Fort Polk Employees-Erroneous Payment of

B-261699 Oct 25, 1996 Jump To VIEW DECISION RELATED PAGES GAO CONTACTS Highlights The term "aggregate amount" is defined in 4 C.F.R. An agency head may grant waiver only where the gross amount of an employee's debt before deductions is $1. The agency was unable to correct the error during the year and had to report it as income for the year on the employee's W-2 statement and withhold monies for income taxes. The employees were notified and were required to repay the gross amount of the overpayment. Most of them were unable to recover from the taxing authorities the amount withheld for income taxes on the overpayment. The agency asks whether the amount withheld for income taxes may be waived because it is unrecoverable. The application of the tax laws to an individual's income is a matter solely within the jurisdiction of the taxing authority. View Decision Matter of: Fort Polk Employees-Erroneous Payment of Compensation-Amounts Withheld for Federal and State Taxes-Waiver File: B-261699 Date: October 25, 1996 An agency asks whether the gross amount of an overpayment of pay must be used to determine those cases that come within its $1,500 waiver authority, when the agency intends to consider waiving only a specific amount less than $1,500. The waiver statute, at 5 U.S.C. Sec. 5584(a)(2)(A) (1994), limits the waiver authority of an agency head to claims "in an amount aggregating not more than $1,500." The term "aggregate amount" is defined in 4 C.F.R. Sec. 91.2(j) (1996) to mean "the gross amount of the claim against the employee . . ." Therefore, an agency head may grant waiver only where the gross amount of an employee's debt before deductions is $1,500, or less. Each of a group of employees received a single overpayment of compensation. Because the administrative error occurred at the end of the calendar year, the agency was unable to correct the error during the year and had to report it as income for the year on the employee's W-2 statement and withhold monies for income taxes. The employees were notified and were required to repay the gross amount of the overpayment, but recoupment did not occur until the following year. However, due to their individual income tax circumstances, most of them were unable to recover from the taxing authorities the amount withheld for income taxes on the overpayment. The agency asks whether the amount withheld for income taxes may be waived because it is unrecoverable. The application of the tax laws to an individual's income is a matter solely within the jurisdiction of the taxing authority, and an individual's income tax liability on the overpayment does not permit partial waiver of a debt not otherwise appropriate for waiver. DECISION This responds to a request for decision from the Director, Defense Finance and Accounting Service (Arlington, VA) (DFAS). [1] The agency has submitted for waiver consideration the cases of seven civilian employees whose debts arose due to a single erroneous payment to each, in amounts ranging from approximately $1,550 to $2,000. [2] In conjunction with those cases and others, DFAS asks whether it is appropriate to waive part of an employee's debt to the United States that is represented by the amount withheld from that payment for income taxes where the employee is required to repay the debt, but is unable to obtain a refund of the amount withheld for those taxes. We conclude that it is not appropriate to waive part of a debt represented by income tax withholding, and partial waiver is denied in the seven cases presented here for consideration. BACKGROUND The DFAS report states that the Defense Accounting Office, Pensacola, encountered problems with its civilian pay system for the pay period ending December 10, 1994 (the last pay period for calendar year 1994 for income tax purposes). The problem was discovered on December 15, 1994, and pay processing was stopped. Corrections were made to the appropriate data base and final processing of pay was run on December 18, 1994. In spite of that effort, each of 306 civilian employees at Fort Polk, Louisiana, received single erroneous payments of salary during the period of December 20-22, 1994. [3] Because of the time constraints associated with the approaching end of the calendar year, the Pensacola office focused its efforts on adjusting large-dollar overpayments in cases which could be readily corrected. This involved pay transactions by electronic fund transfers for 18 employees whose overpayments exceeded $2,000 each. However, this effort resulted in the 288 other employees to be treated differently because they received the overpayments by check and the Pensacola office was unable to correct the problem before the end of the calendar year.