Colonel Robert M. Krone, USAF (ret.)-Federal Income Tax

B-271052 Aug 06, 1996 Jump To VIEW DECISION RELATED PAGES GAO CONTACTS Highlights In calculating the amount of monthly disposable retired pay which is subject to apportionment under the Uniformed Services Former Spouses' Protection Act. That is. The Defense Finance and Accounting Center was correct in limiting a member's request for additional withholding deductions to an amount computed using his projected effective tax rate. DECISION This is in response to a request for an advance decision regarding the calculation of the amount of income tax withholding from the military retired pay of Colonel Robert M. As that amount affects the apportionment of the retired pay between Colonel Krone and his former spouse. [1] BACKGROUND Colonel Krone and his former spouse were divorced in Nevada in 1976. View Decision Matter of: Colonel Robert M. Krone, USAF (ret.)-Federal Income Tax Withholding from Military Retired Pay for Former Spouse Protection Act Purposes. File: B-271052 Date: August 6, 1996 In calculating the amount of monthly disposable retired pay which is subject to apportionment under the Uniformed Services Former Spouses' Protection Act, the deductions of regular and additional federal income tax withholdings from gross retired pay may not be fixed at a combined percentage rate exceeding the retiree's projected effective tax rate, that is, the ratio of the retiree's anticipated total income tax to his anticipated total gross income from all sources. 63 Comp.Gen. 322 (1984). Accordingly, the Defense Finance and Accounting Center was correct in limiting a member's request for additional withholding deductions to an amount computed using his projected effective tax rate. DECISION This is in response to a request for an advance decision regarding the calculation of the amount of income tax withholding from the military retired pay of Colonel Robert M. Krone, USAF (Ret.), as that amount affects the apportionment of the retired pay between Colonel Krone and his former spouse. [1] BACKGROUND Colonel Krone and his former spouse were divorced in Nevada in 1976, incident to which the court awarded the former spouse a fixed monthly amount of Colonel Krone's retired pay as property. Subsequently, she submitted an application to the Defense Finance and Accounting Service (DFAS) to have a portion of Colonel Krone's retired pay paid directly to her under the Uniformed Services Former Spouses' Protection Act, 10 U.S.C. Sec. 1408. Her request was honored effective December 1994. Effective July 1995, her payments were modified from a fixed amount to a percentage of disposable retired pay pursuant to a Nevada Court order dated March 16, 1995. Because Colonel Krone was already having an additional amount withheld from his retired pay for federal income tax purposes, DFAS requested that he provide documentation to justify the additional withholding if he wanted the additional withholding to be deducted from his gross retired pay to calculate his disposable retired pay to which the percentage allocable to his former spouse would be applied pursuant to Former Spouses' Protection Act. Colonel Krone responded with a request that a total of $1,040 be withheld from his retired pay for calculation of both his net pay and the portion allocable to his former spouse. In support of his request, Colonel Krone submitted a copy of his tax return from 1994 and information from his accountant indicating that the marginal tax rate on his military retired pay was 28 percent and that $1,040 in withholding was required to cover his estimated tax liability calculated at that rate. DFAS based its calculation of Colonel Krone's withholding for Former Spouses' Protection Act purposes on our decision B-213895, April 25, 1984, 63 Comp.Gen. 322. It calculated his projected effective tax rate to be 12.2382 percent and used that rate to determine that regular withholding (at 01 married) of $446.65 plus additional withholding of $8.48 could be deducted from Colonel Krone's retired pay to determine his former spouse's portion of it. The balance of the withholding he requested would be used only to calculate his net pay. [2] Colonel Krone disagrees with the above calculations. He objects to the fact that the amount of additional withholding allowed for Former Spouses' Protection Act purposes is based on the effective tax rate applicable to his and his current wife's combined income rather than his highest marginal tax rate. ANALYSIS The Uniformed Services Former Spouse Protection Act, 10 U.S.C. Sec. 1408, [3] gives state courts the authority to treat a member's disposable retired pay either as the property of the member or as the property of the member and his spouse, in accordance with the law of the state concerned. 10 U.S.C. Sec. 1408(c).