U.S. Geological Survey Manual
344.1 - Federal, State, County, and City Taxes Withheld from Wages
1. Purpose. This chapter contains the general policies and procedures for withholding and reporting Federal, State, Territorial, D.C., County, and City income taxes and FICA (Social Security) taxes.
2. Federal Income Tax.
A. Coverage. All wages paid by the USGS are taxable wages subject to Federal income tax withholding, except:
(1) Wages of nonresident aliens working outside the conterminous United States, Alaska, Hawaii, Puerto Rico, the Virgin Islands, Guam, and American Samoa.
(2) Hawaiian, Alaskan, territorial, and foreign cost-of-living allowances.
(3) Wages paid to deceased employees' beneficiaries and estates.
(4) Wages of employees who are legally exempt, for example, those who do not expect to owe tax at end of that year.
B. Rate of Withholding. See Forms W-4 or W-4A Instructions (Figures 1 and 1A).
3. FICA Tax. The FICA consists of two different types of taxes (Old-Age, Survivors and Disability Insurance Tax; and Hospital Insurance Tax).
A. Coverage. USGS employees hired before January 1, 1984, whose services are covered under the Civil Service Retirement System, are subject to only the Hospital Insurance Tax.
Employees hired on or after January 1, 1984, including those individuals with previous breaks in service of 365 days or more, are subject to both the Old-Age, Survivors and Disability Insurance Tax and the Hospital Insurance Tax.
B. Wages Subject to Tax. All wages paid by the USGS for services performed (1) by an employee within the United States, Puerto Rico, the Virgin Islands, Guam, and American Samoa, or (2) by a citizen of the United States employed outside the United States, except:
(1) Service covered by the Civil Service retirement system.
(2) Hawaiian, Alaskan, territorial, and foreign cost-of-living allowances.
(3) Annuitants retired voluntarily for age or non-recovered disabilities. Disability annuitants reemployed after age 60 are exempt whether or not recovered from their disability.
(4) Foreign Students and exchange visitors covered by Section 101(a)(15)(F) or (J) of Immigration and Nationality Act.
(5) Individuals serving on a temporary basis in case of fire, storm, earthquake, flood, or other similar emergency. (SM 342.3.1)
4. State or District of Columbia Tax. Income taxes are withheld for all taxing authorities which have signed agreements with the Secretary of the Treasury.
A. Unless a USGS employee is a resident of a State other than the State of employment, has filed a certificate of nonresidency with the USGS and has met the requirement of reciprocal agreements between States, the State for which income taxes are withheld will be the state in which the employee's official headquarters or duty station is located, as shown on the Notification of Personnel Action (SF 50).
B. Reciprocal Agreements. Requirements of States for withholding income tax may be modified by reciprocal agreements between States. Generally, these agreements relieve nonresident employees of their tax liability to the State in which they are employed. The Department of Interior Payroll Office must conform to the withholding provisions of reciprocal agreements.
5. County or City Tax. Certain counties and cities have signed agreements with the Secretary of the Treasury for mandatory withholding of county or city taxes from the compensation of employees who are subject to such taxes and whose regular place of Federal employment is within the county or city boundaries.
(1) Upon Appointment.
(a) The employee furnishes to the appropriate personnel office a certified Form W-4 (Employee's Withholding Allowance Certificate). Where applicable, the employee also submits State or District of Columbia withholding exemption statements.
(b) Employees subject to payroll withholding for local taxes should submit the applicable county or city withholding certificate. If not available, TFS Form 7311 (Figure 3) may be substituted.
(c) If the employee has no Social Security number or if the number begins with 8, or 9, the employee completes Form SS-5 (Application for Social Security Number) which is sent to the nearest Social Security Administration District Office. When a number is received, the employee immediately notifies the appropriate personnel office.
(2) During Employment. The employee furnishes to the Division of Payroll Operations (DPO), an amended Form W-4 to change number of exemptions, or to authorize or cancel authorization of additional tax deductions. For change of address use Bureau of Reclamation Form 7-2214 (Figure 2).
(3) Upon Separation. The employee furnishes forwarding address on Form 9-2056 (Figure 4). However, a seasonal employee gives this information in advance to the authorized official who includes it on SF 50A, Notice of Short Term Employment (Figure 5).
B. Personnel Office. Each Personnel Office stocks Forms W-4 and required State withholding exemption forms for use by employees. For new appointees, the appropriate personnel office attaches completed forms to Bureau of Reclamation (BOR) Form 7-2211, Transmittal to Consolidated Payroll Office (Figure 6).
C. Operating Office. Each operating office stocks Forms W-4 and required State withholding exemption forms for use by employees for making changes. For appointments of seasonal employees, follow instructions in SM 370.302.2.8A.
D. Division of Payroll Operations.
(1) Tax Records. A record is made of each new employee's tax address, social security number, marital status, number of tax exemptions, and additional deductions, if any, from the Forms W-4 or W-4A. When an employee's Federal Tax address differs from the address furnished for State tax purposes, the State tax address is used for both.
(2) Amended Forms W-4 and State Exemption Forms. Each amended tax exemption form is effective as of the pay period in which received unless otherwise specified.
(3) Forwarding Address for Separated Employees. The forwarding address shown on Form 9-2056 or Form SF 50A replaces the address previously carried in the employee's tax record.
(4) Employee's Tax Address. The Biweekly Leave and Earnings Statement shows the address for tax purposes.
(5) Withholding and Recording. Federal, State, County, City, and FICA taxes are withheld from wages of all USGS employees subject to withholding.
(6) Withholding Statements. At the end of each tax year, each employee is furnished, in triplicate, Form W-2 (Withholding Statement), showing wages subject to withholding, Federal income tax withheld, total FICA wages, FICA tax withheld, State tax withheld identified by State, County or City tax withheld if any, and other compensation which is not reported as wages. Copies of the Form W-2 are forwarded to local taxing authorities or jurisdictions as required, and a record of the data required by the Internal Revenue Service (IRS) is sent to that office.
(7) Accounting and Reporting. Checks for the total amounts of Federal, State, County, and City taxes withheld, plus the Government's share of FICA taxes, are drawn to the appropriate taxing authority or jurisdiction and forwarded with quarterly returns. Annual returns and reconciliation statements are filed in accordance with the requirements of each taxing authority or jurisdiction.
(8) Reporting to IRS. Under Sections 3401 and 3402 of the Internal Revenue Code (Employment Tax Regulations), BOR must send copies of Form W-4, Employee's Withholding Allowance Certificate, to the IRS if the employee filing it:
(a) Claims more than 10 withholding allowances; or
(b) Claims exemption from income tax withholding and the employee's wages are expected to be than $200.00 a week at the time the W-4 is received.
NOTE: Employees claiming exempt status on Form W-4 must renew their exempt status by filing a new Form W-4 with their payroll office by February 15th of each year.