THAT THE PARTICULAR EMPLOYEE IS EMPLOYED BY ANOTHER AGENCY OF THE FEDERAL GOVERNMENT DURING ANY PART OF ITS PAYROLL PERIOD. SUPPLEMENT NO. 17, SUPRA, MAY ALSO BE USED UNDER SUCH CIRCUMSTANCES TO DETERMINE THE WITHHOLDING REQUIRED BY EACH AGENCY FOR THE NUMBER OF DAYS IN WHICH THE INDIVIDUAL WAS EMPLOYED THEREIN.

QUESTION 3.--- "AN EMPLOYEE RECEIVES A STATUTORY PROMOTION ON APRIL 1, 1944, FROM $1,620 PER ANNUM TO $1,680. THIS MEANS THAT HE IS TO BE PAID ON THE APRIL 6 ROLL FOR 9 DAYS AT $1,620 AND 6 DAYS AT $1,680. ASSUME THAT THIS INDIVIDUAL IS MARRIED, CLAIMS ALL OF THE EXEMPTION, WITH ONE DEPENDENT. HIS NORMAL TAX DEDUCTION IS $5.00, YET IF THE DEDUCTIONS SHOWN IN THE SALARY TABLE FOR 9 DAYS AT $1,620 AND 6 DAYS AT $1,680 ARE USED, HE WOULD HAVE A WITHHOLDING TAX OF $0.90. IN THIS CASE, HOW SHOULD THE TAX BE DETERMINED? " (REGULAR PAYROLL PERIODS ARE FROM THE SEVENTH TO THE TWENTY-FIRST OF THE MONTH INCLUSIVE, AND FROM THE TWENTY-SECOND OF THE MONTH TO THE SIXTH OF THE FOLLOWING MONTH INCLUSIVE.)

ANSWER.--- THE TOTAL WAGES ($83.33) FOR THE SEMIMONTHLY PAYROLL PERIOD SHOULD BE USED IN DETERMINING THE TAX TO BE WITHHELD. SINCE THE TOTAL WAGES FALL IN THE LINE "AT LEAST $80.00 BUT LESS THAN $100.00," ON THE SEMIMONTHLY WAGE BRACKET WITHHOLDING TABLE THE AMOUNT OF TAX TO BE DEDUCTED IS $5.00. NOTE THAT IN THE WITHHOLDING TABLE THE AMOUNT OF TAX TO BE DEDUCTED IS $5.00. NOTE THAT IN THE CASE OF A STATUTORY PROMOTION OR OTHER CHANGE IN STATUS WHICH DOES NOT RESULT IN THE TRANSFER OF THE EMPLOYEE FROM ONE DISBURSING AGENCY TO ANOTHER, AS IN A TRANSFER BETWEEN VARIOUS REGIONAL OFFICES OR AGENCIES, THE TABLES PROVIDED FOR EACH WAGE CLASSIFICATION IN SUPPLEMENT 17 MAY NOT BE USED IN DETERMINING THE AMOUNT OF TAX TO BE WITHHELD FROM THE TOTAL SALARY PAID. UNDER SUCH CIRCUMSTANCES, HOWEVER, REFERENCE MAY BE MADE TO THE " SEMIMONTHLY WAGE BRACKET AND WITHHOLDING TABLE" WHICH IMMEDIATELY PRECEDES THE $600 WAGE TABLE IN SUPPLEMENT NO. 17, AND THE WITHHOLDING REQUIRED IS THAT APPLICABLE TO THE WAGE BRACKET IN WHICH THE GROSS AMOUNT PAID IS FOUND.

QUESTION 4.--- "AN EMPLOYEE ENTERS ON DUTY ON MARCH 1 BY TRANSFER FROM ANOTHER AGENCY AND SEPARATES AT THE CLOSE OF BUSINESS MARCH 15. IT IS DESIRED TO PAY HIM FOR 15 DAYS OF SERVICE, BUT THESE 15 DAYS FALL 6 IN ONE PAY PERIOD AND 9 IN ANOTHER. SO FAR AS THE TAX IS CONCERNED, SHOULD THESE BE TREATED AS SEPARATE ITEMS OR AS A SINGLE ITEM? IF AS SEPARATE ITEMS, IS THE EMPLOYEE ENTITLED TO AN ENTIRE PAY PERIOD'S WITHHOLDING EXEMPTIONS FOR EACH OF THE PAY PERIODS IN WHICH HE WORKED? IF HANDLED AS A SINGLE ITEM, WOULD YOU COMPUTE THE TAX ACCORDING TO THE REGULAR SEMIMONTHLY WITHHOLDING TABLE? ASSUME THAT THIS EMPLOYEE WAS APPOINTED AT A SALARY OF $1,800 AND WAS MARRIED, CLAIMING ALL OF THE EXEMPTION, WITH NO DEPENDENTS ( AO) WHAT WOULD HIS WITHHOLDING TAX BE ON A TOTAL GROSS OF $91.25 FOR THE 15 DAYS? " (THE REGULAR PAYROLL PERIODS OF THE AGENCY ARE FROM THE SEVENTH TO THE TWENTY-FIRST OF THE MONTH INCLUSIVE, AND FROM THE TWENTY- SECOND OF THE MONTH TO THE SIXTH OF THE FOLLOWING MONTH INCLUSIVE.)

ANSWER.--- THE WAGES FOR THE TWO PAYROLL PERIODS SHOULD BE TREATED AS SEPARATE ITEMS, AND THE EMPLOYEE IS ENTITLED TO AN ENTIRE PAY PERIOD'S WITHHOLDING EXEMPTION FOR EACH PAY PERIOD IN WHICH HE WORKED. ASSUMING THAT THE EMPLOYEE WAS APPOINTED AT A SALARY OF $1800 AND WAS MARRIED, CLAIMING ALL OF THE EXEMPTION, WITH NO DEPENDENTS, THE WITHHOLDING TAX ON A TOTAL GROSS OF $91.25 FOR THE 15 DAYS IS $0.30 FOR THE PAYROLL PERIOD ENDING MARCH 6, AND $0.90 FOR THE PAYROLL PERIOD ENDING MARCH 21.

QUESTION 5.--- "ASSUMING THE IDENTICAL CASE AS THE ABOVE, BUT WHERE THE EMPLOYEE SEPARATES AT THE CLOSE OF BUSINESS MARCH 16, INSTEAD OF MARCH 15, HOW WOULD YOU DETERMINE THE TAX--- AS A 15-DAY ITEM PLUS A ONE-DAY ITEM, OR AS A 6-DAY ITEM PLUS A 10-DAY ITEM? OR WOULD IT BE POSSIBLE TO COMPUTE THE TAX ON THE ENTIRE 16 DAYS PAYMENT AND IN SUCH CASE WOULD YOU USE THE WAGE BRACKET TABLE FOR DAILY AND MISCELLANEOUS PAY-ROLL PERIOD?

ANSWER.--- THE TAX SHOULD BE DETERMINED ON THE WAGES PAID FOR THE 6 DAYS DURING THE PAYROLL PERIOD ENDING MARCH 6, AND ON THE WAGES PAID FOR THE 10 DAYS DURING THE PAYROLL PERIOD ENDING MARCH 21. IN THIS EXAMPLE, AS IN ANSWER 4, THE CORRECT RESULT WILL BE REACHED BY COMPUTATION OF TAX FOR THE NUMBER OF DAYS THE EMPLOYEE WORKS DURING THE PARTICULAR PAYROLL PERIOD INVOLVED, IN ACCORDANCE WITH THE TABLES IN SUPPLEMENT NO. 17. THE WAGE BRACKET TABLE FOR DAILY AND MISCELLANEOUS PAYROLL PERIODS IS NOT USED FOR COMPUTING THE TAX WHERE THE PAYROLL PERIOD WITH RESPECT TO AN EMPLOYEE IS SEMIMONTHLY.

QUESTION 6.--- "A WAE EMPLOYEE IS APPOINTED AT $22.22 PER DAY, WHICH IS THE EQUIVALENT OF $8,000 PER ANNUM. THIS EMPLOYEE IS MARRIED, CLAIMS ALL OF THE EXEMPTION AND HAS NO DEPENDENTS ( AO). HE WORKS 3 DAYS, EACH OF WHICH IS IN A SEPARATE PAY PERIOD, AND THESE 3 DAYS ARE TO BE PAID FOR ON A SINGLE PAYROLL. THE PAYROLL SECTION IN QUESTION COMPUTED THE TAX ON THE ENTIRE $70.28 AS A SINGLE ITEM, USING THE WAGE BRACKET TABLE FOR MISCELLANEOUS PAY PERIODS, THEREBY RESULTING IN A WITHHOLDING TAX OF $11.70. WAS THIS THE CORRECT WAY TO DETERMINE THE TAX, AND IF NOT, HOW SHOULD IT HAVE BEEN DONE AND WITH WHAT RESULT?

ANSWER.--- THE PAYROLL PERIOD IN THIS CASE IS A "DAILY" PAYROLL PERIOD, AND THE WITHHOLDING DEDUCTION SHOULD BE COMPUTED UNDER THE WAGE BRACKET TABLE FOR THE DAILY OR MISCELLANEOUS PAYROLL PERIOD. FOR A MARRIED PERSON CLAIMING ALL OF THE EXEMPTION, WITH NO DEPENDENTS, THE TAX TO BE WITHHELD, UNDER THE TABLE METHOD, ON WAGES OF $22.22 PER DAY IS $3.90. THERE ARE THREE SEPARATE DAILY PERIODS INVOLVED IN DETERMINING THE EXEMPTION TO THE WAE EMPLOYEE UNDER THE CIRCUMSTANCES PRESENTED.

QUESTION 7.--- "IN 22 C.G. 1046 IT WAS HELD THAT "THE AMOUNT TO THE CREDIT OF AN EMPLOYEE IN THE RETIREMENT FUND IS AVAILABLE FOR SET-OFF ON ACCOUNT OF OVERDRAWN LEAVE OF ONLY 95 PERCENT OF AN EMPLOYEE'S SALARY PAID ON OR AFTER JANUARY 1, 1943 * * *, IN DECISION DATED JULY 10, 1943 (B- 34335) (23 COMP. GEN. 16) IT WAS FURTHER STATED THAT THERE APPEARED TO BE (NO) REASON WHY THE SAME PROCEDURE SHOULD NOT BE FOLLOWED WITH REGARD TO ADJUSTMENTS FOR DEDUCTIONS TO COVER THE WITHHOLDING TAX ON OR AFTER JULY 1, 1943. IT APPEARS FROM THE ABOVE DECISIONS THAT THE RETIREMENT FUND IS AVAILABLE FOR SET-OFF ONLY TO THE EXTENT OF 95 PERCENT OF THE VALUE OF UNLIQUIDATED ADVANCED LEAVE WHICH OCCURRED BETWEEN JANUARY 1 AND JUNE 30, 1943, AND ONLY TO THE EXTENT OF 80 PERCENT OF THE VALUE OF UNLIQUIDATED ADVANCED LEAVE WHICH OCCURRED ON OR AFTER JULY 1, 1943. VICTORY TAX, OF COURSE, WAS NOT A STRAIGHT 5 PERCENT, HOWEVER, AND WITHHOLDING TAX IS NOT A STRAIGHT 20 PERCENT. THE MINIMUM WITHHOLDING TAX IS AS LITTLE AS 3 PERCENT OF THE AMOUNT IN EXCESS OF A SEMIMONTHLY WITHHOLDING DEDUCTION OF $26.00. IN DETERMINING TAX APPLICABLE TO INDEBTEDNESS FOR ADVANCED LEAVE MAY THE SALARY TABLE BE USED WITH RESULTING UNDERSTATEMENT OF TAX OR SHOULD THE TAX BE STATED AT 20 PERCENT AS PREVIOUSLY INDICATED?

ANSWER.--- THE WITHHOLDING TAX APPLICABLE TO THE INDEBTEDNESS FOR ADVANCED LEAVE SHOULD BE DETERMINED UNDER THE SAME METHOD, THAT IS, BY USE OF THE WAGE BRACKET WITHHOLDING TABLE OR THE APPLICATION OF THE THE PRESCRIBED PERCENTAGE RATE TO THE AMOUNT OF THE WAGES IN EXCESS OF THE WITHHOLDING EXEMPTION, USED BY THE EMPLOYER IN COMPUTING THE TAX APPLICABLE TO THE WAGES OF THE EMPLOYEE. THIS MAY BE ILLUSTRATED IN THE FOLLOWING EXAMPLE. (EMPLOYEE, MARRIED, WITH NO DEPENDENTS, CLAIMS ONE- HALF OF THE WITHHOLDING EXEMPTION AND EMPLOYER USES THE WAGE BRACKET WITHHOLDING TABLE.)

TABLE GROSS SALARY FOR SEMIMONTHLY PAYROLL PERIOD:

FEBRUARY 7 TO 21 INCLUSIVE -------------------------- $131.80

WITHHOLDING TAX -------------------------------------- $20.80 INDEBTEDNESS FOR ADVANCED LEAVE (6 DAYS) ----------------- 52.72

-------- WITHHOLDING TAX ON SALARY -------------------------------- $79.08 8.80

----- WITHHOLDING TAX APPLICABLE TO THE INDEBTEDNESS FOR ADVANCED

LEAVE ------------------------------------------------- 12.00

QUESTION 8.--- "WILL PROPER USE OF THE SALARY TABLES FURNISHED BY YOUR OFFICE RELIEVE CERTIFYING OFFICERS OF LIABILITY FOR UNDERCOLLECTION OF WITHHOLDING TAX? WHERE YOUR OFFICE RAISES A POST AUDIT EXCEPTION ON A TAX ITEM, CAN THE CERTIFYING OFFICER BE REQUIRED TO PAY? IF SO, WILL HE BE REQUIRED TO PAY IN ALL CASES (SUBJECT TO POSSIBLE REFUND) OR ONLY IN CASES WHERE AFTER AUDIT OF THE EMPLOYEE'S INCOME TAX RETURN IT HAS BEEN FOUND THAT THE GOVERNMENT HAS SUSTAINED A LOSS?

ANSWER.--- THE PROPER USE BY CERTIFYING OFFICERS OF THE WAGE BRACKET WITHHOLDING TABLES PROVIDED BY LAW RELIEVES THE EMPLOYER OF LIABILITY FOR UNDERCOLLECTION OF THE TAX.

ANY UNDERCOLLECTION OF TAX SHOULD BE ADJUSTED BY THE PERSON HAVING CONTROL OF THE PAYMENT OF THE WAGES OR OTHER OFFICER OR EMPLOYEE APPROPRIATELY DESIGNATED FOR THAT PURPOSE IN THE MANNER PROVIDED IN SECTION 404.701, REGULATIONS 115. IN ACCORDANCE WITH THE PROVISIONS OF SECTION 1622 (D) OF THE INTERNAL REVENUE CODE, WHERE THE EMPLOYER FAILS TO WITHHOLD THE PRESCRIBED TAX, AND THEREAFTER THE TAX AGAINST WHICH SUCH TAX MAY BE CREDITED IS PAID, THE TAX SO REQUIRED TO BE DEDUCTED AND WITHHELD WILL NOT BE COLLECTED FROM THE EMPLOYER OR WITHHOLDING AGENT.

UNDER SECTION 22 OF THE INDIVIDUAL INCOME TAX ACT OF 1944, (58 STAT. 247) CERTAIN AMENDMENTS HAVE BEEN PRESCRIBED IN THE APPLICABLE WITHHOLDING EXEMPTIONS AND IN THE "WAGE BRACKETS" TO BE APPLIED FOR THE WITHHOLDING OF INCOME TAX. NEW GOVERNMENT SALARY TABLES WHICH WILL BE APPLICABLE TO WAGES PAID ON OR AFTER JANUARY 1, 1945, IF ADOPTING THE METHOD FOLLOWED IN THE PREPARATION OF SUPPLEMENT 17 OF GENERAL REGULATIONS 54, GENERAL ACCOUNTING OFFICE, MAY ALSO BE APPLIED IN ACCORDANCE WITH THE SOLUTION TO THE QUESTIONS IN THE PRESENT INQUIRY.

VERY TRULY YOURS,

(S) JOSEPH D. NUNAN, JR.,

COMMISSIONER.

THE FOREGOING RULINGS OF THE COMMISSIONER OF INTERNAL REVENUE GOVERN THE SEVERAL AMOUNTS OF WITHHOLDING TAX TO BE DEDUCTED AND PAID OVER, IN THE SEVERAL SITUATIONS OUTLINED IN YOUR LETTER, TO THE PROPER COLLECTOR BY THE GOVERNMENT OFFICERS ACTING AS WITHHOLDING AGENTS FOR TAXES COLLECTED FROM CURRENT SALARY PAYMENTS. WITH RESPECT TO THE EIGHTH QUESTION, A DEFINITIVE RULING ON THE MATTERS RAISED WITH RESPECT TO THE LIABILITY OF A CERTIFYING OFFICER MAY NOT BE MADE UPON THE BASIS OF THE PRESENT SUBMISSION, BUT IT MAY, PERHAPS, BE SUFFICIENT FOR PRESENT PURPOSES TO ADVISE THAT THERE IS NOT PERCEIVED A SITUATION WHERE A PROPER USE OF THE SALARY TABLES WOULD NOT RELIEVE THE CERTIFYING OFFICER OF LIABILITY FOR A POSSIBLE UNDERCOLLECTION OF WITHHOLDING TAX, OR WHERE A COLLECTION COULD BE REQUIRED UNTIL, AFTER AUDIT OF THE EMPLOYEE'S INCOME TAX RETURN, IT IS FOUND THAT THE GOVERNMENT HAS SUSTAINED A LOSS.